Xbox 360: Cheaper Than Wii?

Is it really true? Is the entry-level version of Microsoft's (Nasdaq: MSFT  ) Xbox 360 about to be priced 20% lower than the bestselling Wii? It is if you believe an alleged RadioShack (NYSE: RSH  ) ad that's circulating online, leaked before the Sept. 7 debut of the new pricing.

Microsoft's console has gone through several price cuts, while Sony's (NYSE: SNE  ) PS3 has also whacked away at its system prices. It hasn't slowed Nintendo (OTC BB: NTDOY.PK), whose Wii has been topping the monthly hardware chart since shortly after its rollout.

If the ad's accurate, next month's $200 price on the Xbox 360 Arcade -- which now retails for $280 -- will be huge. For the first time, a next-generation system will undercut the $250 Wii.

The "arcade" version lacks a hard drive and a few nifty features found in the 360's pricier models, but the same can be said about the Wii. Once and for all, we'll find out over the holidays whether the Wii is trouncing the competition on price.

Woe to the 360 and PS3 if it's not.

This battle has never been won on the basis of spec sheets. The Wii lacks the raw processing power and many of the home-theater functions of its ritzier rivals. Both the PS3 and the 360 play DVDs, while the PS3 also plays high-end Blu-ray discs. Price leadership, and a portfolio of exclusive titles that make the most of Wii's motion-based controller, have catapulted the Wii to the top over the past two years. If the lower-priced 360 doesn't make a dent in Wii's market dominance, its advantages will no doubt be system-specific -- a moat that Sony and Microsoft won't be able to overcome.

A lot is riding on this, especially as most industry watchers believe that Sony and Microsoft are taking financial hits in subsidizing the consoles. Using hardware as a loss leader dates back to the razor and disposable blades, but the sums are substantial if you're marking down a console in hopes of recouping those losses via software royalties.

Microsoft also has digital revenue streams to help offset the sting. Xbox 360 buyers will ideally shell out for Xbox Live Gold memberships, and pay to download expansion packs, movies, and in-game items. In other words, there's never been a better time to subsidize a console.

Investors may want to hit the local GameStop (NYSE: GME  ) next month and perform a few unofficial channel checks ahead of the monthly sales data. A more scientific gauge would be to check the perpetually updated electronics bestseller list on Amazon.com (Nasdaq: AMZN  ) . The price cut will give the 360 an obvious boost come mid-September, but Fools should watch how the systems stack up come October, when the playing field gets a bit more level. Since no more price cuts out of the Xbox camp are likely until after the holidays, the October metrics will likely match the telltale December figures.

The game's just getting started. Learn to take sides, my fellow investors. 

More ways to play like you invest:

Microsoft is a Motley Fool Inside Value recommendation. Nintendo, GameStop, and Amazon.com are Motley Fool Stock Advisor recommendations. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz is a fan of all three consoles, but finds himself spending way too much time with the family on the Wii at the moment. He does not own shares in any of the companies mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool's disclosure policy keeps Fools cool.


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