The PS4 vs Xbox One battle isn’t getting any rosier, but we may have gotten a bit more clarity on Tuesday about which of the players is willing to be more aggressive. Remember Microsoft’s temporary Xbox One price drop for the holidays? Well, the company on Tuesday unveiled yet another Xbox One price drop — back down to $349 — and this one didn’t have the same “limited time offer” caveat. So is the next-gen console now $349 for good?
Most likely, yes. Microsoft hasn’t sold nearly the number of Xbox One consoles that Sony’s sold of its PlayStation 4, and although Microsoft revenues went down in Q4, the company’s in a position to stick with the decrease for the long haul. If it hopes to regain ground on Sony and the PS4, it’ll frankly have to be.
Microsoft saw a big bump in sales during its holiday-timed Xbox One price drop. Metrics like that are always justifying for the marketing team to hear, though the overall dip in revenue was less than ideal. Still, console hardware has traditionally been a loss leader, with the revenues made up down the line.
Sony has flipped that model on its ear with the PS4, selling through more than 18 million units in just over a year. However, whereas Sony’s gone gangbusters with sales and raked in PS4 revenue hand over fist, its overall corporate position is much more challenged, putting increased pressure on the PlayStation unit to avoid cutting its PS4 price.
The flip side of that argument, of course, is that Sony has no need to cut price. If it’s selling at such a high rate for $50 more, why drop? That argument is sound. But Sony seems hamstrung to a degree by that price, as the PlayStation unit seems to be holding the rest of the company afloat. In that sense, a permanent PS4 price drop is off the table for more than one reason.
Make no mistake, Microsoft needed this latest Xbox One price drop. The strategy paid off during the holiday season, and it’s likely that once the price went back up, the Xbox One sales decreased by an order of magnitude. Three weeks into the “back to normal” pricing seems about right for determining whether a sales slow-down was a fluke or a trend. More than likely, it was deemed a trend, leading to Tuesday’s latest Xbox One price drop.
And this time, it’s likely to stick around. Software players like EA, Activision and others follow the install base. In this case, that goes clearly in Sony’s favor. If Microsoft hopes to have the Xbox One be a loss leader, it will need software sales to recoup that loss. Yet without an install base, that saving grace of must-have software won’t come, leaving the Xbox One as just a loss — no leader.
In what’s reported to be a decade-long “marathon” for console supremacy — a word Microsoft itself has used — something had to be done to catapult sales long term. So let’s all say it together, shall we? “Hello, permanent Xbox One price drop.” This time, it’s not likely to go back up.