Sales of Microsoft's (NASDAQ: MSFT ) Xbox One video game saw a spike last month -- according to Microsoft, it sold twice as many consoles in June as it did in May. The sales spike was far from surprising: Early last month, Microsoft rolled out a new version of the Xbox One that retailed for just $399 -- the same price as rival Sony's (NYSE: SNE ) PlayStation 4.
But despite the cut, Sony's console continues to outsell Microsoft's in the United States. According to Sony, its PlayStation 4 was the top-selling video game console during the month of June.
Sony's early advantage
Both Microsoft and Sony's newest video consoles debuted last November, putting them on equal footing in terms of installed base and software libraries. Microsoft's console, however, was hamstrung by its price tag -- at $499, it was a full $100 (25%) more expensive than Sony's $399 PlayStation 4.
This stark difference in price worked in Sony's favor -- while retailers offered discounts to move Microsoft's console, Sony was faced with shortages -- it couldn't manufacture enough PlayStation 4s to satisfy demand.
The price difference was largely the byproduct of Microsoft's Kinect 2.0 -- the voice and gesture-based controller was bundled with every Xbox One console. Sony's PlayStation 4 came with no such accessory, but gamers seemed not to care.
Initially, Microsoft insisted that the Kinect was central to the Xbox One's design, and that removing it would be virtually impossible. Nevertheless, that's exactly what Microsoft did -- in May it announced that the Kinect would now sell as an optional add-on, and that the base Xbox One console would be available for $399 -- the same price as Sony's PlayStation 4.
TV no more
Although the Kinect was utilized by a handful of Xbox One games, its primary purpose seemed to be TV-related. By listening for voice commands and monitoring a user's hand gestures, Microsoft's Xbox One could replace a traditional TV remote.
As initially presented, Microsoft's Xbox One aimed to be at the center of a user's living room, serving as the focal point of the entire entertainment experience. These ambitions extended beyond Kinect to original programming -- when Microsoft unveiled the Xbox One last year, it announced that it had created Xbox Entertainment Studios, and had begun working on original programming -- TV shows that would be served up to Xbox One owners through Microsoft's Xbox Live service.
But Xbox Entertainment Studios is no more. Microsoft is closing the studio, though two of its projects -- the Halo TV show and Halo: Nightfall -- will reportedly live on.
At any rate, with the end of Xbox Entertainment Studios and the move to make Kinect an optional add-on, Microsoft appears to be doubling down on gaming, subtly rebranding the Xbox One as a pure gaming device.
Is Microsoft doomed to second place?
It's still early in the current console cycle -- Microsoft's Xbox One and Sony's PlayStation 4 have been available for less than a year (their predecessors launched almost a decade ago and continue to see new game releases), and Microsoft's tighter focus could ultimately make the Xbox One a superior gaming machine.
But it's alarming that, even with the removal of Kinect and the subsequent price drop, Microsoft's console cannot outsell Sony's in its home market. With CEO Satya Nadella recently reiterating the importance of Xbox to Microsoft's larger business, it's clear the Xbox team still has much work to do.
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