Microsoft Offering Lower Price on Xbox One for the Holidays

The console has fallen well behind Sony's PlayStation 4 in sales.

Aug 15, 2014 at 8:06AM

Editor's Note: Due to currency confusion, this article originally contained incorrect pricing information. We apologize for the error.

Microsoft's (NASDAQ:MSFT) Xbox One saw an uptick in sales when the company unbundled the Kinect motion sensor device from the console, allowing for a reduction in price from $499 to $399. But even with the increased momentum, the Xbox One remains well behind Sony's (NYSE:SNE) PlayStation 4 in sales.

In an attempt to reverse that, Microsoft announced an aggressive holiday pricing plan as well as numerous new exclusive titles Tuesday at Gamescom 2014, Europe's biggest video games expo. The new bundles effectively drop the price below its current $399, and one bundle being offered only in Europe costs £349 (the current Kinect-free European list price) and comes with Electronic Arts' (NASDAQ:EA) popular FIFA15, as well as a headset and some other goodies.

"These bundles offer a great opportunity to enjoy Xbox One alongside an incredible lineup of first- and third-party games, making Xbox the best place to play this holiday and beyond," Xbox head Phil Spencer said.

What Spencer is not saying is that the company is doing everything it can to stop Sony from building an insurmountable lead.

How big is Sony's lead
Microsoft has been cagey about sales for Xbox One, but since the console launched at pretty much the same time as PS4 in late 2013, it has been outsold by the Sony device in every month except December, according to The Wall Street Journal. Sony claimed Tuesday that it has sold 10 million PS4s in the nine months the console has been on the market. Microsoft has not released a specific number for Xbox One but previously claimed 5 million units shipped to retail. Current estimates suggest that around 5 million Xbox One consoles have actually sold.

While dropping Kinect and lowering prices for Xbox One increased sales, it did nothing to slow Sony's momentum. In June, after the price cut, Microsoft announced that sales had doubled for its console. That led to much speculation that Xbox One would outsell PS4 for the month. That was not the case, as NPD Group reported that PS4 was still the leading console in the U.S. for the month. The cheaper, Kinect-free Xbox One went on sale in the U.S. June 9.

Though Xbox One sales are in line with sales of the previous-generation Xbox 360, Microsoft has to be concerned with Sony having twice as many consoles in consumers' hands. In the previous generation of consoles, no real winner emerged, and developers had to make products for not only Sony's PS3 and Microsoft's Xbox 360, but also Nintendo's Wii. If PS4 establishes itself as the clear winner with a much larger user base, then developers will be more likely to focus on releasing games for PS4.

If that happens, Microsoft will have to pay dearly to keep new titles flowing. It's similar to what is happening in the mobile phone world where Apple's iPhone and phones running Google's Android control so much of the market -- Microsoft must pay top app makers to release versions for the much smaller Windows Phone universe.

We're not at the stage yet -- and Microsoft appears to be throwing plenty of money around to lock up exclusive titles anyway -- but if Sony keeps selling twice as many consoles as its rival, it will happen at some point.

What is Microsoft offering?
At Gamescom, Microsoft unveiled three bundles for the holidays, with the third one being a European exclusive. Here's a look:

  • The Xbox One Limited Edition Call of Duty: Advanced Warfare bundle will ship starting Nov. 3. It includes a 1TB hard drive, custom console, controller, and limited-edition exoskeleton, plus a digital copy of the Call of Duty: Advanced Warfare Day Zero edition for $499.
  • The Sunset Overdrive bundle comes with a white console and wireless controller, a digital copy of the game, and special day-one-edition in-game items. It costs $399 and will be released Oct. 28.
  • The FIFA15 bundle for Europe comes with an Xbox One Console, a controller, an HDMI cable, a headset, a digital version of the game, and an Ultimate Team Legends Gold Pack for £349.
The first offering is not a price-based deal, but the second two clearly are. The Sunset Overdrive package offers a relatively large savings for anyone who would have purchased the $60 game. The hard drive and other perks further reduce the effective price. The FIFA15 package is a tremendous deal, as it keeps the same sticker price but includes the popular game and hardware, pushing the effective price of the console below any previously offered deal.

Microsoft needs to sell consoles at all costs
Microsoft does not need to make money selling hardware. It needs to make sure people have its consoles in their living rooms. With game sales increasingly becoming digital -- cutting out retailers -- along with ancillary revenue from app sales and cuts of subscription revenue, every installed console is a mini-store. Microsoft is being aggressive with its holiday pricing because the more consoles it sells, the more money it will make from selling software and more to Xbox One owners.

Sony has consistently led in this round of console wars, and price has been a major factor. Microsoft was stubborn in forcing consumers to buy -- and pay more for -- the Kinect. It cost significant early sales. Undoing that decision that and matching the base price of the PS4 helped, but the company needs to make Xbox a value to consumers -- a cheaper choice than the PS4 -- if it hopes to erase its 5 million-unit deficit. 

The brewing battle for your living room
As the console contest wages and more players try to control your living room, you know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple. 

 

Daniel Kline is long Microsoft. He has not purchased an Xbox One or a PS4 but might this holiday season. The Motley Fool owns shares of 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