360 Elite - Why Does Microsoft Want A PS3?

So the black cat is out of the bag, so to speak. The man with the Redmond hand, Dean Takahashi, gives an extensive amount of skinny:

   In the past, games consoles have been set in stone at the launch. Microsoft debuted the XBox 360 in November 2005 with a $399 version with a 20-gigabyte hard disk, and a $299 version without a hard disk. But Sony came out with the PS 3, which had advanced video features and a Blu-ray next-generation DVD disk player that allowed it to charge as much as $599.

With the new machine, Microsoft is breaking the rules of the console wars, which dictate that the same machine last for five years or so. The new Xbox 360 Elite machine will have  120-gigabyte hard disk drive so that gamers can store more media such as movies or music. It will have a high-end video connector and cable based on the HDMI (high definition multimedia interface) standard. It will sell for $479, less than Sony’s cheapest PS 3 model, which comes with a 20-gigabyte hard disk.

Microsoft will keep its other versions of the Xbox 360 at their current prices. Albert Penello, director of global marketing for the Xbox division, said that Microsoft would not relegate its earlier customers to second-class status. That means that any game or service that Microsoft launches will play on every version of the Xbox 360.

-- Confirmation: Microsoft Unveils Xbox 360 Elite [Mercury News]

Other details include:

- The 120GB will available for $179.99
- The Elite does not use 65-nano manufacturing
- No WiFi, no HD-DVD
- No timetable on IPTV as of yet
- Includes an HDMI cable (which MS claims is a $50 value)

So a few thoughts:

First of all, I'm even more doubtful of the "collapsed SKU" rumor Engadget started a while back stating that once the Elite sells out, it will go for $399. Maybe - if the stock last longer than I had predicted and through 2007 ... maybe. But does anyone think a company that didn't bother to add the $100 WiFi adaptor into their new high model is going to suddenly comp the $180 hard drive?

On that WiFi adapter, Dean asked Microsoft their thinking on leaving it out. Here's the response:

There are so many options with connectivity, it didn’t make sense to make everyone pay for something they may not use. Many of our core LIVE users play with a wired connection. Peoples home configurations are different and people with multiple devices may require bridges. Also – as wireless protocols continue to evolve, you find that built-in solutions are inevitably outdated; as soon as we would have included a G adapter, everyone would be switching to N. We think giving customers the choice to decide how they want to connect is the best route.

Which doesn't add up to me. More users would get a use of out WiFi than that "$50 HDMI cable". Especially since they could get the cable for about $15 online.

Microsoft's Penello also noted, "I’m not particularly worried what’s happening with the PS 2. We have no idea who they are selling to. The Wii did a good job. They are four months in. They are still in allocation, launch mode. It will take time. I’m not saying they are not a good competitor. Sony is doing terribly. Nintendo is doing well.”

They may not have any idea who Sony is selling PS2's to - but they're selling an awful lot of them to whoever they are. Maybe Microsoft should spend some dollars trying to figure that out, actually, since the $130 PS2 has consistently outsold the 360 since the 360 launched.

And, as Dean points out, the $250 Wii is also easily outpacing the 360. So if the cheaper, lower end consoles are selling so well and Sony is doing so "terribly" with the PS3 ... why put out a new model to compete with the PS3?

Especially one which is more expensive than Sony's lineup. If you wanted a 360 Elite to play like the 60GB PS3, you'd have to add WiFi, HD-DVD and a media card reader. And maybe an Intercooler. At that point you've broken $800. And you're still without a media card reader since it doesn't seem to exist. And with a PS3 - you can buy a hard drive from virtually anywhere to upgrade and still come out way ahead.

The reason for the Elite, I think, is doublefold:

One - Sony isn't doing nearly as horribly as Microsoft would like to FUD you to believe. If they were, Microsoft wouldn't be spending money on a failed PR blitz to curb sales of the PS3 European launch. Microsoft knows this - but they're willing to ride out the public "shelf theory" for as long as it lasts.

Second - Microsoft isn't going after the Nintendo market because they're doing the same thing they've been beating on Sony for since Blu-Ray was announced as a PS3 feature. Microsoft doesn't want to sell you a cheap console because they want to bundle as many other features with the 360 as they can. They want you buy movies, television, Live subscriptions, IPTV and whatever other high def living content they can get their hands on. Sure, Sony is trying to muscle their high def player into the living room. So is Microsoft - they just aren't tying the concept of "playing" to a disc format.

And that's really all the Elite is - a device more suitable for Microsoft to sell you downloadable content. I'll be far more interested when Microsoft gets a better hardware design that actually reduces heat and failure in their machine.