How to sell next-gen consoles, Marketing, Positioning, and Pricing [2020]

[AzBat]

Look at the Xbox Series S as Microsoft taking a mulligan on the whole Xbox One generation & giving it a different name. People will know & understand that Series X is the flagship/performant console. Series S is for people where its performance is good enough for the lower cost that it will be targeting. Its price will need to be compelling. Like @Silenti said I don't think $350 is compelling. $300 & less then we talk.

But to get an idea of where it will land you need to look at Xbox All Access. The most expensive monthly plan they had was for the Xbox One X @ $24.99/mo for 24 months(which you could trade/upgrade to a Series X at 18 months & pay the same monthly rate). That's a total of $599.76 of which Game Pass Ultimate costs $14.99/mo or $359.76. That leaves the console costing $240. They would have to charge $27.49/mo for a $300 console or $29.57/mo for a $350 console. I don't see them charging more than $25/mo or $250 for a budget offering. I could possibly see monthly rates more than $24.99 for the Series X, but I think it's less likely. It all depends on which consoles make the lineup. Will it be the One S, Series S & Series X? Or will it be just the Series S & Series X? And do they continue with the $19.99/mo intro rate? Or do they make the intro rate start at $22.99/mo or even $24.99mo? BTW, the One S is at the $22.99/mo rate & the discontinued One S All Digital was at the $19.99/mo rate.

Tommy McClain

 

[Deleted member 11852]

The highs or the lows are unrealistic?

The lows for Series S, the highs for PS5. The Series S is only going to be super cheap if Microsoft are manufacturing 25-30m units a year or they've heavily subsidising. The economics of product manufacture don't allow for anything else. People tossing numbers out have never been involved in project design, manufacture and distribution of a CE device.

 

[London Geezer]

The lows for Series S, the highs for PS5. The Series S is only going to be super cheap if Microsoft are manufacturing 25-30m units a year or they've heavily subsidising. The economics of product manufacture don't allow for anything else. People tossing numbers out have never been involved in project design, manufacture and distribution of a CE device.

Yeah but it's always fun to throw made up figures and 'concrete rumours' on forums

 

[RDGoodla]

would probably be $599 in the US.

Bloomberg said $450 BOM for PS5.

This is what we might see:

PS5 Blu-ray: BOM $450 retail $499
PS5 Digital: BOM $420 retail $399
PS5 1.65 TB: BOM $515 retail $599

 

[TeamGhobad]

I feel like MS is engaging in a bit of dishonest advertising. All their ads show XSX running games at 40k60 but majority of gamers will buy the lockhart version which is not a 4k machine. When you showoff all your nexgen games using the high end model that majority of gamers will not get and don't even mention the low end model i feel like this is a bit dishonest.

 

[milk]

If I were either company, even if I were willing to subsidize the console for the sake gaining quick of momentum, I'd still ride that early adopter wave for all its worth first.

We know there is a whole bunch of people that will buu these machines as soon as they launch, for whatever the price they come out. So give it the price you want for it. Price-cut when that slows down.

I know consumers get angry when there are price cuts too early, but I honestly doubt that has any monetary effect. They will still keep buying your stuff. On the other hand, those that didn't buy it at launch price and were waiting will sudenly feel compelled to do so that much earlier. They will all feel like they are getring a premium product worth the lauch price, but for a bargain deal price.

 

[iroboto]

If I were either company, even if I were willing to subsidize the console for the sake gaining quick of momentum, I'd still ride that early adopter wave for all its worth first.

We know there is a whole bunch of people that will buu these machines as soon as they launch, for whatever the price they come out. So give it the price you want for it. Price-cut when that slows down.

I know consumers get angry when there are price cuts too early, but I honestly doubt that has any monetary effect. They will still keep buying your stuff. On the other hand, those that didn't buy it at launch price and were waiting will sudenly feel compelled to do so that much earlier. They will all feel like they are getring a premium product worth the lauch price, but for a bargain deal price.

still requires a lot of funding to do this type of thing. It could take many years to recoup the losses if you do that.
Every year departments are released money based on a forecasted budget.
You can't just randomly exceed that budget, accounting will stop you. ie the rest of teh business will falter, or there will be job losses etc. Some method to make up for a budget shortfall.

That being said, if you don't have the budget to take those losses, you can't do it. You'd need some serious approvals to redo the budget to 'react' to a competitor and drop a massive subsidy.

Either you subsidize from the get go (forecasted), and Sony has always known it's price point, in which they can't change it so you may as well announce it and get your pre-orders on for solid logistics during a covid launch.

Or you didn't hit your price point at all, you didn't forecast a subsidy, and now you're stuck hoping your competitor will announce a high enough price point so that you can raise yours to match.

This is also why, on another point, when everyone was riding on about how MS was paying out for GamePass, it doesn't matter. The budget is locked. They would have forecasted and planned a whole years worth of game pass a year in advance and left some breathing room incase things moved or that a critical title showed up last minute. If they went under budget they would burn the remaining amounts by end of year. But they should never go over budget. That's why guessing how gamepass works in terms of costs is really just about guessing the budgeted amount, not the actuals. Because you can almost guarantee they will spend the budgeted amount or they will lose it for the following year.

 

[goonergaz]

still requires a lot of funding to do this type of thing. It could take many years to recoup the losses if you do that.
Every year departments are released money based on a forecasted budget.
You can't just randomly exceed that budget, accounting will stop you. ie the rest of teh business will falter, or there will be job losses etc. Some method to make up for a budget shortfall.

That being said, if you don't have the budget to take those losses, you can't do it. You'd need some serious approvals to redo the budget to 'react' to a competitor and drop a massive subsidy.

Either you subsidize from the get go (forecasted), and Sony has always known it's price point, in which they can't change it so you may as well announce it and get your pre-orders on for solid logistics during a covid launch.

Or you didn't hit your price point at all, you didn't forecast a subsidy, and now you're stuck hoping your competitor will announce a high enough price point so that you can raise yours to match.

This is also why, on another point, when everyone was riding on about how MS was paying out for GamePass, it doesn't matter. The budget is locked. They would have forecasted and planned a whole years worth of game pass a year in advance and left some breathing room incase things moved or that a critical title showed up last minute. If they went under budget they would burn the remaining amounts by end of year. But they should never go over budget. That's why guessing how gamepass works in terms of costs is really just about guessing the budgeted amount, not the actuals. Because you can almost guarantee they will spend the budgeted amount or they will lose it for the following year.

I agree with this, but at the risk of going OT the point was if they could sustain a quality product whilst losing money hand over fist. Your s/s was good but lacked on a lot of fronts, and even that had the break even point in around 10 years! Most people knocking it are just concerned if the price rises or the quality drops vs what is in place.

 

[London Geezer]

still requires a lot of funding to do this type of thing. It could take many years to recoup the losses if you do that.
Every year departments are released money based on a forecasted budget.
You can't just randomly exceed that budget, accounting will stop you. ie the rest of teh business will falter, or there will be job losses etc. Some method to make up for a budget shortfall.

That being said, if you don't have the budget to take those losses, you can't do it. You'd need some serious approvals to redo the budget to 'react' to a competitor and drop a massive subsidy.

Either you subsidize from the get go (forecasted), and Sony has always known it's price point, in which they can't change it so you may as well announce it and get your pre-orders on for solid logistics during a covid launch.

Or you didn't hit your price point at all, you didn't forecast a subsidy, and now you're stuck hoping your competitor will announce a high enough price point so that you can raise yours to match.

This is also why, on another point, when everyone was riding on about how MS was paying out for GamePass, it doesn't matter. The budget is locked. They would have forecasted and planned a whole years worth of game pass a year in advance and left some breathing room incase things moved or that a critical title showed up last minute. If they went under budget they would burn the remaining amounts by end of year. But they should never go over budget. That's why guessing how gamepass works in terms of costs is really just about guessing the budgeted amount, not the actuals. Because you can almost guarantee they will spend the budgeted amount or they will lose it for the following year.

I think it's important to remind ourselves that while the BOM is locked, it is what it is, the sales price is not really locked until they announce it, and even then it can change, if need be.

So I can believe that Sony and MS may still not be too sure of the final price of each platform.

I would very much hope that they would have modeled several scenarios, so that they can forecast accordingly. Say, for example:
- Scenario 1 where they sell at or close to BOM, and break even.
- Scenario 2 where they sell at a loss of X or any variations of it.
- Scenario 3 where they sell at a profit of Y, or any variations of it
And so on. They would then pick and choose whichever scenario when they see fit, and deal with the consequences of it all.

Logic may then hint that Scenario 3 is just not going to happen, if this had been deemed a reasonable solution (i.e. price point), or else they would have already revealed the price point associated to this.

Logic then also tells us that they are both waiting because they want to lose as little as possible on those first 5-10+ million units.

In this case, they likely have a scenario based on what their competitor does, but it's getting a bit hilarious to see that neither of them are moving first, which is holding things up. I'm not too sure about past generations, but i'm pretty sure that with 3 months until launch, we have never waited so long for a price reveal. But I could be wrong.

Whatever happened to being confident in your own product and price point, ignoring what your competition does?? No? Too naive?

All of this to say, these babies are not going to be cheap!

 

[iroboto]

Whatever happened to being confident in your own product and price point, ignoring what your competition does?? No? Too naive?

All of this to say, these babies are not going to be cheap!

Like, not calling you out, but you're an executive at a company right? You deal with budgets for departments, you know about OPEX and CAPEX etc. You know about forecast budgeting the year before. You know how annoying it is to go through all that project planning. Timing and schedules and stuff like that.
Like this is concerning right? I can't be the only one thinking something is entirely amiss as well.

 

[Deleted member 13524]

I feel like MS is engaging in a bit of dishonest advertising. All their ads show XSX running games at 40k60 but majority of gamers will buy the lockhart version which is not a 4k machine. When you showoff all your nexgen games using the high end model that majority of gamers will not get and don't even mention the low end model i feel like this is a bit dishonest.

Fortunately, Microsoft is yet to show anything that couldn't run on the 6 TFLOPs OneX, let alone the 12 TFLOPs SeriesX.

 

[Unknown Soldier]

In this case, they likely have a scenario based on what their competitor does, but it's getting a bit hilarious to see that neither of them are moving first, which is holding things up. I'm not too sure about past generations, but i'm pretty sure that with 3 months until launch, we have never waited so long for a price reveal. But I could be wrong.

Whatever happened to being confident in your own product and price point, ignoring what your competition does?? No? Too naive?

All of this to say, these babies are not going to be cheap!

As I remember it, the Xbox One and PS4 prices got annouced at E3 2013 on the same day, 10th June 2013, with MS first announcing the price $499 in the morning and Sony announcing the PS4 price($399) late afternoon. Not too sure who knew what but the big price undercut by Sony certainly seemed to get MS by surprise. Yes MS was offering more with the Kinetic however the DRM news hurt the console as well. Sony were all cheerful with it's share policy that seemed to mock MS and the DRM.

What's the likely chance that both will again announce prices on the same day?

 

[iroboto]

As I remember it, the Xbox One and PS4 prices got annouced at E3 2013 on the same day, 10th June 2013, with MS first announcing the price $499 in the morning and Sony announcing the PS4 price($399) late afternoon. Not too sure who knew what but the big price undercut by Sony certainly seemed to get MS by surprise. Yes MS was offering more with the Kinetic however the DRM news hurt the console as well. Sony were all cheerful with it's share policy that seemed to mock MS and the DRM.

What's the likely chance that both will again announce prices on the same day?

Unlikely
A fun donation bingo bet to guess on which day.

I'd be shocked if it's not before the end of this month; it's just insanity at that point in time. They would be working blind with logistics, just shipping quantities without knowing pre-order allotments.

 

[London Geezer]

Like, not calling you out, but you're an executive at a company right? You deal with budgets for departments, you know about OPEX and CAPEX etc. You know about forecast budgeting the year before. You know how annoying it is to go through all that project planning. Timing and schedules and stuff like that.
Like this is concerning right? I can't be the only one thinking something is entirely amiss as well.

Indeed I am, and indeed this has been and is quite puzzling to me! I'm ok with stretching things out as much as possible, but this does feel like stretching things out a bit too much for my tastes.

I think it's all a bit of a PR mess, if I'm honest. Also, always blame the PR/marketing people, that's how I deal with shit! JOKING.

 

[London Geezer]

Unlikely
A fun donation bingo bet to guess on which day.

I'd be shocked if it's not before the end of this month; it's just insanity at that point in time. They would be working blind with logistics, just shipping quantities without knowing pre-order allotments.

Yes, and even weirder is seeing reports of Sony deciding to increase manufacture to 10 million units (or whatever it was), when we don't even know the price, so how do they even forecast demand for it? Sometimes the console industry is one weird little baby.

 

[Jay]

Yes, and even weirder is seeing reports of Sony deciding to increase manufacture to 10 million units (or whatever it was), when we don't even know the price, so how do they even forecast demand for it? Sometimes the console industry is one weird little baby.

Basing it on strong ps4 and console sales in general.
Social media response and feedback to ps5, probably including things like how much ps5 has been googled also.

Strong sales was because everyone was stuck at home so maybe they think it will continue through launch period.

It had been crazy times though.

 

[Deleted member 13524]

Yes, and even weirder is seeing reports of Sony deciding to increase manufacture to 10 million units (or whatever it was), when we don't even know the price, so how do they even forecast demand for it? Sometimes the console industry is one weird little baby.

My guess is Sony is extremely confident that a large portion of longtime PS+ users (>8 years?) will buy the PS5 even if it's expensive, because their commitment to the platform and its software ecosystem is too large to even consider changing sides.
Boosted backwards compatibility changes everything. If they tell you all / most of your immense library of digital PS4 games will be running at next-gen framerates if you buy the PS5, the choice for next-gen get very narrowed down.

Same thing for the Series X, of course. Due to long time service commitments and boosted backwards compatibility, inertia to console gamers changing sides will be huge, this gen.

 

[milk]

still requires a lot of funding to do this type of thing. It could take many years to recoup the losses if you do that.
Every year departments are released money based on a forecasted budget.
You can't just randomly exceed that budget, accounting will stop you. ie the rest of teh business will falter, or there will be job losses etc. Some method to make up for a budget shortfall.

That being said, if you don't have the budget to take those losses, you can't do it. You'd need some serious approvals to redo the budget to 'react' to a competitor and drop a massive subsidy.

Either you subsidize from the get go (forecasted), and Sony has always known it's price point, in which they can't change it so you may as well announce it and get your pre-orders on for solid logistics during a covid launch.

Or you didn't hit your price point at all, you didn't forecast a subsidy, and now you're stuck hoping your competitor will announce a high enough price point so that you can raise yours to match.

This is also why, on another point, when everyone was riding on about how MS was paying out for GamePass, it doesn't matter. The budget is locked. They would have forecasted and planned a whole years worth of game pass a year in advance and left some breathing room incase things moved or that a critical title showed up last minute. If they went under budget they would burn the remaining amounts by end of year. But they should never go over budget. That's why guessing how gamepass works in terms of costs is really just about guessing the budgeted amount, not the actuals. Because you can almost guarantee they will spend the budgeted amount or they will lose it for the following year.

I think you missed my point entirely. I opened my post with "even if I were willing to subdise". The initial premisse is the company has the money to sell at a loss, has gotten the green light to do so and planned acordingly.

My point is even if you have the funds to do that, it would still be smart to launch at a profitable price or at least break-even, and prepare for an early price-cut a few months after lauch.

I'm not suggesting that it would be smart for a company to prepare for a break-even product and than haphazardly change into a subdized lossleader in the middle of the way. That be reckless business.
My suggested strategy was meant to be a loss-cutting alternative to the subdising from the get go strat. In that context, I believe its pros outwheight its cons.

The con is you mildly frustrate the early adopters that paid full price only months before that price was lowered. This may be ameliorated with coupons for a couple months of free PSPlus for those.

The pro is you have a few less months of losses on console sales, and some more oportunity to react to the market: depending on demand, you might price cut 4 months in, or 6, or 9, 12... If you are lucky, demand is such you never have to price-cut into losses at all, and your provesions for such can be realocated to something else.

All that said, personally, I am still VERY skepticall of any one of the manufactures chosing to sell at a loss. All my speculation relies on the unlikely possibility they are willing to lose that kind of money, and not even I trust it myself.

 

[eastmen]

PS3 redux pricing seems a bad move so unless there is some crazy amount of something in the PS5 to justify it ( I don't see a heat sink costing $80 or whathaveyou ) I can't imagine why they would go there.
Over in the MS thread folks are suggesting 399.99 for the Series X and 199.99 for Lockhart so if Sony is expecting to charge 600 while a more powerful Series X sticks to 400 then anyone associated with any decision that creates such an outcome will be out of a job fairly quickly.
Somehow survival instincts in Sony leadership will kick into gear before this kind of thing happens I would assume.
Mind you if MS wants to cough up that kind of cash up front to make a big splash that would be great for everyone but Sony.

Often times just being the market leader allows you to sell a new product for more than the competition. There will be a lot of people who go ps5 just because its the next playstation just like a lot of people at launch bought a ps3 because it was the next playstation

 

[Johnny Awesome]

Sony won't sell at a major loss. They can't afford it. MS needs to scoop more users into it's ecosystem. This might be the last generation before everything crystallizes and it will be very hard to get a Sony user to go to MS and vice versa after this generation IMO.

MS is well aware of this. They need users. It's like Facebook. A lot of people thought they were fools for paying billions to get customers and now they're raking in the money. I believe MS is willing to lose $100 per unit, easily, to get someone into their ecosystem. If I'm running MS I would pay $100 each for 100 million new users. Lose $10 billion. Who cares? They'll make it up by the end of the generation and Sony would be crying themselves to sleep at night.

$499 launch. $399 in March for XSX. Put out another $499 box in 2024 and the XSX down to $299.
$299 for XSS and $199 by next Christmas.

Just keep churning out hardware every 3-4 years.

Sony would be screwed. MS can afford it. Be aggressive.