scrapking said:
I agree that the Series S has little room for effective long-term price drops. What I see as the flaw in your analysis is that Microsoft is predicting that the PS5 and Series X *also* have little room for effective long-term price drops. Typically consoles are sold at a loss up-front, but with cost reductions so substantial that they can later be sold at a profit despite significant reductions in MSRP. What Microsoft said in the Eurogamer interview that I've been referring to, is that their road map doesn't show substantial cost savings due to moving to smaller processes. They will likely realize some cost savings over time, but not as much as in the PS4/X1 era, which itself was not as much as the PS360 era. Therefore, Microsoft and Sony are likely going to have to choose between selling them at a profit, or significant MSRP reductions, they likely won't enjoy both. They could maybe split the difference (sell them at cost at moderate MSRP reductions). But that significantly changes the rest of your analysis, IMO. You also misquote me. At no point did I assume that Series X demand will decrease over time in favour of the Series S. I indicated that Microsoft suggested that, not that I was saying it was necessarily going to be so. |
Well I apologize for misquoting you but you said Microsoft's (Phil Spencer's) assumption made sense so it looked like you shared their opinion. I don't think their assumption/expectation ever made sense. They underestimated the appeal of a brand new $400-$500 powerful hardware and overestimated the Series S based on poor analogies.
Idk about the Series X, but the PS5 physical edition (which is slightly less powerful) made profit a few months into the generation... until the economical shifts complicated things. I still think PS5 will follow a fairly similar price drop trajectory to PS4 from here on out, with the Digital Edition eventually costing as little as $250-$300 (vs $200 for the much weaker Series S). I think a mass-porduced Series X with two configurations would have been the better strategy for the long term, even if it required slightly lowering the specs in favor of higher quantities.
When the PS5 revision launches later this year, I expect Sony to drop the price outside the US back to its original price or lower, and to start pushing the new "Digital Edition" (namely the PS5 without the disc drive add-on). It looks to me that hardware wise, Playstation's approach was the correct one. Hence copying Microsoft would be wrong imo.