Thanks to massively successful launches and finely tuned hardware, Sony and Microsoft have the luxury of waiting to begin dropping their prices.
(Credit: CNET)
Those holding out for a cheaper next-gen console come next year may need to reconsider their timeline for making the plunge.
The PlayStation 4 and Xbox One launches have given Sony and Microsoft a definitive and reassuring answer to the demand question mark looming over high-end living room gaming. That means that unless one starts to aggressively undercut the other, we aren't likely to see our options decrease in price until well into the devices' life cycles.
"You would certainly cut the price of hardware because there is a demand issue," said Colin Sebastian, an interactive media analyst with Baird Research. "GameStop has 30 million PowerUp Rewards members who are active gamers, and we're only predicting sales of 6 million total units," he added of combined Xbox One and PS4 sales and the amount of growth 2014 holds.
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At launch, that demand issue is nowhere in sight. When Sony debuted the PlayStation 3 in the US in November of 2006 -- for an unappealing $599 and a year after Microsoft released its Xbox 360 -- it sold a paltry 197,000 units in the first two weeks. Sony would go on to cut the price of its console eight months later. Fast forward seven years and the change is eye-opening: Sony sold 1 million PS4 units in under 24 hours in the US and Canada.
And it's not alone in that success. Microsoft's Xbox One launch -- albeit in 13 markets worldwide -- may not have been as strong as Sony's the week prior, but it too saw sales of more than 1 million units and far surpassed that of the Xbox 360. Both consoles are now sold out at all major retailers.
While these launches have been a celebratory moment for the regaining health of console gaming, the one issue all fence-sitting consumers must now grapple with is when to make the next-gen dive. Unfortunately, because Sony and Microsoft have had such blockbuster launches this time around, it's very unlikely the Xbox One or PS4 will see a discount at the usual six- to eight-month mark favored by makers of struggling systems.
Game console price cuts by the numbers
"The two new consoles will likely not have official price drops until spring 2015, at the earliest," Matt Matthews, a game industry analyst who writes for Gamasutra, forecast in an interview with CNET.
That falls in line with history. The Xbox 360, launched in November 2005 to warm reception, didn't see a price drop until August of 2007, and even then it was only $50 on its middle-tier model and $20 on its low- and high-end models. The Nintendo Wii, on the other hand, launched at $249 in November of 2006 and didn't cut its price for nearly three years due to the strength of its sales; the Wii ended up outselling its competitors by tens of millions of units and broke December sales records after its 2009 price cut.
Sony set an especially important precedent when it too waited roughly a year and a half to discount its PlayStation 2, doing so in May of 2002 by $100 and selling a then-record 690,000 consoles the following month.
That puts console discounts for systems with healthy launches on a standard 18- to 20-month cycle, excluding the Wii due to its reasonable initial price. The only deviations from this are with consoles that have poor debuts and lackluster sales in the immediate months post-launch. The GameCube was facing extreme competition from the PS2 -- resulting in Nintendo discounting it from $199 to $150 six months in -- while Microsoft was attempting to force its way onto the gaming mainstream with its initial Xbox and turned to a $100 discount six months after launch to make inroads in that goal.
Other examples of launch hurdles pairing with the early onset of price cuts are the Wii U and the PlayStation 3, devices that were both plagued with lackluster sales and poor launch lineups that forced their makers to move more aggressively and earlier. Nintendo eventually caved 10 months after its Wii U launch and discounted the console by $50 in an attempt to improve sales momentum into the holiday season.
And only eight months into the PS3's life cycle, Sony was forced to discontinue its unfavorable 20GB model and cut the price of its 60GB model by $100. That substantial move helped it push more than double the number of units monthly, but it meant that Sony was then losing even more money on each console sold, ultimately adding up to a $3.3 billion loss after two and a half years.
Video game console price cuts are governed by demand. Looking at sales histories of the previous generation, it's easy to see why the Sony moved faster and more aggressively on discounts and introducing new models.
(Credit: Wikia)
All of this illustrates that when it comes to the PS4 and Xbox One, we're seeing two of the most well-received console launches in gaming history. Both systems' midnight events went off without a hitch; day one sales clocked more than 1 million units; and each platform is offering consumers improved hardware and software at a more reasonable price point than the previous generation. To call the launches and Sony and Microsoft's preparedness for their respective moments successful would be an understatement.
Granted, Sony is grappling with thousands of units -- less than 1 percent of PS4s it claims -- that are experiencing what users call a unbundling question posed by CVG, "Xbox One is Kinect. They are not separate systems. An Xbox One has chips, it has memory, it has Blu-ray, it has Kinect, it has a controller. These are all part of the platform ecosystem."
If you're still on the fence about the next-gen consoles going into Black Friday and the holiday season, there are three important points to consider: History and launch success tells us that neither the Xbox One nor PS4 are projected to sell poorly enough to warrant price cuts within the first 12 or even 18 months; bundles are on the horizon, though all but certainly reserved for launch titles until next fall; and Microsoft unbundling the Kinect to reach an Xbox One price of $399.99 is an extreme long shot that would come with little benefit to Microsoft or developers.
So while there are a lot of reasons to hold off on making the move to a next-gen console gaming, waiting for price cuts should not be one of them.
Those holding out for a cheaper next-gen console come next year may need to reconsider their timeline for making the plunge.
The PlayStation 4 and Xbox One launches have given Sony and Microsoft a definitive and reassuring answer to the demand question mark looming over high-end living room gaming. That means that unless one starts to aggressively undercut the other, we aren't likely to see our options decrease in price until well into the devices' life cycles.
"You would certainly cut the price of hardware because there is a demand issue," said Colin Sebastian, an interactive media analyst with Baird Research. "GameStop has 30 million PowerUp Rewards members who are active gamers, and we're only predicting sales of 6 million total units," he added of combined Xbox One and PS4 sales and the amount of growth 2014 holds.
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At launch, that demand issue is nowhere in sight. When Sony debuted the PlayStation 3 in the US in November of 2006 -- for an unappealing $599 and a year after Microsoft released its Xbox 360 -- it sold a paltry 197,000 units in the first two weeks. Sony would go on to cut the price of its console eight months later. Fast forward seven years and the change is eye-opening: Sony sold 1 million PS4 units in under 24 hours in the US and Canada.
And it's not alone in that success. Microsoft's Xbox One launch -- albeit in 13 markets worldwide -- may not have been as strong as Sony's the week prior, but it too saw sales of more than 1 million units and far surpassed that of the Xbox 360. Both consoles are now sold out at all major retailers.
While these launches have been a celebratory moment for the regaining health of console gaming, the one issue all fence-sitting consumers must now grapple with is when to make the next-gen dive. Unfortunately, because Sony and Microsoft have had such blockbuster launches this time around, it's very unlikely the Xbox One or PS4 will see a discount at the usual six- to eight-month mark favored by makers of struggling systems.
Game console price cuts by the numbers
"The two new consoles will likely not have official price drops until spring 2015, at the earliest," Matt Matthews, a game industry analyst who writes for Gamasutra, forecast in an interview with CNET.
That falls in line with history. The Xbox 360, launched in November 2005 to warm reception, didn't see a price drop until August of 2007, and even then it was only $50 on its middle-tier model and $20 on its low- and high-end models. The Nintendo Wii, on the other hand, launched at $249 in November of 2006 and didn't cut its price for nearly three years due to the strength of its sales; the Wii ended up outselling its competitors by tens of millions of units and broke December sales records after its 2009 price cut.
Sony set an especially important precedent when it too waited roughly a year and a half to discount its PlayStation 2, doing so in May of 2002 by $100 and selling a then-record 690,000 consoles the following month.
That puts console discounts for systems with healthy launches on a standard 18- to 20-month cycle, excluding the Wii due to its reasonable initial price. The only deviations from this are with consoles that have poor debuts and lackluster sales in the immediate months post-launch. The GameCube was facing extreme competition from the PS2 -- resulting in Nintendo discounting it from $199 to $150 six months in -- while Microsoft was attempting to force its way onto the gaming mainstream with its initial Xbox and turned to a $100 discount six months after launch to make inroads in that goal.
Other examples of launch hurdles pairing with the early onset of price cuts are the Wii U and the PlayStation 3, devices that were both plagued with lackluster sales and poor launch lineups that forced their makers to move more aggressively and earlier. Nintendo eventually caved 10 months after its Wii U launch and discounted the console by $50 in an attempt to improve sales momentum into the holiday season.
And only eight months into the PS3's life cycle, Sony was forced to discontinue its unfavorable 20GB model and cut the price of its 60GB model by $100. That substantial move helped it push more than double the number of units monthly, but it meant that Sony was then losing even more money on each console sold, ultimately adding up to a $3.3 billion loss after two and a half years.
Video game console price cuts are governed by demand. Looking at sales histories of the previous generation, it's easy to see why the Sony moved faster and more aggressively on discounts and introducing new models.(Credit: Wikia)
All of this illustrates that when it comes to the PS4 and Xbox One, we're seeing two of the most well-received console launches in gaming history. Both systems' midnight events went off without a hitch; day one sales clocked more than 1 million units; and each platform is offering consumers improved hardware and software at a more reasonable price point than the previous generation. To call the launches and Sony and Microsoft's preparedness for their respective moments successful would be an understatement.
Granted, Sony is grappling with thousands of units -- less than 1 percent of PS4s it claims -- that are experiencing what users call a unbundling question posed by CVG, "Xbox One is Kinect. They are not separate systems. An Xbox One has chips, it has memory, it has Blu-ray, it has Kinect, it has a controller. These are all part of the platform ecosystem."
If you're still on the fence about the next-gen consoles going into Black Friday and the holiday season, there are three important points to consider: History and launch success tells us that neither the Xbox One nor PS4 are projected to sell poorly enough to warrant price cuts within the first 12 or even 18 months; bundles are on the horizon, though all but certainly reserved for launch titles until next fall; and Microsoft unbundling the Kinect to reach an Xbox One price of $399.99 is an extreme long shot that would come with little benefit to Microsoft or developers.
So while there are a lot of reasons to hold off on making the move to a next-gen console gaming, waiting for price cuts should not be one of them.