It’s time for video game fanboys to stop pretending to be business people. For the past year of the PlayStation 4 and Xbox One’s commercial existence, die-hard fans of both consoles have engaged in an endless, tireless and frankly meaningless argument about everything related to “PS4 vs. Xbox One.” The latest volley says Microsoft’s Xbox One is a lost cause. That’s an asinine argument. Sony’s in trouble, not Microsoft.
It’s a fool’s errand to say Sony doesn’t have the upper hand at this point in time. The company has more than 13.5 million PS4 sales in the past year, while Microsoft is rumored to have sold less than half that many Xbox Ones. Microsoft hasn’t reported official sales figures since the first part of 2014.
Sony has also dominated the “free games” circuit for its most-profitable members, offering PS4 owners who belong to PlayStation Plus three free games in November 2014. It’s the third consecutive month Sony’s offered PS4-owning PS Plus members three free games. Conversely, Microsoft’s similar Xbox Games with Gold November 2014 lineup offers one new game to Xbox Live members, continuing a troubling tradition of not equaling Sony’s generosity.
In addition, Sony’s nabbed some high-profile exclusives, most notably timed exclusivity on some Destiny DLC. Though Destiny itself hasn’t been the mega hit Sony (and Activision) had hoped it would be, the agreement still has political clout.
And yet over the long term, none of that may matter. Microsoft is frankly in a better position.
Sony had all the cards in its favor going into the PS4 launch. Microsoft had some major PR hurdles to overcome (always-online functionality, no used games, etc.), the Xbox One had a higher MSRP due to Kinect, and Sony grossly outspent Microsoft in advertising while Microsoft devoted resources to rebuilding trust among the gaming community.
In case you hadn’t noticed, this is now November 2014. Those tables have begun to turn.
Microsoft has implemented an Xbox One price drop, the company’s giving away games for free in a handful of great bundles, its partnership with the NFL is starting to pay off, and Xbox One ads are flooding the airwaves of ESPN and the major networks like Sony’s ads were last year, while Sony’s ads are appearing with much less regularity.
Some would argue this is all a sign of desperation by Microsoft. Considering the hole in which Xbox One sales results find themselves, there’s some logic in connecting those dots. But more than likely it’s an opportunistic and proactive decision to win the “marathon” as Microsoft has called it rather than “the sprint.”
While Sony basks in high PS4 sales results, the number of must-have exclusives Sony’s negotiated is surprisingly small considering the console’s 13-million-plus install base. Furthermore, Sony suffered a massive $806 million loss during the previous quarter. And that was lower than investors had initially feared.
By comparison, Microsoft announced revenue of $23.20 billion in Q3.
Those revenue results have a direct relationship to video games, and it’s foolish to think otherwise.
Sony Corp. has seemingly become reliant on the PlayStation 4 to keep its company afloat. If the company is struggling in other realms, particularly its mobile division, can gamers honestly expect Sony Computer Entertainment America to pursue a PS4 price drop any time soon? Can the PlayStation faithful really expect SCEA to pay handsomely for future third-party exclusives when its parent needs every ounce of profit from its PS4 unit?
On the flip side, Microsoft has a mountain of cash, and while new Microsoft CEO Satya Nadella has taken some dramatic cost-cutting measures, he’s clearly shown a willingness to invest in Xbox. Price cuts? Check. New partnerships that Sony doesn’t have, like EA Access? Check. Giving away games in new holiday bundles? Check.
The adage in Las Vegas is you have to have money to make money. Microsoft has it. Microsoft is spending it. And by all accounts Microsoft will continue to spend it to close the sales gap. The goal, of course, is to win the PS4 vs Xbox One battle.
Does Sony need to spend right now? Not really. The PS4 has a healthy lead at this point in time. But this console generation is expected to last at least as long as the previous one, and we’re just beginning Year Two. It’s short-sighted to look at the current state of affairs and not think Microsoft is in a better long-term position. Sony is hemorrhaging cash, while Microsoft’s making it. Sony’s reliant on PS4 to make as much profit as possible, while Microsoft’s other divisions are subsidizing Xbox to a certain degree.
Taking all that into consideration, it really feels like Sony’s in trouble, not Microsoft. Sony’s winning today’s sales battle, but the evidence seems to point to Microsoft winning the long-term war.
