Microsoft’s Xbox 360 gained an early lead in terms of market share largely due to its early launch date which was one year before its rivals. Sales in North America and Europe have continued to be strong, even after the release of the Wii and PlayStation 3. Like its predecessor, the Xbox 360 received a muted reception in Japan, attributed to the lack of content aimed at Japanese gamers.
This early launch did come with some trouble, as technical problems appeared in a portion of Xbox 360 units sold. The most well known problem is the “red ring of death”, which received a great deal of attention due to some users’ claims of having to replace their consoles multiple times. Microsoft addressed this by offering a three year warranty on all affected consoles and repairing them free of charge. It also retroactively reimbursed owners of affected systems who paid for repairs. According to The Mercury News, new models of the console featuring 65-nanometer technology will address this and other issues; the new technology is expected to reduce heat production, which will lower the risk of overheating and system failures; although, this has not been officially confirmed by Microsoft.
As they share many cross-platform games and compete for the same audience as their predecessors, frequent comparisons are made between the Xbox 360 repairs and PlayStation 3. The PS3 uses the Blu-ray format, while the Xbox 360 uses a standard DVD. The Xbox 360 is less expensive to produce, and analysts expect that a mid-revision will allow Microsoft to break-even on manufacturing costs, while industry consensus is that the Xbox 360’s conventional architecture is easier to develop for.
At the end of first half of 2007, the console stabilized at 11.6 million units shipped as sales dropped 60% while its rival, Wii, gained momentum and Sony announced a competitive price drop on the PlayStation 3. Microsoft’s strategy to boost sales with the release of the highly anticipated Halo 3 in September 2007 paid off, outselling the Wii that month in North America. Microsoft’s Entertainment and Devices Division experienced a huge increase in revenue, largely driven by the release of Halo 3, and posted a quarterly profit for the first time in two years.
In August 2007, the first price drop was announced for all Stock Keeping Units (SKU’s) of the Xbox 360. The Core system’s price was reduced in the United States by $20, the Premium by $50, and the Elite model by $30. Also, the HDMI out port, previously exclusive to the Elite system, was added to new models of the Premium and Core systems (and the new Arcade system).
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