Many blamed that on pricing and assumed Microsoft would catch up once it lowered the dropped the price of its device from $499 to match Sony's at $399. That happened in June when the Windows maker unbundled the Kinect motion sensor from its game system. That move did increase Xbox One sales, but Sony's console still outsold it in the months that followed.
For the holidays, however, Microsoft decided that offering the same price was not enough and decided to cut the price of the various Xbox One bundles by $50. That lowered the cost of the most basic version of the console to $349. Better yet for would be purchasers, Microsoft even offers bundles, which include a popular game at the $349 price. That lowers the effective cost by roughly another $60 because anyone buying a new console is almost certain to buy at least one game as well.
This price cut began Nov. 2 and continues through Jan. 3 and Sony -- perhaps content that PS4 has been outselling Xbox One by a 2-1 margin since the consoles launched -- elected to not match it. That may prove to be a huge blunder for the company as early holiday sales results suggest that offering its device for less may be the thing that finally puts Microsoft back in the game.
What are the sales numbers?
Neither Microsoft nor Sony regularly reports sales figures for its console. Instead, the two companies have chosen to crow when reaching various milestones. Sony trumpeted reaching ten million units sold in August. Now, about three months later, Microsoft has announced that it has almost reached the same milestone. That's a huge leap in a few months as most estimates in August had the company having sold roughly 5 million consoles. Yusuf Mehdi, Microsoft's corporate vice president of devices and studios, took to the Xbox blog to celebrate the sales:
Sales have skyrocketed since the new price took effect on Nov. 2. Compared to the previous week, Xbox One sales in the US have more than tripled, which is exciting as more and more friends will be playing together this holiday. As we head into the busy holiday season Xbox One led generation 8 console sales in the US for the past two weeks. Shortly, we will have sold in to retailers more than 10 million Xbox One consoles.
Sony has not been sitting dormant since August and it claimed the PlayStation 4 had already shipped 13.5 million systems worldwide through the end of September, Ars Technica reported. That's a nice gain and the company certainly added to the total in October and November. Still, it has to be troubling news for Sony that Xbox One is outselling PS4 at the beginning of the holiday season.
Did Sony make a mistake?
When the consoles launched Microsoft positioned Xbox One as more than just a gaming device and much of the pitch was built around Kinect. Consumers rejected that idea (or at least they rejected paying $100 more for it) but the company was very slow to listen. Had Microsoft offered a Kinect-free bundle from the beginning, Sony likely would never have pulled ahead -- and certainly not by the margin it did.
Microsoft was arrogant to stick to Kinect and the $499 price as long as it did. Sony may be making the same mistake by refusing to match Microsoft's holiday pricing. Even if there is a slight consumer preference for PS4, the past year has shown that the console market is very price sensitive. The fact that a consumer can buy an Xbox One with a game for about $110 less than the cost of buying a PS4 plus a game is significant. It's also perhaps more relevant at a time of year when the purchaser is more likely to be a parent or other gift-giver with less of an opinion as to which system is "better."
Sony had a chance to put Microsoft on the ropes this holiday season and has instead allowed its rival to work its way back into the fight. Not matching the Xbox One holiday pricing is a mistake -- one it's not too late to fix. Not doing so may allow Sony's bigger, richer competitor to regain the upper hand and that's something the company should do anything it can to avoid.
Daniel Kline owns shares of Microsoft. 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.