Microsoft appears to be playing a game of cat and mouse with Sony by waiting to reveal the price of the Xbox Series X after the PS5 price tag has dropped. And so far the signs point towards Microsoft being willing to undercut Sony on price even if means losing money at the start of the next-generation console wars.
Back at E3 2013, Microsoft first revealed the Xbox One with its $499 price tag. This had all the buoyancy of a lead balloon with games console fans, especially when Sony then revealed that the PS4 would cost $399. Microsoft did offer a console in a bundle that included the now-defunct Kinect motion control accessory, which arguably made it good value. But combined with being less powerful than the PS4, the Xbox One had a rather rocky launch that took Microsoft a year or so to claw back from.
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Now the folks at the Xbox division seemed to have learnt their lesson and are waiting for Sony draw first. And when they do, Wedbush Securities analyst Michael Pachter reckons the Xbox Series X could end up being $100 cheaper than the PS5 as a result of Microsoft’s supposed machinations.
“Microsoft’s been pretty smart at waiting Sony out here. From what I’ve seen, Sony’s gonna have to charge $500 for their PS5 and Microsoft has a big balance sheet,” Pachter said on a podcast hosted by video games journalist Geoff Keighley.“If [Microsoft] wants to cut the price by $100 – just price below [PS5] and subsidise the first 10 million [consoles] – they will.”
“I think that they’re waiting to have Sony blink first and then they’ll reveal the price and the launch date,” said Pachter, who reckons the Xbox Series X will cost $400 and will “very likely” be launched sometime in November. “And fans will get a lot for their $400.”
Why Xbox Series X could price snipe
Sitting back and waiting for Sony to make its move with the PS5 pricing could be a risky one for Microsoft.
But it’s something that ex-Microsoft and EA executive Peter Moore said he’d be doing if he was in his “old job.” He noted that both companies will be thinking about how much they can “afford to lose in the first 12 to 18 months” when it comes to setting initial launch prices.
From the rumours so far, it looks like Sony will price the PS5 at some somewhere between $470 and $499, which seems reasonable given high-end specs like cutting-edge SSD storage and 3D audio tech. Try and get a gaming PC with plenty of SSD space and a specification to deliver 4K gaming, and you’re looking at spending well in excess of $1,000.
But if the Xbox Series X does undercut the PS5 by $100, then it could be sold for as little as $370. That’s a seriously good price for a machine with 12 teraflops of power, speedy storage, ray-tracing capabilities, and double the power of the Xbox One X, which at the time of writing costs just under $299.
Xbox as a platform, not a console
If Microsoft does indeed get aggressive with its Xbox Series X pricing, then it could take a loss on each console it sells. So how will it get away with that?
Moore reckons the Xbox Series X will simply be used as a platform to for its services, which is where Microsoft will pull back the money lost on selling the next-generation console hardware. Given Microsoft has had Xbox Live since the original Xbox, with it surging into popularity with the Xbox 360, it’s in a position to really capitalize on the services side of the Xbox rather than simply make money from console sales.
While Sony has greatly improved the online element of its consoles with PSN, Microsoft arguably has the edge with Xbox Live. And that’s something Moore reckons Microsoft will lean heavily on with the Xbox Series X.
Moore said that Microsoft is likely thinking: “Let’s get in, let’s price it right, let’s get the right content there, let’s continue to build against Xbox Live, let’s take advantage of this global crisis we’re going through right now because there’s a thirst and appetite for these online experiences that’s never been greater in our history.”
Pachter also added that Microsoft announced that the ability to buy a game for the Xbox One and then get the Xbox Series X version for free, is “super consumer-friendly” and will help make Microsoft’s console more attractive to gamers. And the move to start bundling services like Xbox Game Pass with Xbox Live into one package is something Pachter predicted could be a way for Microsoft to compensate and then capitalize upon selling a lot of Xbox Series X consoles at a loss.
“You’re starting to see [Microsoft] bundle that stuff together; I think there’s going to be an offering for $40-$50 a month and that’s it, no down payment, and you get a brand new Xbox Series X, Game Pass, Xbox Live, and that makes it a lot easier for most consumers to sign up,” said Pachter. “You don’t have to save up $500 right up front and then pay a subscription; you can just do it on an installment plan like you do with your cell phone.”
We’ve already seen Microsoft do this already with Xbox All Access. For $20 a month, this services gets you access to an Xbox One S, over 100 games, Xbox Live, and the option to upgrade to the Xbox Series X when it’s released, provided 18 months of payments have been made.
Pachter then added that this approach will then force Sony to follow suit with the PS5. Whether Sony will simply reduce the price of the PS5 after it launches or if it will create its own form of subscription service is open to speculation.
It’s also worth noting that Microsoft has committed to making all its first-party Xbox games available for Windows 10. And Microsoft's Xbox Play Anywhere feature allows for games to be played across both the Xbox One and PCs, with game syncing also on offer for select titles.
All this helps position the Xbox Series X not just as a powerful console but a gateway into a suite of Xbox services, well-honed by Microsoft’s software experience and backed up by its powerful cloud infrastructure. As such, making a loss on the Xbox Series X at launch is probably not something Microsoft is worried about.
Of course, all this is educated speculation; both Microsoft and Sony have kept their cards very close to their chest when it comes to both console pricing and a solid release date.
Microsoft is holding a series of Xbox 20/20 livestreams over the coming months, and we expect one of them to be focused on price and release date. Sony has yet to reveal the design of the PS5 and has only off its DualSense controllers, so it’s even further behind than Microsoft. But that could all change in June, which is when Sony is expected to carry out a big PS5 showcase.
One thing is for sure; the next-console generation will be properly exciting, and we could see a real difference between the Xbox Series X and PS5 when Holiday 2020 comes around.