The price of a console at launch can make or break the success of the console down the line. Consoles need to be released at the right price to offer good value for its potential buyers. Launching a console at a price that is above what people are willing to pay can be a very risky move. The PS3’s launch price at a staggering $599 almost killed the console, with Sony barely able to recover with some clever marketing. While the PlayStation 4 has yet to receive a launch price, it’s safe to say that Microsoft will do anything in their power to release their system at a lower MSRP than Sony. Current speculation says that both systems will have similar specifications, so how exactly will Microsoft pull this off?
Microsoft will not be beat by Sony, and they will fight back using their most powerful weapon today, Xbox Live. More specifically, Microsoft will release a subsidized Xbox 720. They tested this with the Xbox 360 in some retail store to minor success, and they will launch this system in full force with the release of the Xbox 720.
But why is this such a great idea? It’s the same reason most cellphones are bought subsidized, because there are a lot of people who would rather pay for their system over time than pay the full cost up front. Releasing the console at $199 and charging $15 a month for 2 years sounds a lot better to the consumer than a $399 console. Not only is this good for the consumer, but it’s good for Microsoft too. Instead of making $399 on each console sold, Microsoft will make over $500 on the system over the course of the 2 year contract price.
Mind you there are also plenty of consumers that aren’t willing to go down on a contract, so it’s still likely that Microsoft will release an off-contract Xbox 720 for $350 or $399 because there are still going to be plenty of people who do not wish to buy a system on a contract. By releasing at both price points/options, Microsoft will set itself up for success simply by appealing to both demographics.