One the video game "console wars," it really hasn't been a fair fight.
The PlayStation 4 gained a dominant lead over the Xbox One when the two devices were launched within a week of one another last November and hasn't looked back. Microsoft's recent revamp of a few key aspects for the Xbox One does not appear to have made any meaningful difference at present. And as investors and gaming enthusiasts learned recently, Sony's device remains as dominant as ever.
Sony surges and Microsoft meanders
Last week, Sony announced that the PlayStation 4 had surpassed 10 million total end-user sales in the 10 months since the console's market debut. This makes the PS4 Sony's fastest-selling video game console in company history and helps to further paint Microsoft's Xbox One as an increasingly inferior product (although it's hard to pin down exactly how inferior it really is).
Microsoft has been notably tight-lipped in providing periodic updates on Xbox One shipments, a sign most interpret as an attempt to avoid outright embarrassment over the console's seemingly abysmal performance versus the PS4. In April, Microsoft reported it had shipped 5 million Xbox One units into its retail channel. However, it's worth noting that Microsoft reporting shipments into its retail channel isn't necessarily the same thing as sales to consumers, Sony's preferred measuring stick for console shipment health.
Investors have attempted to establish a more current comparison between Xbox One and PS4 shipments from the recent quarterly reports from Microsoft and Sony. Although not a perfect barometer, it appeared that Sony's total console sales (PS4 and PS3) outdid Microsoft's gaming hardware (Xbox One and Xbox 360) by a rough ratio of three-to-one. Judged through this lens, it appears that Microsoft's cutting the Xbox One's price tag by $100 (to $399) to match Sony's pricing has done little to shift demand away from the PS4.
What this means going forward
If you guessed "nothing good" for Microsoft, you'd be correct.
Although quantifying the exact impact is difficult, Microsoft undeniably disenchanted a lot of its core user base with several decisions made in the Xbox One's rollout. Moves such as forcibly including Microsoft's Kinect motion sensing device, pricing the Xbox One $100 above the PS4, and requiring users to maintain a paid Xbox Gold subscription were all key tactical errors. That is particularly true in the context of today's gaming market, which is rife with console alternatives thanks to the proliferation of tablets and smartphones, Microsoft might find it harder than originally imagined to grow, or even keep, its once-loyal user base.
Video game hardware cycles are extremely long at about eight years between console refreshes, so there's plenty of time for Xbox One sales to catch up to the PS4. It's also important to note that Sony's console currently enjoys a substantial distribution advantage over Microsoft's device. At last tally, Sony sold the PlayStation 4 in over 100 countries and regions, while the Xbox retails in far fewer markets. Regardless, it appears the sales discrepancy between the two cannot be entirely explained away simply because of Sony's distribution advantages.
Ultimately, this is a narrative about consumer preference, and we have little evidence suggesting user penchants will shift anytime soon. So try as Microsoft might, it still appears 2014 will be the year of the PS4 in gaming circles, and that's certainly worth noting today.
Andrew Tonner has no position in any stocks mentioned. 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.
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