Even though Microsoft and Sony have both unveiled their next-generation consoles, titled the Xbox One and PS4 respectively, many questions still remain. As a result, much of the conversation has shifted from internal hardware architecture to how exactly the console makers intend to use all of that new computing power – in order to provide gamers with fresh gaming experiences (not just better looking rehashes of the current generation).
Next week at E3 2013, both companies will pitch their forthcoming console packages to potential customers – in an effort to explain why their hardware is the one to buy this winter. A large chunk of both presentations will be dedicated to actual in-development games (not cable TV or pre-rendered tech demos) but one key factor that will also need to be addressed is each console’s launch price point. A lower price (along with a 12 month head start) helped Microsoft get the jump on Sony in the PS3/Xbox 360 era and with both the PS4 and Xbox One launching at the same time, there’s no doubt that pricing could have a major effect on which system comes out of the gate faster.
Ahead of E3, Wedbush Morgan’s (infamous) industry analyst Michael Pachter has offered-up his predictions for how the two consoles could be priced – based on the cost it takes to manufacture each one. According to Pachter (via a Wedbush Moran report), each PS4 costs Sony $275 each Xbox One costs Microsoft $325. Using those figures, he has recommended that investors expect the PS4 to launch at $349 with a slightly higher price tag for the Xbox One at $399. Pachter doesn’t elaborate on whether this means we’ll only see one hard drive option for each console at launch – or if these two prices are merely representative of the basic models in each line.
Either way, longtime game fans will quickly note that the 2013 “console war” is on much more even ground – compared to the 2005/2006 launches of the last generation. This time, both consoles will be released in roughly the same window and the $349 PS4 cost is $150 less than the basic PS3 model at launch in November 2006 — which carried a $499 price tag. Conversely, at $399 the Xbox One cost is $100 more than the basic Xbox 360 model at launch in November 2005 – which carried a $299 price tag.
It goes without saying that both consoles will sell big numbers at launch (and likely be in very short supply), but if Pachter’s predictions prove to be correct, Microsoft may be fighting a slightly tougher battle this round – especially since, in addition to a slightly higher console price, the Xbox One isn’t likely to ditch the added cost of Xbox Live subscriptions which are necessary for online play. The PS4 is expected to continue Sony’s commitment to free online play – reserving PlayStation Plus subscriptions to added features, content, and discounts only. The Xbox One may be aiming to expand into the “living room entertainment” market but casual consumers are easily turned-off by post-purchase tacked-on costs – especially when Sony’s console could be cheaper and subscription free.
Yet, Pachter also indicates that Microsoft could offer lower/subsidized console costs – through longterm agreements with cable and Internet providers or Xbox Live subscription plans:
“We believe the ability to watch live TV from a cable, telco, or satellite set-top box through Xbox One could entice an MSO [Multiple-System Operator – i.e. cable or satellite TV providers] to drive subscriptions through a subsidised box in exchange for a multi-year contract. The ‘always connected’ requirement for the Xbox One likely means that a broadband connection will be required, suggesting to us that ISPs may have an incentive to offer a subsidy as well.
In addition, Microsoft could conceivably subsidise the Xbox One through prepaid Xbox Live Gold subscriptions (as it has done on a limited basis in the past) or premium Skype functionality as well. Similarly, Sony could subsidise the PS4 through prepaid PlayStation Network subscriptions, but unlike Microsoft, it does not have a history of doing so.”
Microsoft has already tested the model out, offering gamers the ability to purchase a basic Xbox 360 for $99 if they sign a two year contract charging $14.99-per-month for Xbox Live (instead of the prepaid cost of around $50 a year – depending on where you buy). Basically, the model is similar to subsidized cell phone purchases – where cellular carriers provide discounts on hardware upfront to get customers signed-on while charging more in the long-run and locking buyers into a lengthy contract. For consumers with less disposable income it’s a good option, but there’s no doubt that these gamers will have paid more after two years than anyone who purchased the same console at full price along with two pre-paid Xbox Live subscription cards.
As Pachter indicates, Sony hasn’t tested subsidized pricing in the PlayStation line. While it’s not out of the question, they’d need added incentive beyond a higher monthly PlayStation Plus price, since the subscription service is more of a discount and VIP offer program – not a pay wall for online play and other core features. PlayStation Plus is a solid option that many Sony gamers enjoy but why would anyone pay a premium monthly cost for a program designed to give players access to cheaper games? It’s also possible that Sony will try and evolve the Plus program in this new generation – by announcing that certain PS4 online features will require a subscription and, as a result, adding more value to a potential subsidy initiative. That said, the company remains committed to free online gaming on the PSN – so, if they add services to PlayStation Plus, it’d have to be new features (not ones that gamers currently enjoy for free).
If Pachter’s predictions are even close to the truth, it’s hard to know whether or not subsidized pricing would be enough to help off-set the higher costs of an Xbox One launch purchase relative to the PS4 – assuming that both E3 conferences deliver equal purchasing incentive for players. Gamers are quick to criticize the Wedbush Morgan analyst but a fair amount of his predictions are backed-up by official reveals – at least often enough to keep his own customers happy.
As mentioned, there’s no doubt that both consoles are poised to sell big numbers – and enjoy a long and prosperous life on store shelves and in homes but many hardcore gamers are going to want to buy a next-gen system this winter. Few of them will have the money to splurge for both consoles – especially since many of the last-gen controllers and other peripherals will not be compatible (not to mention speculation that game prices could expand to $70). For these reasons, price could be a major factor this round – even if we’re only talking about a $50-100 difference. Obviously, we’ll know more soon – as E3 2013 is fast-approaching.
No official release dates for the PS4 or Xbox One have been announced but both consoles are expected to launch this winter.
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