120GB HDD pricing analyzed and it's overpriced

by Dustin Burg { May 8th 2008 at 11:45AM }

The crew over at MTV Multiplayer did some detective word, analyzed the cost to produce the Xbox 360's 120GB HDD peripheral and guess what? They concluded that it's one over-priced hard drive ... shocker! According to their research, the 120GB drive (which retails for $179 in the U.S.) costs around $75 for the drive itself, another $5 or so for the special software and casing bringing the total to about $80. Tack on a Microsoft profit of around $20 per drive and a retail profit of around $80 and you've got yourself a $180 120GB HDD. Way too expensive. You'd think Microsoft would want to make it cost effective for gamers to upgrade their 360's storage seeing that the majority of the content being put on them is paid XBLM content. Guess not though.

Tags: 120gbhdd, hard-drive, microsoft, peripherals

Reader Comments (Page 1 of 1)

Chaunches @ May 8th 2008 11:53AM

Ps3 pwns the xbox in that respect.... damn Micro$oft

Exiled Legend @ May 8th 2008 12:15PM

How does that overpriced console own anything?

Morgon @ May 8th 2008 12:29PM

I think he might be referring to the fact that you can provide your own drive for use with the PS3.

However, I doubt a 360 + 120GB HDD is any more expensive than a PS3 + Arbitrary User-purchased drive

James @ May 8th 2008 12:34PM

I've posted on both PS3FB and here a bunch of times about this, but I'll do it real quick again. If you need HDMI, HD movie disc capability, a big hard drive, etc, you're better off with a PS3. Why? An Elite 360 or a HDMI-able Pro + 120 gig HD runs you about 450 - 500, depending on which route you take. If you want to bother with an HD DVD drive (why?), tack on a few extra bucks. And if you want *more* than 120GB, you're out of luck. Alternately, you can get a $500 PS3 and add on any hard drive you want for market price (which, as the article points out, is a hell of a lot less than what MS is charging). If you "need" online mulitplayer, your first year of Live brings the Elite price up to match the 80GB PS3.

Of course, if you don't care about HDD space, HDMI, Live, or HDDVD/Bluray, you can just get a Pro for $350 and save a bunch of money. It's all about your needs.

James @ May 8th 2008 12:43PM

Not to beat a dead horse, but Morgan: if you really wanted to, you could get a $400 PS3 and add a $47 160 gig hard drive (like this http://www.geeks.com/details.asp?InvtId=ST9160821AS-R) to make a system that's basically the same price, with 40 gigs more space (and a "free" 40 GB leftover HDD). Of course, to me it would make more sense to get one of the PS3s that has backwards compatibility, but if you already own a PS2 and have the room/TV hookups to use it at the same time, maybe that doesn't matter to you.

Like I said, it's all about what your needs are.

JakubK666 (Ninja Defence Force) @ May 8th 2008 2:17PM

Yeah but people who actually see a difference between HD and non-HD are either fags or don't own a good DVD players to upscale it.

Poddie @ May 8th 2008 8:11PM

Could somebody PLEASE inform James and the other PS3 fanboys that ALL new 360s come with HDMI... even the Arcade system.

I'm tired of seeing their incorrect assertions posted over and over again. If you're going to compare a system you own to a system you don't you should at least take some care to ensure that you know what you're talking about.

Thank you

Raheem @ May 8th 2008 11:54AM

Detective word?

Tarl @ May 8th 2008 11:58AM

You were right. This really doesn't come as any surprise. Then again, Microsoft is a business and is looking to make a profit, so although I hate the price, and still have yet to purchase the drive myself, I have to say kudos to them with their business plan. They are making money.

James @ May 8th 2008 12:46PM

The point is that it's a *bad* business plan -- these things do not sell at the current price point. You'd have to be a complete idiot to buy a Core ($300) plus one of these ($180) instead of an Elite ($450), which is basically the same thing (do Cores even have HDMI?) for 30 bucks less. Plus, since they force you to use their custom hardware interface (unlike the PS3 which can use any 2.5" SATA laptop drive), the biggest drive you can get is 120 gigs. That means that when you hit that cap, you have to stop buying their content off XBLM or delete something. Which is another bad business decision.

DSK UK @ May 8th 2008 1:01PM

James, there's one little thing you failed to express when you are explaining the whol 120Gb hard drive vs the PS3's "any size you want" drive. The point is that 120GB can go a lot further on the 360 than the PS3. Why you ask? mandatory installs

xJx @ May 8th 2008 1:14PM

@ James:

Cores (Arcade) do not cost $300, it cost $280 and they do have have HDMI and a Wireless controller. It would be a $10 difference buying a core (arcade) + 120gb HD compared to the elite, but the elite is still the way to go because you get a headset and a HDMI cable.

James @ May 8th 2008 1:24PM

@xJx, thanks for setting me straight. I hadn't followed the price drops, and they don't SAY you get HDMI on the product pages, though at the Gamestop website there's a user comment to that effect that I hadn't noticed.

@DSK, a few games so far have mandatory installs, but not that many, and the biggest ones are ~5 gigs. That's one HD movie from the XBLM. I'm not saying I like it -- my PS3 is an un-upgraded 20GB, so my HDD space kept me from buying the PS3 versions of Devil May Cry 4 and GTA4 -- but if I *do* decide I need more space, my $-per-gig options are a whole lot better than on my old 20GB 360 Pro.

ZeroCorpse @ May 8th 2008 1:56PM

The Arcade (formerly Core) system is identical to the other SKUs in terms of guts, build, etc.. The only difference is cosmetic: The drive bezel is white instead of chrome. Otherwise, yes, it's got the HDMI port and everything else you'd expect to find on any Xbox 360.

For those of us who already had a hard drive, headset, and HDMI cable, the Arcade is a good buy. (honestly, I hate using the headset anyway-- Like I want to hear a bunch of 13-year-olds swearing at me while I kill them in GTA IV.)

russ Tundra @ May 8th 2008 12:00PM

orly? is this new news? I thought everyone thought it was over priced when it came out...... You can buy a 750GB HDD for cheaper at Newegg or TigerDirect. M$ Pushing it to the limit (over it)..

ZEBRA NINER @ May 8th 2008 12:03PM

I can't believe they are still getting away with that... but then again, I have one. :(

Merehorseplay @ May 9th 2008 11:03AM

Microsoft trying recoup losses on its hardware failures. Does anyone really need a 120GB drive? I keep most my TV shows and arcade games on live anyway and download them when want to play them, or just buy an extra 20GB drive on Ebay $20. thats what I did and I still haven't used it.

Outinthedark @ May 8th 2008 12:31PM

What a waste of $20...

joey @ May 8th 2008 12:08PM

I don't believe it cost more than 50 bucks to make.
MS's got negotiation power.

J @ May 8th 2008 12:11PM

I could defnitely use and afford one, but the price is so high that I haven't bought one in protest. I think it's a total rip-off.

EdgeOne @ May 8th 2008 1:27PM

I totally agree! I'm NOT paying that much money for 120 GB no matter how "special" (read proprietary) it is, even if I can afford it.

And its NOT a sound business decision by MS because I would be purchasing more movie views on Xbox Live Marketplace if I didn't have to clean house on my 20 GB (only 13 GB free when new!?) every time I want to rent a single HD movie!

ZeroCorpse @ May 8th 2008 1:43PM

Add me to this list. I'd get one if it were reasonably-priced, but as it's a whopping $100 markup over what I can get for ANY other hard drive for any other computer or console, I'm not buying one. If MS wants to move these things, they'll drop the MSRP to something in the area of $100 even.

For now, I can put my non-MS media (movies and music) on an external HDD built from an OEM 2.5" drive and a MacAlly enclosure. As long as I have Handbrake, I don't need to buy movies from the Xbox Marketplace... And as long as MS makes it too expensive and inconvenient for me, I won't.

mirage @ May 8th 2008 12:11PM

Why is M$ tacking on an $80 profit for their retailers? That is what I would like to know. Do retailers get that high of a return on all of the 360 accessories? I for one would like to buy one of these because my 360 but I cannot justify this amount.

monkeymonkeymonkey @ May 8th 2008 12:12PM

Ive always wondered why they did this. If they make the drives cheaper (maybe even free with X # of points purchased) then more people would download stuff from XBL, I know I would! Pretty bad oversight on MS part if you ask me. If I could get a free drive for buying $50 worth of XBL points, I would jump at that deal.

joey @ May 8th 2008 12:43PM

dream on.

monkeymonkeymonkey @ May 8th 2008 12:45PM

Cellphone companies do this, satellite/cable companies do this, Tivo does this, VoIP companies do this, need I say more?

JakubK666 (Ninja Defence Force) @ May 8th 2008 2:19PM

True...that's how I got my TV and PSP.

CapNJunkie @ May 8th 2008 12:21PM

I don't think they want to sell any of them because of all the headaches they would have dealing with support.

Big Filth @ May 8th 2008 12:25PM

I have 84 mb left on my 20 gig HDD.

its pretty sad. I need to buy the bigger hard drive I guess? :(

It should be cheaper. That thing is almost as much as a Wii!!

hunter2223 @ May 8th 2008 12:44PM

Ok time to play Basic Economics!

If the HDD costs $80 to produce... and no reason to think they don't, then we start to get into the profits... Watch the bouncing ball.

MS takes $20 profit on their $80 investment.
The distributor then takes a profit off of the item, and sells to the Retailer, probably about $120 or so.
The retailer then marks it up 40-60% and sell it.

To put it another way, MS sell to the Distributor, normally for 60% of MSRP, but because of their stated $20 Profit from each unit, that means they are selling to the Distributors for closer to 48% of MSRP.

Distributors normally sell to Retailers at 40-50% of MSRP, so the retailers can make money on the product, but in the case of this drive it's more then likely 25-35% of MSRP.

The average Retailer needs to make 40% on anything out on their floor to make money.

By the basic laws of Profitability and Retail sales, the 120gig HDD is Under Priced. May be more then the consumer is willing to pay, but with the Starting manufacturing cost of $80 the numbers all make some sense.

Think of it this way, that HDD you buy for your PS3 that costs $80 from New Egg (Who take a hit on the retailer percentages to begin with) Probably cost $20 to manufacture.

Duke 2 @ May 8th 2008 1:20PM

Uhh, since when??

Retail profit of $80 on a per unit wholesale cost of $100 is exorbinantly high by any definition. Consoles are being sold at a loss (to MS w/razor thin margins for retail), and they're making it up on aftermarket stuff.

They charge it because they can and people are paying. And yes, it is an undeniably short-sighted marketing strategy to not automatically build in max storage capacity at no addl cost and make it up several fold in increased DLC- which IS OF COURSE what Microsoft's entire strategy going forward. Expect this practice to change in the not too distant future (MS sees the contradiction to it's own stated strategy going forward and is realigning it's marketing plan accordingly.

I also don't buy any the rhetoric about how this makes PS3 a better alternative because you can buy an external HDD. It's still on a system that simply doesn't have the games most want to play and need to load the entire freakin game on the HDD just to play?? give me a break

chenry @ May 8th 2008 12:46PM

And despite the strength of the Canadian dollar, this thing costs $209 up here! WTF Microsoft.

evilfoxhound @ May 8th 2008 12:54PM

I upgraded my 40GB PS3 to 150GB for £40 (about $20). This is why I made sure I purchased a 360 Elite. The HDD price is rediculous to the point that they are taking the piss.

Jesse @ May 8th 2008 12:56PM

Amazon.com has them for $149.99 and free shipping. Still over priced, but those of you that need to get one can at least save a bit. My "buddy" kicked my console over on a tile floor and trashed my old 20 gig. Gave me an excuse to upgrade, although it could have been better circumstances.

Procris @ May 8th 2008 1:11PM

Sony's done it as well with their own brand HDMI cable, Memory sticks for PSP and so on. Only difference being... You can actually buy third party stuff which is 100% cheaper (if you smart enough). Though with Microsoft and 360, you can't. Thats not totally a bad thing. There is increased security by not having it totally open.

We've known for a while that the drive is over priced. I mean compare it with just about any drive on the net and you'd realise you could buy one yourself cheaper but because it won't work on the console your stuck buying the MS ones (if you choose too).

Honestly i think Microsoft should cut the prices on these hard drives a lot. Sure its good business for them selling them at high prices but do you know whats also good? Getting more hard drives (bigger) in the hands of people who will then be more likely to buy DLC/GAMES/Movies off of the market place. Think of it as an investment.

That and the Core/Arcade needs a hard drive added to it so that future games can take advantage of it.

h0mi @ May 8th 2008 1:17PM

The bottom line is that with the ps3 console, I could pay as much as $80 (if I didn't try very hard to find it cheaper) to get a retail 2.5", 120gb sata drive. This is $100 cheaper than the xbox 360 upgrade. This price difference is simply insane, and wipes out any and every price advantage that the 360 has over the ps3.

Gemini Ace @ May 8th 2008 1:39PM

And this is news how? We knew this when the damn thing came out.

Gemini Ace @ May 8th 2008 1:40PM

And this is news how? We knew this when the damn thing came out.

mike @ May 8th 2008 2:02PM

all i know is the Xbox is the most expensive system out right now to get the same quality as the PS3

If you want HD Movies, Wi-Fi, Rechargable Controllers, Any theme really, Online Play, etc.

All that comes to way more than what the PS3 offers.

I'm sorry to say, the Xbox is the OverPriced system, but if you don't need what the PS3 has, then it's a greatly prices system.

So, everyone, I win this battle.

doug @ May 8th 2008 3:08PM

Stop equating cost with value.

Ninjakamster (PSN: Chin-Poh) @ May 8th 2008 3:29PM

I have a PS3 but do every much like the 360, I may later swap my PS3 for a 360 or buy it when I get extra money.

Anyways, its surprising that Sony would let you easily upgrade the HDD yet Microsoft keeps it proprietary.

Shouldn't there be a way to remove the casing on the 360 HDD, slap in your own 2.5" HDD and put it back together?

I swear I saw a guide on how to do this.......

Nate @ May 8th 2008 4:53PM

In other news, the sky is blue.

refinedsugar @ May 8th 2008 9:03PM

Everyone should know how the game is played by now. They take losses on the actual hardware, but there is major money to be made in accessories, licensing and peripheral add-ons. It's been like this from day one, nothing has changed in that respect.

Josh @ May 9th 2008 7:54AM

Ya it might be overpriced, but is it overpriced compared to the $99 20GB HD? An extra 100 GB for $80 is reasonable to me looking at what the 20GB costs...

digitarius @ May 9th 2008 8:40AM

As others have said, You and I can buy a 120GB drive for $70, right now on Newegg. That's not even shopping around.

Microsoft will be buying these in bulk, probably directly from a solid partner like Toshiba. This means that they bypass whatever markup Newegg is making and get a price break for volume.

The casing materials, at the scale they are produced (Mostly interchangeable with the regular HDs, I'd imagine) cost probably on the order of a dollar a piece. Maybe. Another dollar (rounded up!) for the retail packaging.

Freight is handled in a super efficient manner, too. Microsoft generally will ship these to a few distribution centers and wholesalers who handle it from there. Major chains pay very little (Even with rising gas prices) because they buy in bulk, break down the quantities to what a store needs, and ship that using their own trucks or a contractor.

I'm thinking that $50 is a solid guess as to how much this thing costs to make. Lets be super-duper pessimistic and say that the cost of Freight to get it into your local Circuit City costs another dollar a unit.

What's left? Markup, baby. The lions' share of that will be taken by the retailer, but Microsoft will gouge on it since this is an accessory product.

Then you've got the other spreadsheet-monkey costs, the cost for retail space, the employee stocking it, the employee ringing it up, etc. And then there is marketing, but this product has zero specific marketing. The 360 line marketing is all it needs. So lets be pessimistic and say that it costs a whopping $60 all told.

How much is it retailing for again?