Pachter: Microsoft Prepared to Lower Price on Xbox One

According to Wedbush analyst Michael Pachter, Microsoft could cut the price of the Xbox One a year or so after launch. Pachter thinks that the Xbox One bundle offers more value because it includes the new Kinect – even if it is $100 more than the PlayStation 4.

"…the focus will shift from Microsoft's onerous policies to the price differential between the Xbox One (at $499) and the PS4 (at $399). The differential is due to the inclusion of Kinect (a high definition camera with a microphone array) with every Xbox One; Microsoft intends to offer a more robust hardware bundle than Sony will offer, and Microsoft is convinced that consumers will ultimately appreciate the value proposition presented by Kinect… Microsoft has not done a particularly good job of communicating the value proposition to consumers, but today's announcement will remove an impediment to the company's ability to get its message across," he noted.

He also said that he expects the Xbox One to sell just as many units as the PS4. Prior to last night's announcement that Microsoft would change its various poorly received restrictions on Xbox One, it looked like Sony might have an advantage coming out of the gate.

"We are confident that with six months of focused messaging, Microsoft can fully level the playing field with Sony, and we expect the Xbox One to sell as many units as the PS4. If we are wrong, we think that Microsoft is prepared to lower price next year."

As long as the current-gen console cycle has lasted, Pachter said he thinks the next one should last about 10 years, and one of the biggest winners in the Microsoft reversal will be retailer GameStop. "While Microsoft still intends to offer digital downloads of new games on the same day they are released on DVD, the removal of restrictions on transfer makes it far more likely that the large number of consumers who value used games as currency will continue to buy them in physical form," he said. "Ultimately, we think that no more than 50 percent of game sales will be in digital format, suggesting that GameStop's used game business could be healthy for many years."

Pachter added that no more than 50 percent of AAA title sales on Xbox One, would be generated from digital sales – excluding DLC and indie games.

"Measuring what is currently sold in packaged form, I think that there will be a migration of 50 percent to digital in the next 5 – 10 years for Xbox One. It's a harder call on PS4, it's not as online friendly (yet)," he told GII.

Source: GII


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