AUG. 24, 2012 • Redington Ltd., the India Xbox 360 distributor, announced increases in street prices for the game system. The 4GB model now costs Rs 15,990 ($288) up from Rs 14,990 ($269), the 250GB system went from Rs 21,990 ($395) to Rs 24,990 ($449), and the 4GB with Kinect bundle saw an increase to Rs 26,990 ($485) from Rs 24,990 ($449). Redington did not provide a reason for the increases, but Indian retailers assumed the decreasing value of the Rupee was the catalyst. Despite the increases, the cost of the 250GB Xbox 360 is still less than the Pro model that launched in 2006 at Rs 27,750 ($498). While Microsoft did not comment on the rational for the price changes directly, the company did announce the availability of new bundles for each of the SKUs sold within India through September. Consumers who buy the 4GB Xbox 360 get Halo 3, Need for Speed: Hot Pursuit and Street Fighter 4, while the Kinect and 4GB bundle includes Kinect Sports, Forza 4, and a three-month subscription to Xbox Live Gold.
Impact: The target market in India for a console system like the Xbox 360 is extremely small and mainly consists of the very well-to-do consumers that can afford this luxury item. Basically we would estimate that a game system like the Xbox 360 might reasonably sell into one out of every 500 households in India. In India 50% of households make less than $2,000 a year. 90% of households make less than $6,000 a year. This makes a price of $250 or more unrealistic for most all of the market. Then again, sheer numbers like you have in India can change the context. The percentage of well-to-do consumers is India is minor, yet that is still a huge number of people as a Deutsche Bank report concluded in 2010: “India’s middle class consumption is roughly equivalent to Ireland’s total private consumption and is forecast to triple as a share of India’s total consumption over the next 15 years.” On balance, for the top 0.5% of consumers whose income is far above the average within India, a minor price increase in console system will probably not make a huge difference.