Sunday, May 10, 2020

Xbox Series X could cost less than PS5 at launch, according to analyst

Microsoft is revealing more details about the Xbox Series X than ever but one thing it hasn’t confirmed yet is its next-gen console’s price. According to reputed industry analyst, Michael Pachter, it could be surprisingly low. 

Speaking on a recent live episode of Geoff Keighley’s Bonus Round (via PushSquare), Pachter suggests that Microsoft could consider taking a significant loss on its next generation console in order to launch it at $400.

Launching at this price point could potentially allow Microsoft's console to undercut its main competition—Sony’s PS5—which, Pachter points out during the episode, is rumored to have a launch price closer to $500. 

Getting the price right

It’s a bold strategy but according to Pachter “Microsoft has a big balance sheet” which means that “If they want to cut the price by $100, just price below and subsidise the first 10 million, they will." 

As a result, Pachter believes that Microsoft is waiting for Sony to "blink first, and then they’ll reveal the price and launch date. It’s going to be Holiday, so very likely sometime in November and very likely $400.”

Fellow guest on the episode Peter Moore, who has previously held prominent roles at Sega, Xbox and EA before becoming CEO of Liverpool F.C., agreed with Pachter’s view:

“What both companies are going through right now is how much we can afford to lose in the first 12 to 18 months? What is our attach rate of software to hardware? What is our revenue we can drive from services? What are we willing to do in year 1, 2 and 3 to hit 10 million?”

Moore went on to explain that "from the perspective of each company, Microsoft right now… the stock price, the market cap, everything is flying for them. Does Satya [Nadella, Microsoft CEO] say, ‘This is our opportunity right now as we did with Xbox 360, let’s get in, let’s price it right … Let’s dare Sony to come in at $500.'"

If Pachter’s scenario played out it would see Microsoft flip what happened at the launch of the PS4 and Xbox One in 2013, when Sony undercut Microsoft’s launch price and reaped the rewards. 

Microsoft has previously said that it’s learned from this launch mistake, with Phil Spencer saying that this time around “we will not be out of position on power or price.” 

Spencer's words don't, of course, mean the Xbox Series X will have a price point as low as $400—which would actually be lower than the launch price of the Xbox One—they do at least suggest that Microsoft is aware the price of its next console should better align with the price of its competition. 

It's worth pointing out, though, that Sony is also no stranger to the problems caused by a high launch price following the PlayStation 3's release in 2006, so both companies are likely to be taking great care with the pricing of their consoles given these previous missteps.

That said, until Microsoft and Sony officially confirm the launch prices for their consoles themselves all of this remains conjecture. Both consoles are scheduled to release in Holiday 2020 so it’s unlikely we have too much longer to wait to find out. 

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