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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information