Leading up to E3 2013, Microsoft and Sony were locked in an increasingly tense game of chicken – next-generation hardware edition. Sony revealed PS4 details first (but not their console design), at a February PlayStation media event, then Microsoft followed suit a few months later – detailing Xbox One policies as well as an official unveil of the physical hardware. Yet, neither publisher was eager to be first out the gate with a price point – and potential buyers had to wait until each company’s respective E3 presentation to find out how much money to set aside.
Since that time, Microsoft’s $499 price tag is considered a major reason why Sony, pricing their PS4 at $399, has a slight head-start on this console generation. Despite solid reviews for both consoles, and adequate (albeit unremarkable) launch libraries, the PS4 has kept a steady lead on the Xbox One – and remained, for some time, difficult to keep in stock at retailers. Months later, the release of Titanfall resulted in a significant (and expected) shot of adrenaline for Microsoft console sales – as new adopters took advantage of bundles and other deals. Recently, several retailers dropped the price of the Xbox One Titanfall bundle to $450 and, now, the official Microsoft Store is following suit – prompting some gamers to wonder if an official Xbox One price drop is incoming.
Wal-Mart was the first retailer to discount Xbox One bundle prices and was quickly accompanied by additional stores – including Amazon and Best Buy. That said, several other video game retailers in the U.S. have yet to reduce their prices (such as GameStop) or have returned to the standard price – meaning that while it’s certainly possible Microsoft has plans to reduce the cost of the console, to help gain ground on Sony, it’s just as likely that the company is merely taking the Titanfall release, and discounts at competing retail outlets, as a limited time opportunity to push a lot of hardware. Additionally, the Microsoft Store still has to compete with other retailers and might have lost a decent amount of sales (not to mention an opportunity to sell software and peripherals) if they simply ignored the competing $450 price tag.
Considering gaming, especially in the upcoming generation, is a social entertainment medium, establishing a large block of buyers early-on is key – since those players will encourage their friends to game on the same system. The buzz around Titanfall, and the multiplayer-only approach of the title, may have created a situation where Microsoft felt it was worth losing $50 per console sale in the short term – only to help pad their user base for the long haul. Console competitions are a marathon, not a sprint, after all.
To that end, Microsoft released the following official comment to Ars Technica:
This is not a price drop on Xbox One. The Microsoft retail stores often set prices and run promotions in line with the rest of the retail industry, ensuring that its customers always get a good value for the devices and services purchased from the stores. The current online and physical Microsoft retail store price is not reflective of an MSRP price drop on Xbox One, which is still priced at $499 USD.
Microsoft could also be testing how the lower price point will affect their net profits without having to officially commit to a price cut. Obviously they’ll sell more consoles at $450 but will they sell enough overall to offset lost per-console profit? Temporarily lowering the price, alongside other retailers, would be a smart way to find out – without having to make an immediate (and high profile) decision.
Lowering the price of a console makes consumers happy but, for stockholders, it can be a sign of weakness, short-sightedness, and general instability. While a lot of gamers and industry insiders think the $499 price point for Xbox One has been a tough hurdle to clear, announcing an across the board price cut only four months after launch could make Microsoft look as though they’re nervous about their current strategy – potentially devaluing the Xbox brand in exchange for a yet-to-be-determined rise in hardware sales. Still, Microsoft could actually be nervous about how their console is performing agains the PS4 – and feel as though a price drop will be necessary to help keep things competitive.
At this point, nothing is certain. Gamers who have been thinking about picking up an Xbox One and were enticed by the $50 price discount – should probably act on it. An official across the board price drop might help maintain the console’s recent momentum but it’s still too early to assume that lower prices at select retailers aren’t just temporary – and that the publisher won’t simply bump-up prices at their internal storefronts once Titanfall buzz has died-down.
Xbox One is currently available at select retailers for $450 but normally retails for $499.
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