For the first 2 years crossgen is the norm anyway, and sure people won`t replace their X1X for Series S on launch, but people that have regular X may do it, and then 2 years after the release there will be people that will look at the only cheap option for 9th gen games and buy Series S.
Well, I don't agree, but I concede that your point has some validation.
I still think that Lockhart is a mistake, only because of MS "all our games is crossgen" policy, but we will see.
I to think that Lockhart is more probably a mistake, but for other reasons.
A gimped SKU has never worked out well in the past, but the circumstances would be different this time around, so we need more information, especially regarding pricing.
What I will say, though, is that Microsoft better not run a sandwich pricing strategy for their own sake. If they come out with "XSX will cost more than the PS5, but Lockhart is cheaper than the PS5", it's not going to bode well. Early adopters don't want gimped, so the actual comparisons will always be PS5 vs. XSX, and the XSX doesn't have a big enough performance advantage to really justify a higher price.
If XSX costs the same as the PS5 while Lockhart is merely a (much) cheaper option, then that could turn out okay. Still leaves the question if console gamers properly understand the scaling of graphics, because if they did, they'd be PC gamers. If they don't, then Lockhart will become known for holding back next gen graphics which is a bad narrative for Microsoft and in turn drives people towards the PS5 where people know what they'll get.
Basically what I think. And that was before PS5 without disc. Now that Sony revealed it a possible scenario that would be a nightmare to MS would be PS5 without disc (heavier subside) 399 and regular PS5 (break even) 499, probably most will buy the disc one anyway but that way they kept mass market price point.
Let`s say MS needs to have a cheaper system to market, with PS5 without disc being same power as the regular one then Series S would need to be no more than 299 to justify its price and then their premium one since is stronger than PS5 they decide to make 599 to make profit. In that scenario PS5 would reign supreme (even if Series X is 549 it would be hard for MS). Because that way regular customer would think well for only 100 more (Series S to without disc PS5) I get three times more power, and on the other hand (PS5 with disc versus Series X) why would I pay 100 more for just 20% power difference?
I`m quite curious to see what will be the price point of all systems to better guess what will be the impact on initial sales and reception.