Over the next few weeks, fan boys will battle it out for console superiority. Forums will explode with topics about which console is better and which system will succeed in the long run. The most devoted among us will wait outside for hours in the cool fall weather, hoping to be one of the first to get their hands on a new console.
But for many, the decision on whether to buy a Playstation 4 or an Xbox One will be not be made in the next month. Many will wait for the first price drop before deciding upon a console. In an effort to try to anticipate the first price drop[s], we have compiled some data from the previous generation of consoles to see if we can gain some insights.
The Xbox 360 launched in the fall of 2005 with a base price of $299. Besides special holiday bundles or promotions, the console did not receive a substantial price drop until three years later in the fall of 2008. The Arcade bundle, then the cheapest retail package, dropped to $199. During that same time period, the original 20GB Premium devices were phased out in favor of the new 60GB versions. Within a year of that model being introduced, it was reduced $100, from the original $349.99 in August of ’08 to $249.00 in August of ’09. During this same time period, Microsoft sold an Elite version that had 120GB and an original price tag of $479. By late 2010, as the Elite was being phased out in favor of a new 250GB high-tier model, the price had dropped all the way to $249.99.
What can we learn from the Xbox 360 price history? It is interesting that Microsoft did not drop the price dramatically until 2008. From 2008 to 2009, however, they reduced the price of their base model 28% and their elite unit by 33%. Prior to these drops, Microsoft had only dropped the prices by around 6% or so each of the previous holiday seasons. It would take three years before declining Xbox 360 sales pushed Microsoft to make a substantial price cut. Will it take that long before the Xbox One get similar cuts?
Of course, Xbox 360 did not exist in a vacuum. It faced considerable competition from the Playstation 3 and Nintendo’s wii. PS3, probably the most direct competitor, was released a year after the 360 and with a much higher price point. In November of 2006, Sony released two versions of the Playstation 3: a $499 20GB version and a $599 60GB version. Microsoft has managed to get their next-generation to market a year earlier and $200 cheaper than their main competitor. Yet, Playstation 3 boasted some impressive specs and a handful of important exclusive titles. In just a few short months, citing lackluster sales, Sony discontinued its cheaper 20GB model. By October of 2007, they released a new 40GB model that, at $399, was $100 cheaper and had twice the memory of their launch console. In late 2009, as Sony began to phase out the 80GB PS3, the price dropped another $100 to $299. In three short years, the memory had doubled and the price had been cut in half. By the end of 2010, five years since the release of Xbox 360 and four since PS4, both Sony and Microsoft had their consoles priced at $299. Ultimately, the Playstation 3 had much more significant and frequent price drops than the 360, but it also started at a higher price point, giving Sony more flexibility with price.
Of course, a lot goes into deciding the cost of a console. Manufacturing overhead, licensing fees, and global markets all contribute to a complex and often volatile decision-making process. Despite both Sony and Microsoft being no strangers to battling over console market share, there are a number of factors that make this upcoming battle rather unique. First, the consoles are being released within weeks of each other. Xbox 360 was released a year ahead of the PS3 and the original Xbox came out a year after Sony released the Playstation 2. For the first time in recent memory, the consoles would directly compete day one. Second, this is the first generation of consoles that will embrace the transition to fully digital content. Games can be downloaded entirely online, forgoing to the need to have an actual disc. This will make system updates more important and hard drive space even more crucial. Finally, both companies seem incredibly committed to supporting the previous generation of consoles. Microsoft just released a new 360 model that is selling this holiday season at some retailers for under $100 and Sony is rumored to be considering a significant price drop for the PS3. Many who own a current-fen system may be willing to hold onto it for another year in hopes that the Xbox One and PS4 will lower in cost.
So where does that leave us in terms of predicting the next few years? Currently the Xbox One is priced $100 more than the PS4, thanks in large part to the included Kinect sensor. Part of the problem in predicting future price drops is that they are largely tied to sales figures. Unless either of the consoles fails entirely, we may not see a price drop for a while. We could, however, see new models with larger hard drives released as early as next fall. Both Sony and Microsoft could probably, by next year, start selling these beefed up consoles for the same price they are offering at launch. It maybe a few years before we see a sizable drop in price, especially if sales are as robust as most analysts predict. Unlike the Playstation 3/Xbox 360 situation, both next-gen consoles are priced similarly enough that it should not impact sales too dramatically. Of course, some of that may depend on whether Microsoft can sell the value of the Kinect and its higher price.
Are you getting a day one console or are you waiting for the first price drop? Let us know in the comments below.