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Will a Cheaper Xbox One Make a Difference?

By Rick Munarriz – Mar 30, 2014 at 6:00PM

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Microsoft's Xbox One bundle is selling for less than the game-less console it rolled out just four months ago.

Source: Microsoft.

We're now more than four months into the video-game generation led by Microsoft's (MSFT 1.92%) Xbox One and Sony's (SONY 2.39%) PlayStation 4, and we may have its first pricing war. 

Microsoft's new Xbox One bundle -- combing the Xbox One and Electronic Arts' (EA 0.99%) Titanfall video game -- is being offered for $450 across various retailers. That's a pretty big deal since the original Xbox One hit the market at $500 without a game included. The Titanfall combat game retails for $60 on its own, so the bundle effectively values the console for less than the $400 PS4 console. Sony currently does not offer any bundles.

The Electronic Arts game isn't mere filler. Titanfall just came out earlier this month, and the shooter has been generating rave reviews. Its score across dozens of established reviewers tracked by Metacritic makes it the third best reviewed game for the Xbox One in the console's brief public tenure. Framed another way, it's the best ranked game that's been put out in 2014. If fighting titles aren't your bag, some retailers are also offering a different bundle anchored by the Forza Motorsport 5 racing game at the same $450 price point.  

The discount that started with a couple of retailers has spread in recent days. Now even Microsoft's own store is offering up the two bundles at $450. That may not last. The software giant is describing this as a "limited-time savings" that could reverse itself at any moment. However, if the markdown sparks a spike in console sales this month relative to the PS4, do you really think that Microsoft will be able to go back to $500 for its console or even higher for a system bundled with a popular game?

Both new consoles have been selling well. GameStop (GME -2.98%) revealed on Thursday that hardware sales soared 88% in its latest quarter, but the problem is that folks aren't buying games. New software sales plunged 24%, and even GameStop's bread-and-butter business of reselling refurbished trade-ins fell during the quarter. Shouldn't folks have been flooding GameStop with trade-ins to help pay for their shiny new Xbox One and PS4 consoles? Shouldn't gamers be loading up on new software to show off their new toys?

Things aren't perfect. The Xbox One and PS4 were marketed last year as home theater cornerstones, so folks may be spending as much time watching enhanced TV, engaging with Web-tethered apps, or just playing downloaded games. However, the one thing that is certain is that Microsoft isn't doing itself any favors by being the more expensive of the two systems. Sony pulled a fast one at the last minute last year by eliminating its motion-sensing camera as standard equipment to achieve a lower price point, but if Microsoft is able to stick to this "limited time savings" as a permanent move it would give the stateside company a big edge in a race that's been neck-and-neck since November.

Four months into a new product cycle may seem a bit early for its first price war, but there is too much at stake here for an industry's that's been languishing for years. If cheaper Xbox One bundles stick around, don't be surprised if Sony makes the next move.

Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of GameStop and Microsoft. 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.

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