Ever since the Xbox One was announced back in May 2013, Microsoft’s latest games console has been on the back foot. With the Xbox 360 having sold so well across the globe, Microsoft was looking to capitalize on its popularity, but due to some early stumbles the Xbox One didn’t have such a great start. At first it was the fact that Microsoft promoted the Xbox One as a ‘media hub’ instead of a games console, then there was the pricing, which made the Xbox One $100 more expensive than its rival the PS4, and finally there was the always-on policy that Microsoft quickly backtracked on following heavy backlash.
As a result, the console trailed behind the PS4 in terms of sales for 10 consecutive months. But this all changed late last year when, following their decision to separate Kinect and Xbox One (deciding not to make the camera add-on mandatory made the standalone Xbox One $100 cheaper) Microsoft continued to cut the Xbox One’s cost and make it more affordable. There were bundles that included high profile games, there was the $50 off holiday promotion and there was also the free game promotion, which allowed players to take advantage of those Xbox One pricing deals and get a free game on top.
The discounts paid off as the Xbox One proved to be the most popular console in the United States’ annual Black Friday sales and it was the best-selling console in the country during November, 2014. However, in Q4 2014 overall the PS4 still managed to ship more units than the Xbox One, despite the fact that Sony didn’t discount their console. Microsoft is certainly up against some tough competition then, so after extending their Xbox One price promotion past its initial end date, industry analyst Michael Pachter believes they don’t ever plan on putting the prices back up.
In an interview with Game Informer, Pachter laid out why he thinks that the Xbox One had a rough start:
“The truth is that Kinect was a really great concept that didn’t address a real world problem. Kinect allowed players to voice control and motion control things, but most of us didn’t need that. I don’t need to say “Xbox on.” I don’t mind pressing a button on my controller – that’s all you have to do. It’s not that hard. It’s actually harder to say “Xbox on.”
[Former Xbox boss Don Mattrick] made sure the Xbox One was centered around Kinect, but gamers were like, “That was $150 I wish I had back when I bought it last time, so I definitely don’t want to buy it again.” That killed them. The messaging and DRM absolutely left a bad taste in people’s mouths, but we all should have been over that a week after E3. When Microsoft said don’t worry about it you knew that they meant it. “
He then went onto suggest Microsoft’s pricing plans moving forward:
“First they came in and said, “From Thanksgiving through January 3, we are cutting the price temporarily to $349.” On January 16, they said, “Effective tomorrow we have special promotional pricing of $349.” It didn’t say temporary, and it didn’t put a date of when it ends, which is really curious. It’s not officially a price cut – it’s promotional pricing. This allows the retailer to advertise regularly $399 and now it’s $349, but I have a feeling it will never go back up.
While Pachter hasn’t always gotten it right in the past (most notably he said that the Xbox One had beaten the PS4 in September, though this was untrue and the PS4 actually broke sales records that month) here, he may be right on the money. Not only is the promotional pricing massively helping the Xbox One’s sales figures but Microsoft can afford to lose out on profits if it increases their user base in the long run. After all, the company is said to have more in cash and investments than the United States government, so losing around $50 on each Xbox One console sold (the standalone console costs around $400 to manufacturer) is a small price to pay.
Sony, on the other hand, cannot afford to cut the price of the PS4. Their income is propped up on the success of their gaming business (and, specifically, thanks to the strong sales of the PS4), and by the end of the financial year Sony will be facing losses of over $1 billion. The PS4 is already selling well so even if a price cut would help it sell better, a large slash of profits isn’t necessarily in Sony’s best interests.
The NPD figures for console sales in January will be out within the next few days, so we’ll be able to see how the Xbox One pricing is affecting the industry then.
Source: Game Informer