Ed Moltzen

The Chart

September 04, 2008

Microsoft is slashing prices of its Xbox 360 lineup of gaming consoles and, in the process, gut-punching its partners in the PC gaming channel. This is happening just as signs have begun to show that the PC gaming platform may be starting to gain a stronger footing in the market.

Starting tomorrow, Microsoft has announced, XBox 360 Arcade systems will be priced at a slim $199 - - at least a month before the leading edge of the holiday buying season. (Xbox 360 Elite will be priced at $399 and Xbox 360 at $299.) It's a strong, aggressive move that could make it more competitive against Sony and Nintendo - - but also against PC gaming OEMs.

These are the very OEMs who have been out in front with hardware configurations more favorable to Windows Vista.

For much of the year, PC gaming as a platform, compared to the proprietary console platforms, has appeared to lag somewhat. Gamestop, the leading gaming retailer, recently reported 14 percent growth in its category that includes PC gaming products, compared to two and three times that growth in its console-based businesses. But recent data, its executives told analysts last month, suggested some potential strengths for the PC platform. Gamestop's CFO said PC gaming software was "very strong" in its most recent quarter.

How strong is PC gaming software to be in coming quarters, after Microsoft slashes pricing on hardware for its proprietary platform? Some of that will depend on the popularity of PC gaming titles (like "Age of Conan"). But it could also very well depend on how aggressive PC gaming OEMs may want to get in sacrificing margin to keep up.

Between now and the end of the year, some of those gaming OEMs may look up and see Microsoft playing a game of Grand Theft Market Share even as they've been on the front lines with Vista.