There is an upper limit to how high Microsoft can price their new console.
Possibly the biggest news to have come out of E3 this year was Microsoft’s confirmation of the existence of the Xbox One Scorpio, a superpowered new Xbox console that they will be releasing next year. The Scorpio is going to be 6TFLOPs, and when it releases, it will be the most powerful console ever. Moreover, it will achieve all of this while being fully backwards and forwards compatible with the existing Xbox One.
In other words, it is the perfect successor console, one that does not break compatibility with the existing 20 or so million Xbox One consoles already sold, but one that still manages to be a substantial step up from what we have. When the Scorpio launches next year, it is likely to help Microsoft turn their futures around in the console market, where they have been taking a beating at the hands of Sony and the PS4 for a few years now.
However, no matter how powerful a console may be, it’s not going to do well if it’s overpriced- the PS3 and its dismal early performance is proof of that. In other words, if Microsoft want the Xbox One Scorpio to actually perform well in the market, and for it to perform its implicitly suggested task of turning their fortunes in the console market around, then they cannot price it beyond a certain point, no matter how good or powerful it may otherwise be.
Which brings us to the million dollar (let’s hope not) question- just how much should the Xbox One Scorpio cost?
"I’ll draw the line in the sand at the $400 price point and say that the Scorpio is not going to cost more than it."
One might think that with the Scorpio being as powerful as it is will lead to a higher cost. And if we were speaking in terms relative to the existing Xbox One or even the PS4, then yes, this supposition would hold true. However, on the whole, the Scorpio is not likely to cost too much- as a matter of fact, I’ll draw the line in the sand at the $400 price point and say that the Scorpio is not going to cost more than it.
There are multiple reasons for this. The first reason is that while the Scorpio’s specs seem outlandishly impressive right now, the console is not due out for another year and a half. A year and a half is an eternity in the technology world, and economies of scale, as well as further advancements in technology, are likely to make the Xbox One Scorpio far cheaper to manufacture than one might assume right now.
None of this is to say that the Scorpio won’t be impressive when it launches, or that it won’t be the most impressive console ever made- it still will be. It’s just that it will be using technology that will be far more matured then than it is right now. Manufacturing the proposed Xbox One Scorpio right now would be truly expensive- however, a year and a half from now, it will be far easier to keep the costs under control.
There is also the simple point to consider that Microsoft will almost certainly be willing to take a hit on the Xbox One Scorpio hardware when it launches.
This is not a new strategy for Microsoft– they have done this with the original Xbox and the Xbox 360, which was what caused them to be able to make them so powerful, for such a cheap price, for their respective times. It was only with the Xbox One, where they decided to follow the Nintendo strategy of making profit on each hardware unit sold, and decided to price a relatively weaker machine higher than its production cost. Given the general success of the original Xbox and especially the Xbox 360, and the relative failure of the Xbox One (and the Xbox One is a failure, let’s not beat the bush here- the very existence of the Scorpio is proof of the fact that the Xbox One failed) means that Microsoft are probably going to go back to what they know for sure works- which is, a powerful console sold at a mass market price.
"The hardware weakness of the Xbox One, and its higher price in contrast, were in large part driven by the inclusion of the controversial Kinect."
Yes, they will lose money on each hardware unit sold. However, given Microsoft’s recent assertions that the hardware is just a means to an end for them, and that they care more about their overall ecosystem – about their services, about engaged customers, and about how many games they sell – it doesn’t seem like they will mind too much, since they will probably look at the loss as a short term immediate hit that furthers their software sales, Xbox Live engagement numbers, and their Xbox and Windows ecosystem in the long run.
This means that they would be willing to keep the price low even if that means they lose money- meaning that suppositions of the Scorpio costing too much simply because of how powerful it is go right out of the window.
In addition to the above two points, there is this one final one: the hardware weakness of the Xbox One, and its higher price in contrast, were in large part driven by the inclusion of the controversial Kinect. The Kinect was a sophisticated and highly advanced piece of technology that no one wanted. This means that a lot of research and development went into Kinect, leaving a smaller allocation for the base hardware power, and that the Kinect managed to drive hardware costs of the Xbox One up for customers- the proof of this can be found in the fact that the first major Xbox One price cut was also accompanied with the Kinect being dropped from the SKU altogether.
Given that Microsoft have learned their lesson about relying on gimmicks – they have systematically dropped and de-emphasized Kinect (in fact, the upcoming Xbox One S doesn’t even have a port for the Kinect, and requires an adapter so that one can be plugged in) – and that the focus with the Scorpio seems to be squarely on making it a powerful machine, any costs associated with the machine will be for its hardware power only, which is ultimately something that the market has shown is what it wants- not needless gimmicks.
"Microsoft could legitimately get a second chance to turn things around here- all they need to do is not get too greedy with the pricing."
Given these three points, then – no Kinect, Microsoft willing to take a loss, and the console almost certainly being cheaper to manufacture in a year and a half – I think it is safe to conclude that the Scorpio will not be too outlandishly expensive. $400 is my guess for it on the higher end- I think that will go well with the Xbox One S, which will by that time probably have an SKU at $249 and one at $299. This price point will also make the Xbox One Scorpio look like much better value in comparison to the far weaker PS4 Neo, the Nintendo NX, as well as to the PlayStation VR, all of which are bound to be similarly priced.
Microsoft could legitimately get a second chance to turn things around here- all they need to do is not get too greedy with the pricing.