Analysts: Microsoft will undercut Sony on next-gen console price; Xbox Series X could...

midian182

Posts: 7,782   +80
Staff member
A hot potato: As we’ve learned from past and current generations of consoles, it’s not just a machine’s performance that makes it “better” than a rival. There are also elements such as games, reliability, and, of course, price. In the case of the PS5 and Xbox Series X, Microsoft’s offering could be the cheaper option, according to one analyst, as the company waits for Sony to reveal the PS5 price so it can undercut its rival.

The prediction comes from Wedbush Securities analyst Michael Pachter and ex-EA and Microsoft executive Peter Moore, who both appeared on Geoff Keighley’s Bonus Round podcast.

Pachter believes Microsoft is holding back from revealing the Xbox Series X’s price until Sony announces how much the PS5 will cost, at which point the Redmond firm will undercut it.

Back in February, we heard that Sony was having trouble deciding a price for the PS5 due to its expensive components. With some estimates putting the console’s MSRP as high as $550, the company will reportedly limit its supply at launch because of anticipated subdued demand compared to its predecessor.

Pachter believes Sony will price the PS5 at $500, which matches what we’ve heard before, and he thinks Microsoft will respond by announcing its machine will cost $400.

"From what I've seen, Sony's gonna have to charge $500 for the PS5," he said.

Pachter added that Microsoft will be willing to take a bigger loss on every Xbox Series X sold than Sony will on its PS5.

“Microsoft has a big balance sheet. If they wanna cut the price by $100 – just price below [PS5] and subsidise the first 10 million [units] – they will. So, I think that they’re waiting to have Sony blink first and then they’ll reveal the price,” he added. “Very likely $400.”

Moore agrees, saying that much of the decision on pricing will come down to how much each company can afford to lose. “Michael’s right; what both companies are going through right now is [asking] ‘how much can we afford to lose in the first 12 to 18 months?’ ‘What is our attach rate of software to hardware?’ ‘What are we willing to do in year one, two and three to hit 10 million [units]?'”

There’s been no official word from either company on how much their respective consoles might cost. What we’ve seen so far has been a bit disappointing: there was the bone-dry Sony presentation, and the Xbox game trailers from Microsoft, which didn’t look like the mind-blowing experiences promised by Xbox boss Phil Spencer. Hopefully, we'll get some solid pricing information soon enough.

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m4a4

Posts: 2,848   +3,623
TechSpot Elite
Well, considering MS has a stronger gaming services side of things (which includes PC, unlike Sony), they certainly can afford selling the hardware at a loss more than Sony (from my view).

My bet is that someone is going to announce $400 (probably MS first) and the other side will match it. I can't see Sony making the first move (for their sake), especially not at $500 in this economy.
 

GNelson

Posts: 16   +23
I would almost bet yes MS will be lower by $49.00 but will have a better set of give away items. They will market is saying here are three bundles at 700$ value and cost of 459.00 or something. You can only take a 15% hit on cost or sell below for a short term but giving something away already spent on in development is easy. Remember that software cost has already been expensed out so watch for it being sold this way!
 

Skjorn

Posts: 668   +534
Every PC player thinking maybe I should buy an xbox than build a new pc.
Maybe about one in every ten thousand..
As a PC gamer who enjoys high refresh rate displays and high fps, consoles mean nothing to me other than a new baseline for games.

And all xbox exclusives are available to PC..so no
 

Irata

Posts: 2,042   +3,469
Maybe about one in every ten thousand..
As a PC gamer who enjoys high refresh rate displays and high fps, consoles mean nothing to me other than a new baseline for games.

And all xbox exclusives are available to PC..so no

But honestly, what kind of gaming performance can you get on PC in the $ 400 - 500 range, even if you just use this money to upgrade the GPU?
 

Axil00

Posts: 82   +96
Michael 'never wrong' Pachter spinning his usual nonsense I see.

Microsoft might be able to swallow a billion dollar subsidy but shareholders wouldn't be impressed with such a huge divisional loss, which is why they don't do it.
While I agree that eating an additional 100$ seems like a bigger outlay than youd expect from a huge public company the economics may work.

Every xbox they get into someone's home has the potential to be extremely valuable. They want to sell as much content as they can digitally which delivers very high profit margins. They have also talked about upgrading your console in the future which is a source of profit that scales with the install base.

And perhaps most importantly they probably view every customer they dissuade from purchasing a PS5 as a perennial source of income they very rarely get an opportunity to tap into.

All that said, my guess is it'll be somthing like $50 cheaper, or even the same price but they throw you a coupon for 2-3 digital games of your choice.

People can point to PS5 exclusives all they want but you better value them extremely highly to choose a more expensive, less capable console with less longevity just to get access. And if MS bites hard enough into their market share how long do you think those titles will remain exclusive?
 

LinxESP

Posts: 72   +47
While I agree that eating an additional 100$ seems like a bigger outlay than youd expect from a huge public company the economics may work.

Every xbox they get into someone's home has the potential to be extremely valuable. They want to sell as much content as they can digitally which delivers very high profit margins. They have also talked about upgrading your console in the future which is a source of prof6thay scales with the install base.

And perhaps most importantly they probably view every customer they dissuade from purchasing a PS5 as a perennial source of income they very rarely get an opportunity to tap into.

All that said, my guess is it'll be somthing like $50 cheaper, or even the same price but they throw you a coupon for 2-3 digital games of your choice.

People can point to PS5 exclusives all they want but you better value them extremely highly to choose a more expensive, less capable console with less longevity just to get access. And if MS bites hard enough into their market share how long do you think those titles will remain exclusive?
But you have to remember that the manufacture price in both is quite different, the xbox has been presented more powerful and looks like all the cooling and stuff aint gonna be as cheap, ans sony hasn't show anything decente... so even the same price would mean MS already losing money
Is it worth? Phil knows
 

Bas Keur

Posts: 46   +28
Michael 'never wrong' Pachter spinning his usual nonsense I see.

Microsoft might be able to swallow a billion dollar subsidy but shareholders wouldn't be impressed with such a huge divisional loss, which is why they don't do it.

They did it with with every generation before, it's called R.O.I. shareholders will be thrilled if it helps to push more units. Buy 3 games and they make even. Most buy more
 

Axil00

Posts: 82   +96
But you have to remember that the manufacture price in both is quite different, the xbox has been presented more powerful and looks like all the cooling and stuff aint gonna be as cheap, ans sony hasn't show anything decente... so even the same price would mean MS already losing money
Is it worth? Phil knows
Oh I agree.
And to clarify my comment even the $50 discount vs Sony would be a welcome suprise. Large companies tend to be risk averse.

However if M$ learned from the shellacking Sony laid down on them last generation and wants to win this market badly enough, you can paint a story where the math works out.

They are looking to squeeze revenue out of thier consoles that Sony just can't. Play Anywhere, etc. And because of thier infrastructure advantage they have better margins on all digital sales.

So I guess what I'm saying is: I hope it true. I can see a business case to go this direction. But it's a really ballsy move and I wouldn't be surprised at all if there is nothing to the rumor
 

Vulcanproject

Posts: 1,506   +2,736
They did it with with every generation before, it's called R.O.I. shareholders will be thrilled if it helps to push more units. Buy 3 games and they make even. Most buy more

Everyone knows that most consoles have been subsidised from launch as loss leaders. The point is the times they have done it to the kind of level that has been suggested here the losses have been so enormous the lessons have been learned and it hasn't been done again. Microsoft got killed on the OG Xbox and then Sony the same on PS3.

Neither will do such a massive subsidy ever again. $50? Sure, at a push. $100 plus to come in that much cheaper at retail? Extremely unlikely. Wishful thinking from this analyst and everyone else that thinks it'll happen.
 

Bas Keur

Posts: 46   +28
But honestly, what kind of gaming performance can you get on PC in the $ 400 - 500 range, even if you just use this money to upgrade the GPU?

None, but $700,- and some ebay searching will get you started. Mark my words if the msrp is 550 it will be 650.
 

Bas Keur

Posts: 46   +28
Everyone knows that most consoles have been subsidised from launch as loss leaders. The point is the times they have done it to the kind of level that has been suggested here the losses have been so enormous the lessons have been learned and it hasn't been done again. Microsoft got killed on the OG Xbox and then Sony the same on PS3.

Neither will do such a massive subsidy ever again. $50? Sure, at a push. $100 plus to come in that much cheaper at retail? Extremely unlikely. Wishful thinking from this analyst and everyone else that thinks it'll happen.

Devs pay for the store, pay for the dev kits. Users buying just 3 games will nake enough money to be even. Remember the PS3 cluster sage ? Now ask yourself again why they killed linux on it.


 

dangh

Posts: 507   +773
Every PC player thinking maybe I should buy an xbox than build a new pc.
and what, forget large library of Steam games, gog games and easy access to titles which never came to xbox? Not mentioning full mod support for any title I wish to play?
As a PC gamer there is absolutely no need for an xbox. And additionally nearly all xbox games are available on PC, so if I ever would like to grab something from MS I still be bale to do so, flight simulator seems to be a very nice title. Which will work on any hotas without issue and with 3 screen set-up or with VR... why xbox, if it cant do 80% of things PC can?
 

dangh

Posts: 507   +773
But honestly, what kind of gaming performance can you get on PC in the $ 400 - 500 range, even if you just use this money to upgrade the GPU?
oh, so you're playing performance, not the games?:) that's cool. I don't mind to have to pay $500 every 5 years for PC upgrade to play games in high details, but all the games available on PC which is much more than what xbox offer, play them the way I want, with mods I want to have and paying for games much less as they are discounted on PC much faster than on ms store.
For $500 this winter I will be able to choose from new AMD navi 2 and nVidia ampere, with all the other card nicely discounted. If I want to have 12 tflops performance - this is AMD Vega 64, which costs like 300-400 dollars right now? Thankfully, I do not play performance, I play games.
 

Vulcanproject

Posts: 1,506   +2,736
Devs pay for the store, pay for the dev kits. Users buying just 3 games will nake enough money to be even. Remember the PS3 cluster sage ? Now ask yourself again why they killed linux on it.



I know about how this all works, except your hopeful attach rate figures for next gen is going to be entirely ruined by the fact Microsoft have built a cross generational aspect to their platform. They might sell a game for Xbox One and it'll transfer to XSX but it certainly doesn't pay for the subsidy like back in the day of the traditional loss leading machines you're alluding to. It isn't the same market any more.

You're suggesting that Microsoft indeed are going to go with the billion dollar hit they took on the original Xbox? Are you committing to that?

I'll wait and see the price but I wouldn't hold your breath. We're moving to games as a service and Microsoft are looking at generating more and more revenue outside the usual hardware streams, with games pass.

It still doesn't mean they can give expensive hardware away. Not to the level of subsidy suggested by this madman.
 

Irata

Posts: 2,042   +3,469
oh, so you're playing performance, not the games?:) that's cool. I don't mind to have to pay $500 every 5 years for PC upgrade to play games in high details, but all the games available on PC which is much more than what xbox offer, play them the way I want, with mods I want to have and paying for games much less as they are discounted on PC much faster than on ms store.
For $500 this winter I will be able to choose from new AMD navi 2 and nVidia ampere, with all the other card nicely discounted. If I want to have 12 tflops performance - this is AMD Vega 64, which costs like 300-400 dollars right now? Thankfully, I do not play performance, I play games.
The games are what matters but if I could play the same game on 1080p low or 4k high I would chose the latter. Easy of use is another factor.
Then again, it‘s not like I get to use either the PC or the XBox long enough to play any game in the first place since my kid is hogging it.
 

Bas Keur

Posts: 46   +28
I know about how this all works, except your hopeful attach rate figures for next gen is going to be entirely ruined by the fact Microsoft have built a cross generational aspect to their platform. They might sell a game for Xbox One and it'll transfer to XSX but it certainly doesn't pay for the subsidy like back in the day of the traditional loss leading machines you're alluding to. It isn't the same market any more.

You're suggesting that Microsoft indeed are going to go with the billion dollar hit they took on the original Xbox? Are you committing to that?

I'll wait and see the price but I wouldn't hold your breath. We're moving to games as a service and Microsoft are looking at generating more and more revenue outside the usual hardware streams, with games pass.

It still doesn't mean they can give expensive hardware away. Not to the level of subsidy suggested by this madman.

I hear what your saying, but have seen their earnings of the past years ?

2018 -- 16.57 B
2019 -- 39.248 B

That pure profit, sure mostly Azure, but just saying, they have enough liquidity to pull a stunt like this to get a buyer edge over Sony. The whole new service model is only helping making MS more money. So yeah, if I have to put my money on a bet like this, I would. Remind me over a year ;)

Cheers
 

SG736f6

Posts: 160   +245
I'd rather spend more $$$ on a PC and get cheaper games than buy a less expensive console with comparable performance but outrageously priced games. Then again, I'm more than happy to wait for a Humble Bundle or a Steam sale before paying full price on any game. My daughter has an Xbox One and the games are ALWAYS more expensive than the PC versions. 8/10 times we wind up buying the PC version and she just plays on PC instead.
 

Adi6293

Posts: 931   +1,309
An RTX 2060 laptop with Core i7 is less than $1000 from a good brand nowadays.

I have been with Xbox since day one and I feel they've lost me this generation.

And why would you even consider i7 with a RTX2060 laptop over Ryzen? Plus at $400 that will be INSANE deal, maybe not to 144Hz gamers but personally I care about visuals before refresh rate so 4K @ 60 with very good visuals for $400 - $500? Take my money that's all I'm saying
 

Skjorn

Posts: 668   +534
But honestly, what kind of gaming performance can you get on PC in the $ 400 - 500 range, even if you just use this money to upgrade the GPU?
You forgot the factor of XBL and PS+ over the consoles lifespan and full priced games at $60. Let's say 6-7 years of this. 50x6= $300 just to connect to the internet you already pay for. A full price game every year 60x6= $360. We're talking over $1k by the time the console is dying... so no consoles don't cost $400-500..