Xbox One Price Cut Appears to Be Working

Though the new $399 Xbox One package is not available until June 9, a leading video game retailer's CEO says the price cut appears to have increased interest in the console.

May 28, 2014 at 10:12AM

In the nine days since Microsoft (NASDAQ:MSFT) began selling a $399 version of its Xbox One console, demand for the gaming system appears to have increased, according to one major video game retailer.

"I definitely think we're already seeing in our stores with our reservation program as well as dialogue with PowerUp Rewards [members that] there's a stronger demand as a result of the price drop," GameStop (NYSE:GME) President Tony Bartel said on a phone call last week. "The good news for us is ... we'll sell a lot more units."

The newly announced $399 Xbox One package does not include the Kinect motion sensor controller, which was bundled with the previous $499 version of the console. That configuration is still available. The new $399 version can be pre-ordered at GameStop, directly from Microsoft, or from a number of the company's other retail partners for a June 9 release. Microsoft also plans to sell Kinect as an add-on, though its product page on the Xbox website shows it as "coming soon." 

The unbundling of Kinect allows Microsoft to offer its base console at the same price as rival Sony's (NYSE:SNE) PlayStation 4. Sony has an early lead in the console war with the company reporting in April that 7 million PS4's have been sold. Microsoft has not released sales numbers for Xbox One but the company posted -- also in April -- on a company blog that the console had shipped 5 million units to retail.

Hardware sales are climbing in general

Spending on video game hardware grew 47% to $983 million during the first quarter of 2014, but total industry consumer spending on video gaming fell 1% to $4.6 billion compared to the same period in 2013, according to NPD. The research firm attributes the rising hardware sales to the launch of Xbox One and PlayStation 4. NPD believes that this trend should continue through "most of 2014," according to NPD analyst Liam Callahan.

While hardware sales have risen and will likely stay high, Microsoft may have won itself more customers with the $100 price cut. So far neither company has released a game that pushes fence-sitters into choosing one platform over the other -- there haven't been any massive hits for either console. Even Titanfall, a heavily hyped exclusive on Xbox One that was bundled with the original $499 Xbox One package for no additional charge, did not appear to move the needle on console sales. 

That's not to say Titanfall is not a hit. The game was the top-selling title in April, according to IGN, but it hasn't become the mass-market cross-over megahit (like Halo for the first Xbox in 2001) that convinces casual gamers and families to spend an extra $100 buying a console. With the base unit of both new consoles now costing $399, software releases may play a bigger role in people unsure of which to buy. 

Both Sony and Microsoft have made exclusive deals for various titles, but Microsoft has deeper pockets. Offering exclusivity gives game companies a smaller universe of potential buyers, but the added publicity and promotion is often worth it. Though details of the deal between Microsoft and Titanfall publisher Electronic Arts (NASDAQ: EA) have been kept secret, you can assume the arrangement compensates the publisher for all the PlayStation sales it won't be making. 

More good news for consoles

While Xbox One has not sold as well as PS4 it has gotten off to a strong start on a historical basis. The One has outsold the Xbox 360 by 76% for both of those systems' first six months in market, according to Microsoft. To date sales of PS4 and Xbox One hardware are more than double the sum total of PS3 and Xbox 360 hardware sales in their respective first six months, according to NPD.

So while the media often makes it seem like one or both consoles are struggling to find users, neither company has reason to be alarmed. Most people do not buy a new $399 (or $499) console on the night it gets released. Instead people either wait until a game they want is only offered on one platform or some life occasion (a holiday or a birthday) helps justify the purchase. And while the new consoles are exceptional, the previous generation was pretty damn good. For casual players or those with younger kids (of which I am both), there's simply not a pressing need to upgrade. I'll buy one eventually, but my Xbox 360 still meets my console needs. 

The sales battle is just beginning

The Xbox price cut needed to happen to make sure Sony didn't run off to an insurmountable lead. With that no longer an issue it's possible that neither console becomes the clear winner. In the previous generation there were three winners -- Xbox 360, PS3, and Nintendo's (NASDAQOTH:NTDOY) Wii were all hits with many people owning more than one. The same could be true in the next-generation battle, as both Xbox One and PS4 could reach the approximately 70 million consoles their predecessors each sold.  

There's no guarantee of that, and it's still early enough that either side could develop (or stumble upon) the so-called killer app that tips the scales in their favor. But for now, the decision to buy one console over the other is personal preference, and neither side has a clear advantage. Without the Xbox price cut, that was not the case -- even people comfortable with the Xbox controller (like me) because they own a 360 had to give PS4 consideration. Now, I am much more likely to stay in the Microsoft fold. 

Microsoft does not need to eliminate Sony. Both companies are successful if they hold serve and continue battling for first place versus a close second.

Are you ready to profit from this $14.4 trillion revolution?

Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980s, before the consumer computing boom. Or purchasing stock in e-commerce pioneer Amazon.com in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.

Daniel Kline is long Microsoft. He is considering justifying the purchase of an Xbox One by telling his wife he "needs one for work." The Motley Fool owns shares of GameStop and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers