An Xbox price revision in North America had been expected for some time; the company had early slashed prices in Europe and Australia in an effort to bolster sluggish sales but had held firm on its pricing in North America and Japan. While Xbox has found success with older, hardcore gamers, Microsoft hopes the price cut will help broaden the consoles appeal to a larger, more mainstream audience. “This price reduction is something we've been planning for a long time,” explained Microsoft’s John O’Rourke, “It's really part of our long-term strategy to broaden the audience for Xbox.”
Microsoft's Xbox cut puts all three console contenders at the same $199 price point, but Microsoft has potentially the most to loose. While Sony has already reached the break-even point on Playstation 2 and Nintendo's Gamecube is comparatively cheap to manufacture, Xbox was already generating a hardware loss at $299. In an effort to cut some of its manufacturing costs, Microsoft and Felxtronics, its manufacturing partner, announced a plan to move Xbox production from a Flextronics facility in Hungary to a plant in Doumen, China.