Yesterday, I wrote an article explaining that despite some recent cost estimates, Microsoft would have to be crazy to price an Xbox Series X, its next generation console, at $600 for its initial launch. This got some pushback, saying that for as much power as the thing is going to be putting out, which is on par with a solid gaming PC, that $600 is a perfectly fine price and actually, a steal.
I also kept hearing the same argument over and over again, that this is an era where we are paying $1,000 for phones, yet somehow it’s crazy to think a video game console can cost $600.
I have seen this comparison a lot, and it also came up back when people were balking at a pricey mid-generation upgrade with the PS4 Pro and Xbox One X, as phones are updated with new models far more often than once every 3-4 years.
And yet I really don’t like this comparison as it ignores a lot of different things.
First of all, in 2019 a phone is quite literally essential to existence as a human being. Everyone on earth needs a phone, which is why companies can gauge for higher tier models, and this is especially true of Apple which gauges on well, everything it sells, as that’s just what they do. By comparison, a brand new high-end video game console is not a must-have purchase the way a phone is.
Secondly, the way most phones are purchased is different than the way a new video game console is bought. Even if a phone costs $999, you will almost never see someone plunk down a thousand dollars for it on the spot. Either the phone is added to your monthly bill and you will end up paying it off over X number of years, or you will get a free or discounted phone if you agree to be locked into some sort of pricey phone contract with a new or existing cell provider. While it’s possible to break up something like a new Xbox into installments, for the most part, these are generally up-front purchases.
Finally, these are just fundamentally different industries, and you have to look at the broader context. As I said in my last piece, the video game industry has a history of not being kind to overpriced consoles, particularly ones that launch at $600 like the PS3, which was ridiculed for that lofty price over a decade ago and it floundered initially as a result. On top of that, a huge reason that Microsoft lost the console generation race to Sony last time was because they opened with the Xbox One (and Kinect) at $500 while PS4 was $400. Even if Sony decides it’s time for an upgrade and the PS5 costs $500 this time, Xbox Series X is not going to want to enter at $600 to repeat the exact same scenario, as at the very least, they’re going to want to price at $500 to match it, and then just pray Sony doesn’t pull a rabbit out of its hat and somehow make PS5 $400 again.
You can say that adjusting for inflation, something like the $600 PS3 is now more like $750 in today’s dollars, but have you…ever paid attention to the video game industry? It does not care one bit about inflation, which is why we have been paying $60 for new games for an eternity without a price increase, and gamers would riot if we suddenly rocketed up to $80-100 games even if that “makes sense” given the rising cost of development and the general principles of economics. If anything, you’re seeing prices of some games even go down from that point as AAA offerings have to compete with free to play titles. Now they’re supported by microtransactions or DLC or other post-launch paid content. So even if it makes some amount of sense for a console to cost $600 in 2019, the general public will still reject a console at that price, and it would put Microsoft in a dangerous position, potentially undercut by Sony and Nintendo.
I am not saying this is impossible. It’s true that Microsoft may decide the Series X is worth that premium price point. And yet it would show that Microsoft is choosing to ignore its own history and that of its rivals, and it would have to make a very convincing case that it’s both worth that much on its own, and worth that much when compared to PS5 as well.