About three-quarters of the way into their E3 2013 press conference Microsoft did something few expected them to do: they announced a price for the Xbox One. And what made the announcement even more surprising was the relatively high price point of $499 that Microsoft selected.
To make matters worse for Microsoft, not 10 hours later Sony announced the PS4 would launch at $399 — a hundred dollars less than the Xbox One. Let’s not mention the policy on used games and always online because that’s a non-issue at this point, but the price alone was something Sony had working in its favor.
As economist Rafi Mohammed explains, the price of the Xbox One could “derail” the console’s sales when it launches in November. However, in Mohammed’s mind, the key downside to the Xbox One price is the “$100 premium” Microsoft is charging as compared to the PS4.
“You want to get that console in consumers’ hands, and then where you really make the money is off of the games. So it was really surprising that they charged such a premium, especially when they had a lot of negatives…like the very restrictive DRM, which they did retract on…one of the key things is that they really listened to their consumers and they did backtrack and they reduced the price, but I still think the price is too high. So it’s still a $100 premium.” “
As some might know, that $100 premium partially goes towards the price of the Xbox One’s revamped Kinect sensor, which ships with the console and is mandatory. The console will not work if the Kinect sensor is not connected. This, of course, has called into question the idea of privacy, but Microsoft maintains they will not use the device without gamers’ prior knowledge.
Kinect aside, the real question is whether or not Mohammed has a point — does the $100 premium make the Xbox One less appealing than the PS4? Many commenters suggest it is, but that might be because it’s in our nature to seek out the cheapest prices where possible.
That being said, some might forget that the 60GB PS3 launched at $599 and was in short supply for the better part of 4 months. The same thing happened with the first generation iPhones ($499 for 4GB, $599 for 8 GB) — very high price, but still hard to find in stores. Granted, Apple lowered the iPhone price less than a month later, but the device still launched with a high price point and sold well.
At the same time, a lot has changed since the launch of the PS3 and iPhone 1G. Consumers have become more financially conscious than ever, and they have also become more knowledgeable. They are well aware of the comparative value of a piece of technology, and know where the cheapest prices can be found.
So, we’ll have to wait and see whether the Xbox One price discourages some gamers from picking one up. Microsoft still has a devoted fan base who is willing to pay the $499 — even before the used games DRM reversal — but that doesn’t mean the casual gaming public will be as willing.
Do you think the higher price point will hurt Xbox One sales? Will both consoles sell out at launch?
The Xbox One will hit store shelves this November.