We’re at the dawn of a new game console generation, and both Sony and Microsoft are hoping to come out of the gate with strong sales. However, numerous reports claim that Sony is having trouble keeping the PlayStation 5’s price down, and now some industry veterans think they’ve figured out Microsoft’s strategy. The company may just be waiting for Sony to announce a price so it can undercut the PS5 by a noteworthy amount.
Wedbush Securities analyst Michael Pachter and former EA and Microsoft executive Peter Moore appeared on a podcast recently to talk about the game industry. The pair talked about console launch strategy with particular emphasis on how much the hardware will cost. Neither Microsoft nor Sony have talked about pricing, but numerous reports claim that Sony’s cost to manufacture the PS5 is much higher than previous consoles.
Both the Xbox Series X and PlayStation 5 will rely on an eight-core, 16-thread AMD processor and an RDNA 2 GPU. Sony’s implementation is a bit different with support for flexible clock speeds and Adaptive Voltage and Frequency Scaling that sends unused power from the CPU to GPU. It also has a faster custom storage platform. Sony is reportedly looking at around $470 to manufacture each console, so much that it has allegedly opted to scale back the number of units it plans to manufacture for launch.
It’s not unusual for companies to make little to no money on game console hardware when new generations launch — it’s all about getting people locked into a platform for the next five years so they’ll buy games, controllers, and online services. Pachter noted that Sony looks to be targeting $500 for a launch price, but Microsoft has more cash on hand than Sony. It could afford to lose money on the first 10 million units.
So, Microsoft might be ready with a price, but it’s waiting on Sony to announce that $500 price tag. Then, Microsoft will very publicly undercut Sony by as much as $100. A $400 price tag would make the Xbox Series X a much more attractive purchase this holiday season, and that could give Microsoft a big advantage going into this new console era. Microsoft will also be able to lean heavily on its growing Game Pass subscription service and the xCloud game streaming platform.
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