Just how much are people going to be willing to pay for new consoles so soon after the launch of the previous ones?
Against all odds, this year has turned out to be an exciting one for the industry when it comes to hardware launches- though the last major round of console and handheld launches was less than three years ago, it seems we are already primed for major new hardware this year. This includes the three new VR headsets that launched this year, of course – the Oculus Rift, HTC Vive, and PlayStation VR are all major new game platforms for the industry that launched, or will launch, in 2016 – but it seems we are also getting new consoles this year.
One of them, at the very least, was expected- Nintendo’s NX, which is primed to be the successor to the disappointing Wii U, has long been marked as a 2016 launch. However, what was unexpected was the rumblings of new hardware launches from Sony and Microsoft, too- both of whom look to be launching new PlayStation and Xbox systems. Effectively, then, the launch of new consoles by all three companies leads to a mid generation reset– an all new generation, so to speak.
What Microsoft is planning is as yet unknown- they were among the first companies to raise the idea of iterative consoles, but they went back on that notion shortly afterwards. Nevertheless, enough indications exist that we know they are working on something new, and Xbox head Phil Spencer himself has hinted at an announcement of something beyond the Xbox One coming soon. What that something is, however, is as yet unknown.
"Xbox head Phil Spencer himself has hinted at an announcement of something beyond the Xbox One coming soon."
On the other hand, the PS4K and the Nintendo NX, while both equally enigmatic and unannounced, are far clearer to us- the PS4K appears to be a highly incremental revision of the PS4, enhancing the base console’s specs somewhat to lead to better performing and looking games. The Nintendo NX is Nintendo’s brand new console, and is, according to the consensus found in most rumors and leaks, pegged to be at least a bit more powerful than the current PS4 (where it would stand with respect to the PS4K is unknown for now).
So we have two new consoles coming this year that could conceivably lay claim to being the most powerful console ever released. The question is, will that be enough to sell them to the masses? Remember, the current console generation is only now hitting its stride after almost three years of wallowing in the shadow of the previous generation. Most customers have, within the last year or so, spent a few hundred dollars on new hardware- why would they buy either the NX or the PS4K?
Both the NX and the PS4K will have to make a compelling case for their existence- however, equally important to their ultimate appeal to the mass market will be their value proposition. In other words, how much the machines cost could single handedly make or break their fortunes on the market.
Sony must surely realize that- the reason the PS4 has done as well as it has is because of its consumer friendly pricing. When Sony announced the price of the system, it was just $399- a full $100 cheaper than the Xbox One, and it delivered on this cheaper price while being a more powerful and capable console as well. This good pricing for the PS4 is just the most notable incidence of good pricing moves by Sony in the last few years, which have all lent them a measure of success- the PS Vita was similarly well priced at $249, and the PlayStation VR is priced at an extremely low and attractive $399. Sony, it seems, understands the value of pricing their hardware just right.
"Sony, it seems, understands the value of pricing their hardware just right."
How much, then, should the PS4K be priced at? This is an interesting question that needs to be approached with the full context of the picture in mind: the PS4K, while a new and more powerful machine, is not meant to replace the current PS4 model. Rather, all indications are that the two models will exist side by side on the market- much like how Nintendo sells multiple variants of its handhelds at the same time. Given, then, that the PS4K is not meant to replace the current PS4, but simply complement it, Sony have a lot more breathing room with how they can price the system. Since the PS4K will not be the primary PS4 SKU on the market, but just a premium, high end addition to the PS4 line, Sony can conceivably price it higher than they would have been able to a regular mid cycle refresh, while keeping the regular PS4 model as their cheaper entry into the PlayStation ecosystem.
All of which is to say, the PS4K could be pricy- it will at the very least be $399, a full $50 more expensive than the PS4 currently is (though that difference could go as high as $100, if Sony drops the price of the current PS4 to $299 permanently- as they should), but we could conceivably see it go as high as $449 as well. It would be a high margin SKU sold at the higher end of the market, to those that are willing to spend a little extra money to get the very best that their money can buy. At the same time, Sony will not risk alienating their mass market base either, since the current PS4 will continue to be sold at a lower price. They get to, essentially, have their cake and eat it too.
With that said, a $449 price for the PS4K honestly seems unlikely- $399 seems to be what Sony will target, as that seems to be the magic price point for them. If they drop the price of the base SKU to $299 in this period, then they have a healthy price difference- if not, however, then Sony can make a compelling, implicit case for all would be buyers of the base PS4 SKU to spend just $50 more and get the best PS4 SKU on the market. Given all of these competing factors, we would argue that Sony will end up pricing the PS4K at $399- with the price for the base PS4 SKU probably being kept as is at $349.
"Nintendo’s strongest market, traditionally, has been the family market- the family market is not looking at spending a lot of money."
Nintendo is a far more interesting case to argue. Like Sony, they, too, have learned the importance of price- but because of the opposite reasons. The Nintendo 3DS and Wii U both launched at historic high prices of $249 and $349 respectively- and both did poorly on the market, until Nintendo dropped their prices, and managed to reverse their performance somewhat. Generally, in the past, Nintendo have done the best when they have kept their prices low- appealing to the mass market with their products, as it were. This is particularly important, because Nintendo’s strongest market, traditionally, has been the family market- the family market is not looking at spending a lot of money.
But any discussion on the failure of the 3DS and Wii U at higher price points must be tempered with the realization that Nintendo were essentially trying to sell what was outdated tech at premium prices- while yes, the 3DS and the Wii U had state of the art autostereoscopy and low latency streaming tech to them respectively, they were essentially half a decade old tech being sold at shockingly high prices. The market did not perceive them to be good value at those price points, and it responded appropriately.
The NX, by all accounts, appears to be different- while Nintendo is likely to skip out on the extraneous media functionality that both the Xbox One and the PS4 seem to espouse, it is rumored to be a capable machine- at the very least more powerful than the PS4, and, depending on how it ultimately pans out, possibly more powerful than the PS4K too- at the very least, it would be in the same general vicinity of hardware power as the PS4K.
Then, too, is the fact that Nintendo has now understood the value of selling their systems at a loss should the need for it come- they did it with both, the Nintendo 3DS and the Wii U when it was necessary. Nintendo will probably not balk at selling the NX for a loss upfront as much as they would have done before.
"Any discussion on the failure of the 3DS and Wii U at higher price points must be tempered with the realization that Nintendo were essentially trying to sell what was outdated tech at premium prices."
Given all of this, then, how much should the NX be priced at? If we assume that Nintendo will still want to appeal to their traditional family market, but that the NX is a capable, powerful machine, somewhere between the PS4 and the PS4K in terms of power, meaning that it will not be perceived to be outdated, out of value tech, and that they are willing to take a loss on their systems now, then the best price point for Nintendo to sell the NX at will probably be $349- at that price point, the NX will appear to be good value to most families, and avoid the ‘premium’ pricing label associated with prices $399 and above, they will be able to make a good value proposition (a very powerful machine being sold at a cheaper price than the PS4K’s projected $399), and probably not make enough of a loss for it to put a serious dent in their balance books- in fact, depending on how the NX is designed, they may even break even or make a small, tidy profit for themselves.
Of course, these are all just predictions and projections- the final pricing may vary. Sony may decide to be competitive and go in for the kill with the PS4K’s pricing, and try to undercut Nintendo, a strategy they have tried with the competition in the past with the PS4, PS Vita, and PSVR. Nintendo may decide to change their strategy, and rebrand and reposition themselves as a ‘premium’ alternative for the console market. The Xbox One Elite may throw a wrench in Sony and Nintendo’s plans by being a far more powerful machine than either, sold at just $299- right now, it is naturally impossible to know.
But given what we do know right now, or think we know, at any rate, we feel comfortable with predicting the price points for the two systems that we have predicted above. Whether or not Nintendo and Sony go for these prices remains to be seen- and that, among other reasons, is why we are so excited for E3 this year, when the gauntlet for the next round of the console wars will probably be thrown into the ring in earnest.