Price has been a point of contention for many in the six months that new consoles have been available from Microsoft and Sony. Microsoft chose to launch their Xbox One at $500, compared to Sony’s $400 PS4. While both companies claim that these new consoles are doing better in terms of sales than their predecessors, Sony is undeniably having more success with the PS4. They’re ahead in terms of sales figures (7 million sold to consumers vs. 5 million shipped to retailers), they’re ahead in terms of value, and most importantly, they’re ahead in terms of public perception.
Though over the last month or so, we’ve seen an onslaught of retailers offering steep discounts on the Xbox One. It’s come in a number of different forms, and we’ve seen a mixture of bundled content and freebies included in the deal to boost perceived value.
The most recent Xbox One deal is a doozy from Newegg. For those looking to pick up an Xbox One from the online retailer, they can snag Forza Motorsport 5 and Titanfall in an Xbox One bundle that retails for $450. A bundle like this unofficially undercuts the PlayStation 4. Granted, it’s the retailers that are doing the price cutting at this point, looking to move surplus consoles out of their inventory. A surplus that’s likely the culprit in Microsoft issuing us their 5 million shipped figure. Is it time for Microsoft to officially drop the price of the Xbox One and start giving consumers a compelling argument to buy the new console without waiting for a fire sale?
It’s been decided. Consumers believe that the PlayStation 4 is the less expensive, more powerful alternative. Games only sell consoles, to an extent. At some point, there will be no game big enough for Microsoft to deliver enough value to the consumer to forgo their option to buy a PlayStation 4 instead. At some point, demand at the $500 price point will dry up completely, if it hasn’t already started. The only true way to increase real demand is to either have a trickling supply, fantastic marketing, or low prices. We know that supply isn’t exactly constrained for the Xbox One. The company is still battling the perception that they created last year with the reveal of the console, and not even a strong games lineup has been able to do the trick. That leaves us with option three. An option that all consoles see over time. Price cuts are a fact of life, it’s just a matter of when they occur.
Microsoft doesn’t need to look very far into the past to see one clear cut example of why they should cut the price of the Xbox One. When Nintendo launched its 3DS handheld with an exorbitant price tag, consumers didn’t bite. They waited. They called Nintendo’s bluff, and their inaction forced the company to cut prices. A move that soured early adopters, but also a move that propelled the handheld’s sales considerably. Years later, we see Nintendo dominating the more powerful PS Vita. It worked because they gave consumers multiple reasons to buy their product. It was an unconventional move, one that was made less than six months from its original release date.
With E3 2014 just around the corner we could see an all fronts push by Microsoft, similar to the game changing decision that Nintendo made in 2011. We’re going to hear about games, that much is certain. Xbox head Phil Spencer has made this much clear. But are they enough to drive new interest and demand to the console? Are they enough to change the public perception, and most importantly, make people more comfortable with a $500 price tag? After all, Sony will be making their own compelling arguments to purchase a PS4 as well. It’s not a certainty that Microsoft will drop the price of the Xbox One this year, but it’s certainly starting to look likely as they run out of cards to play.