Microsoft’s new Xbox costs $500, but that could be a good thing – Business Insider
You might think it’s crazy that Microsoft is once again
introducing a new game console with a $500 price.
But it’s just possible the company is being crazy like a
Microsoft is pretty certain there’s a good market for its new
Xbox One X game machine, despite its high price point. More
importantly, the company is pretty excited about who’s likely to
buy the new device. The kinds of customers who will be attracted
to the Xbox One X tend to be the best game customers of all, Phil
Spencer, head of Microsoft’s Xbox operations, said in a
recent interview with Business Insider.
“The thing that we should all realize is that that customer buys
a lot of games,” Spencer said. “That customer plays a lot of
That’s a pretty strong argument for why huge companies like
Microsoft and Sony are bothering to create more powerful, more
expensive iterations of their existing consoles, even if those
consoles only serve a small minority of console buyers.
Because at first blush, the fact that Microsoft is offering
another $500 console seems absurd. Notoriously, the Xbox One
launched in 2013 with a $500 price tag, and that high price is
one of the main reasons why the Xbox One lags so far behind
Sony’s PlayStation 4 in adoption. The PS4 debuted at $400,
and has seen double the number of sales as the Xbox One.
Spencer understands this problem and perception, and he’s
not unrealistic about how sales of the new console will
compare with the Xbox One S, the new base model Xbox One that
“We’re gonna sell more Xbox One S consoles next year than we will
Xbox One X,” he said.
But as Spencer indicates, there’s a method to Microsoft’s
The company’s betting there’s a ready audience of folks
ready to buy what the Xbox One X offers. This is a console
that’s capable of outputting games in 4K resolution —
the next step after HD. There are definitely people who have a 4K
TV and who are itching for a game console that can take advantage
Here’s how Spencer described the target audience for the new
“You’ve got a person who really wants a premium experience.
“You ask who is that person today? I’m gonna bet a large
percentage of those people have a current-generation console
already. So in that world I have to show them an experience
that’s demonstrably better. And that’s where we started with Xbox
“We get some interest from PC people who have been playing 4K
games on their PCs now for awhile, and say, ‘Okay here’s a
console that can play a true 4K game with a controller sitting on
my couch. And I think a lot of the other people have a current
generation console and are looking for a premium experience and
something that really looks different.”
While Microsoft is offering gamers a premium experience,
it isn’t really charging them a premium to get it, even in
spite of the Xbox One X’s relatively high price. The
be making any money from selling Xbox One X consoles.
That’s because the components required to power
the level of graphical fidelity the box offers are
expensive. Indeed, the Xbox One X actually
looks like a bargain compared to what you’d have to pay
for a PC that has similar capabilities.
But that’s not unusual. Video game consoles typically aren’t what
make money in the video game business — it’s the games,
accessories, and services that make the money. Microsoft likely
makes far more money from Xbox Live Gold subscriptions, for
instance, than it does from Xbox One hardware sales.
And what makes the Xbox One X so interesting for Microsoft is
that the kind of folks who buy “premium” consoles like it
and the PlayStation 4 Pro are the kind of folks who not only buy
more games, they also tend to buy more accessories, and services
than the average customer.
Sony has already paved the way for a pricier, more powerful
console with its PlayStation 4 Pro. The company says that
Pro purchases now make
up about 20% of all PlayStation 4 sales. Spencer expects
similar adoption for the Xbox One X.
From where he’s sitting, though, that wouldn’t be a problem.