Xbox Won't Raise Price Of Consoles As It's Not Fair On Customers (2024)
Phil Spencer, Xbox's head honcho, has said that there is no intention to hike the price of the company's consoles currently because it would place significant economic strain on their intended customers. That's nice, isn't it?
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Both November and December are looking stacked for shiny Xbox releases, includingSkull & Bones, Goat Simulator 3, The Devil In Me, Marvel's Midnight Suns, The Callisto ProtocolandHigh On Life. The cost of games is continuing to scale according to the value of the new generation of consoles, and so, the choice of which one to buy in the midst of an already hefty holiday season is likely to weigh heavy on the minds of families.
Check out the trailer for Planet Of Lana, a pretty puzzle-platformercoming to Xbox Game Pass early next year!
Speaking to CNBC, Spencer was asked about what he thought of the recent price change of the PlayStation 5 and whether or not Microsoft is looking to mimic that price increase with its own products.
"We're always evaluating our business going forward. So I don't think we can ever say on anything that we will never do something. But when we look at our consoles today, and you talked about it - Series X and Series S, we think value is incredibly important," answered Spencer. "We love the position of Series S in the market, which is our lower cost console. Over half of our new players that we're finding are coming in through Series S."
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"And I can definitely say we have no plans today to raise price of our consoles. We think in a time when our customers are more economically challenged and uncertain than ever, we don't think it's the right move for us at this point to be raising prices on our console," concluded Spencer. That's one less thing to worry about.
As a seasoned expert in the gaming industry with a deep understanding of the dynamics surrounding console pricing and market strategies, it's evident that Phil Spencer, the head of Xbox, is making a strategic move by affirming that there is currently no intention to increase the prices of Xbox consoles. This assertion is not merely a casual statement but is rooted in a careful consideration of economic factors and a keen awareness of the gaming industry landscape.
The evidence supporting Spencer's stance is multifaceted. First and foremost, he acknowledges the economic strain that a price hike could place on the intended customers. This demonstrates a nuanced understanding of the economic realities faced by the target audience, aligning with a customer-centric approach that values affordability and accessibility.
Furthermore, Spencer points to the significance of value in the current gaming market, particularly emphasizing the role of the Series S as the lower-cost console. The mention that over half of new players are entering the Xbox ecosystem through Series S underscores the success of this pricing strategy and validates the belief in providing accessible options to a diverse player base.
The decision not to raise console prices is also contextualized within the broader industry landscape, as evidenced by Spencer's reference to the recent price change of the PlayStation 5. By stating that they are always evaluating their business and not ruling out future changes, Spencer maintains a strategic flexibility while emphasizing the current commitment to maintaining affordable options for customers.
In conclusion, Phil Spencer's statements reflect a thoughtful and well-informed strategy aimed at navigating the challenges of the gaming industry. The emphasis on value, consideration of economic challenges faced by customers, and awareness of market dynamics collectively demonstrate a depth of knowledge and a commitment to providing a positive gaming experience for Xbox users.
The system went on to sell a worldwide total of 24 million units, including 16 million in North America; however, Microsoft was unable to make a steady profit off the console, which had a manufacturing price far more expensive than its retail price, despite its popularity, losing over $4 billion during its market life.
Last year, during its court battle with the Federal Trade Commission over its $69 billion acquisition of Activision Blizzard, Microsoft said in a court filing that Xbox had “lost the console wars” and “has consistently ranked third (of three) behind PlayStation and Nintendo in sales."
In other words, Microsoft does not make money from selling Xbox consoles, and the hardware actually only plays a role in the company's long-term software and services strategy.
"We don't -- we sell the consoles at a loss," she replied, before confirming that Microsoft has never earned a profit on console sales. Microsoft has been making games consoles since the original Xbox in 2001. It released the Xbox Series X and S last November.
Last month, Microsoft reported that Xbox hardware revenue was down by 31 percent year over year and an obvious admission that this was “driven by lower volume of consoles sold.” Last year, Microsoft reported a 30 percent drop in Xbox hardware revenue, blaming “increased console supply” from the prior year in 2022.
If your Xbox console is unexpectedly shutting down, it may be because it's not getting enough ventilation, or there may be a problem with the power supply.
The main issue is that the Xbox division is stagnating. Although Microsoft reported a 51% growth in its Q3 gaming revenue, without Activision Blizzard sales would have fallen 4% year-over-year. So there is now a lot of pressure on the company's game development studios.
Microsoft is neither exiting the console market nor taking all its games multiplatform, as whipped-up rumour mongers had wildly speculated. And the (excellent value) Xbox Game Pass subscription service is remaining exclusive to Xbox and PC. This is, essentially, non-news.
Sony has announced that the PS5 is now the developer's most profitable console generation throughout its 30-year gaming history. The PS5 has reportedly nearly matched the PS4 in sales with $106 billion USD, while boasting a higher operating income at $10 million USD.
In terms of nominal gross (without inflation), the highest‑grossing video game to date is Dungeon Fighter Online, a 2005 beat 'em up that has grossed $22 billion worldwide (mostly in Asia) as of 2023.
Microsoft has made very little if any money on the consoles themselves. It has been reported that it took Microsoft five years to break even on the Xbox One. Microsoft's profits come from licensing to 3rd party publishers and from subscriptions to Xbox Live and Xbox Game Pass.
Unlike competitors Sony and Nintendo, Microsoft doesn't sell video games hardware at a profit. No Xbox console from any generation has been sold at a profit. In fact, non-profitable hardware was a source of Microsoft's pre-merger pains, and a catalyst for the $68.7 billion buyout.
“The console gaming business is traditionally a hardware subsidy model. Game companies sell consoles at a loss to attract new customers. Profits are generated in game sales and online service subscriptions.
The PlayStation 2 was first released in 2000 in response to Sony's hugely popular original PlayStation. The PS2 has become the best-selling video game console of all time. As of February 2024, it had sold over 158 million units worldwide.
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