Business Approach Comparison Sony PS4 and Microsoft Xbox

[Arwin]

I think that kind of advertisement is a bad idea. They don't need to draw attention to that the Xbox One is coming, even if it is coming later.

 

[patsu]

I think MS made a bold gamble and were right to do so. The future will tell whether that gamble will pay off. The biggest risk is that the TV will lose its center stage to individual devices, and that few people feel the need for a central one that does everything, but excels at little.

But there is also a good chance it will be good enough at a bunch of things to pay off. I think most of the hardcore audience prefer specialist devices that excel at specific tasks. But there may be a large enough audience that wants something that works nice and easy. My wife loves her iPad, and she is a big risk - she does everything on that, watch TV etc. My son (and I) love the big screen, and we are a good opportunity. If MS can make the right games and leverage Kinect in a really cool way, that's a good in. Right now, Sony's Playroom isn't even a proper game, but more successful in capturing his attention. Microsoft needs to do more in this area. It's a long game. In three years, the system can be 299 and have a good ecosystem with games. It may be hard to beat by then, as they have a good head start.

They have to take the "It Does Everything" route because it's the natural path from being a specialized device. It is also the natural way to fight iOS and Android.

They will likely price Xbox One lower ASAP, not 3 years. MS have always worried first about consumer perception than cost. If the $100 difference is problematic, they will remove that disadvantage.

 

[patsu]

Which is why I found it surprising that there are still units on shelves. I expect it to be sold out as there is no way that there could be an over supply. So something has happened to basically flatline sales, and price is the only thing I can think of. Of course all that could have changed overnight and all those units are now gone. But it wasn't something I expected.

Where are you geographically located ?

 

[Arwin]

Normally yes, but they don't have a lot of leeway from the mothership, imho, to take any further big losses. There's more likely to be more hardware + subscription model sales coming.

 

[patsu]

Normally yes, but they don't have a lot of leeway from the mothership, imho, to take any further big losses. There's more likely to be more hardware + subscription model sales coming.

Yes subscription and h/w model is likely, but they will also watch Sony's momentum. If it's better than what they can take, they will do something about it.

 

[McHuj]

A year after the 360 launched, there were reports from these groups that estimate the BOMs that MS managed to shave off over $100 from the cost of the console. It would not be surprising to me if the BOM for the X1 scaled similarly. With a simpler design and no manufacturing issues like the 360 had, the price can come down quicker.

It would not surprise me in the least if both console manufactures were going to try to get to the 199/299 price points quickly (within 2 years). To fend off mobile and other gaming/media devices they need to ramp up the install base quickly.

 

[Arwin]

I don't think they can, or even should, look at Sony too much. They should run their own race, and stay profitable. They have a different target audience in mind, and there will be different points in time where that target audience is obtainable.

Obviously they've been doing things to keep up though, they already reversed several decisions because they were impopular, and Sony has been influential (though perhaps more as a catalyst / representative of the status quo).

But I don't think Microsoft can entirely ignore the calls for ditching the Xbox brand. They'd be stupid to imho, but only if they are willing to take another loss ...

 

[Squilliam]

I think it is better to be perceived as more expensive (then made cheaper) than it is to come in at a lower price. I think Microsoft may have been burned this generation by people feeling that the PS3 was a 'better' product because of historical price differences and brand recognition. They can't beat them by making the same product, Sony would win if they showed up with identical machines by default.

 

[Arwin]

I think Microsoft may have been burned this generation by people feeling that the PS3 was a 'better' product because of historical price differences and brand recognition.

I highly doubt anyone at Microsoft things this. Should be pretty common knowledge that their price difference has been a great help in establishing the 360 early on. We've done a lot of discussion about how the potential audience grows at each price decrease (given a static desireability). The lower the price you start at and the faster you can go down, the faster you can expand your audience. The question for Microsoft is how scaleable their approach is (room for cost reduction). There's likely to be a fair bit.

The biggest, most drastic response that Microsoft can make would be getting rid of Kinect. That one won't be off the table for a while yet, I'm willing to bet, but they aren't ready to do so right now or very soon, that much is also clear, as the UI needs some additional work in that case, I think.

 

[SlimJim]

I think people in the Europe believed it was a better product, not 'better', but "better".
HDTV adaptation rate was really high (in early 2006 there were only a few CRT models at the big electronics stores, PS3 released in 2007), so it was logical to go with PS3, as it offered HDMI, as well as being the best DVD upscaler, not to mention a great BD-player. A large HDD was included, as well as wifi.
The promise of games with graphics like uncharted or TLOU or GT5 sealed the deal, even if some multiplats had bad quality.

In the case of the Xbox One, most, if not all of the 'added features' are wasted on the EU market:
-On demand video/streaming is going to replace live-tv
-the TV stuff doesn't work in all countries, and even then, it's not so good (see the 50hz problems)
-The voice recognition doesn't work in all countries
-Kinect is not popular in Europe, sales of kinect-only titles are almost non existent

So the features won't justify the 100 euro (150 dollar) price difference between the two. And that is not even taking into account the huge performance delta between the two

 

[blakjedi]

I highly doubt anyone at Microsoft things this. Should be pretty common knowledge that their price difference has been a great help in establishing the 360 early on. We've done a lot of discussion about how the potential audience grows at each price decrease (given a static desireability). The lower the price you start at and the faster you can go down, the faster you can expand your audience. The question for Microsoft is how scaleable their approach is (room for cost reduction). There's likely to be a fair bit.

The biggest, most drastic response that Microsoft can make would be getting rid of Kinect. That one won't be off the table for a while yet, I'm willing to bet, but they aren't ready to do so right now or very soon, that much is also clear, as the UI needs some additional work in that case, I think.

I would choose s different route. I would rather they shrunk kinect, got rid of the bluray player and gave me an always on always connected Xbox tv type of device.

 

[Nesh]

I would choose s different route. I would rather they shrunk kinect, got rid of the bluray player and gave me an always on always connected Xbox tv type of device.

Reducing options and strong features to reduce cost isnt necessarily an effective solution to increase perceived value for a bigger market.

 

[patsu]

I don't think they can, or even should, look at Sony too much. They should run their own race, and stay profitable. They have a different target audience in mind, and there will be different points in time where that target audience is obtainable.

Obviously they've been doing things to keep up though, they already reversed several decisions because they were impopular, and Sony has been influential (though perhaps more as a catalyst / representative of the status quo).

But I don't think Microsoft can entirely ignore the calls for ditching the Xbox brand. They'd be stupid to imho, but only if they are willing to take another loss ...

They will want the core gamers as part of their userbase. If Sony gain too much ground there, they will have little weapons against the iOS and Android offerings. They will track their XBL subscription together with market share to gauge their standing. You can tell they want marketshare badly in both the tablet and phone markets.

MS is also trying to come up with new type of contents, but so is everyone else. I expect innovative Internet integration in games. And TV integration.

 

[Arwin]

TV integration is definitely a key play for Microsoft.

 

[patsu]

Yes but I suspect the real TV integration is in the business model and deal making, not the Kinect type integration. For those dealings, you need marketshare or tons of $$$ to work with the networks and studios.

It may be too much to expect profitability and marketshare at the same time, especially when Amazon, Apple and Google seem interested in gaming.

 

[SlimJim]

Within less then 5 days on the market, the Xbox One in Germany already received a 'pricedrop':

You get 2 free games of your choosing, as well as a full year of Xbox Live, and also, 3 full years of extended warranty. All for the price of 499.

http://www.microsoftstore.com/store/msde/de_DE/pdp/Xbox-One-Complete-Bundle/productID.292467000

As I said before, their Business Approach is not quite fit for the European customer.

edit: whoops, Germany only
...for now ;-)
edit2: now I read that it's a mis-price? Still, I think it's happening before the next year

 

[DuckThor Evil]

It says that the price is 719€ on that German site.

 

[blakjedi]

Reducing options and strong features to reduce cost isnt necessarily an effective solution to increase perceived value for a bigger market.

Kinect is more of a benefit than blue-ray.

 

[RancidLunchmeat]

Kinect is more of a benefit than blue-ray.

I would think that we'd see a blu-ray-less One before we see one without Kinect.

BR is entirely unnecessary for people with a good internet connection, whereas Kinect is integral to the entire experience. Even if that experience, for now, still needs improvement.

 

[SlimJim]

It says that the price is 719€ on that German site.

yeah, I edited at the exact same time as your post :smile:

Still, the Dutch launch is in early 2014.. I think that's enough time for a free game or two