Microsoft Shocks Sony by Announcing Kinect-Less Xbox One at $399

Source: Xbox.com

It's no secret that Sony (NYSE: SNE  ) has been winning this round of the console wars. The company's most recent sales data had the PlayStation 4 eclipsing 7 million units sold to consumers as of April 6. Microsoft's (NASDAQ: MSFT  ) last quarterly report showed 5 million Xbox Ones shipped to retailers. Now, Microsoft has announced that it will ship a version of its console without the Kinect camera in an attempt to reinvigorate its platform and limit Sony's gains. The system will hit U.S. retailers with a $399 MSRP. That's not the only big change in the works.

Sony's PlayStation Plus online service has been offering offering superior value and building a user base lead over Microsoft's Xbox Live. Consider that Microsoft once stood as the undisputed leader of online console gaming and it's clear that Sony has accomplished something with its platform. Microsoft has announced a series of changes to Xbox Live that look to make it much more competitive. Welcome to the Xbox One's comeback push.

Microsoft reshapes the console battlefield
The revelation that Microsoft will ship its console without the expensive Kinect camera is the biggest gaming news to hit this year. Particularly shocking is the timing for the announcement and the launch of the company's new SKU. While many analysts and industry watchers predicted that Microsoft would make this move, it's arriving earlier than most were expecting. The new $399 Xbox One will hit all territories in which the platform is currently available on June 9, just in time for the E3 gaming conference. The price reduction should substantially better Microsoft's standing in the console race. It gives the platform an actual shot of achieving market leadership.

Xbox Live gets a value boost
Microsoft is also making serious changes to its Xbox Live online platform, offering better value in hopes of better competing with PlayStation Plus. Introduced with the original Xbox, the Live platform stands as one of Microsoft's greatest accomplishments in the gaming space. The company was ahead of the curve with its push for online gaming, and it reaped the benefits. The success of Live on Xbox 360 generated incredible margins for the company. Heading into the current generation, Xbox Live was Microsoft's greatest gaming asset. The company got overconfident, however.

Sony's PlayStation Plus currently offers users access to a greater number of games for its subscription cost. If PlayStation 4 users decide not to subscribe to Plus, they can still access services like Netflix, something not currently available on the Xbox One. A June update will change all of that, however. Xbox One and Xbox 360 users will be able to access video streaming and other services without needing a Live subscription. Additionally, Microsoft looks to seriously beef up its Games with Gold initiative. The heightened value push will help Microsoft's online service better compete against PlayStation Plus and stop user bleed to the rival service.

A strategy to combat Sony's early gains
Performing well early in this console generation is more important than in any previous cycle. The fact that both the Xbox One and the PlayStation 4 now require paid subscription for online play means that there will be fewer users who are active in both ecosystems. This made the lead that Sony has established particularly troubling for the Xbox One's prospects, but it's clear that Microsoft has at least recognized the gravity of the situation. The company is making the necessary moves to improve its gaming prospects. Most importantly, it is addressing perceived value deficiencies in its hardware and online platforms, allowing the focus to return to its offering of exclusive games and media services.

It just got real...
With the announcement of a Kinect-less Xbox One, Microsoft has seriously improved its competitive chances in the console wars. What's more, the speed with which the company has acted portends very well for the future of the device. If the Xbox One were left to languish too long at its current $499 MSRP, the situation would have been disastrous. It's undeniable that Microsoft botched the rollout of its latest console, but it's also clear that these mistakes have been recognized and that they are in the process of being rectified. The console wars just got a whole lot more interesting. 

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 13, 2014, at 7:36 PM, JJ82 wrote:

    I don't know of a single person that passed on the One because of the Kinect or the price. Its due to it being an "entertainment hub" with weaker hardware.

    The Kinect, Price, arrogant ceo's and horrible "vision" came after that.

  • Report this Comment On May 13, 2014, at 7:45 PM, chicagocubsfan wrote:

    How did this shock Sony? People have been predicting this on message boards for months, so you think that Sony wasn't expecting it lol? Sounds dubious to me, pretty much a click-bait title.

  • Report this Comment On May 13, 2014, at 8:06 PM, SuntanIronMan wrote:

    The Xbox division's voice mail just be filled with a few angry messages, haha. There are a few developers who still have games yet to be released that will use the Kinect as the primary controller.

  • Report this Comment On May 13, 2014, at 8:46 PM, ashleyjhonson wrote:

    Kinect always struck me as odd because by its nature it excludes so many games (RPG, strategy, FPS, Mech sims *cough cough* etc). Still, it was novel and having played Dance Central with my brother's Kinect, very fun. Enough to move a brand new system though? Especially once the novelty has worn off? I'm not surprised that it failed to do so. I am surprised that MS execs apparently thought it would http://goo.gl/6uWeHW

  • Report this Comment On May 13, 2014, at 10:17 PM, SmoothDouglas wrote:

    XBox is bringing a new attitude to the game. The new XBox head guy Phil Spencer is making a very strong play here. The XB1 has more features than the PS4 when it included Kinect. Now they're much closer in comparison although the XB Live services are still better than the PSN. Now, it's simply a matter of what Exclusive games (Halo, Gears of War) you like and what your friends have. If alls equal the XB1 seems more ready for it than the PS4.

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