The entertainment console market is getting set to welcome the new “Xbox One” by Microsoft Corporation (NASDAQ/MSFT) and the “PlayStation 4” (PS4) by Sony Corporation (NYSE/SNE).
I just received an e-mail from Best Buy Co., Inc. (NYSE/BBY) to pre-buy the Xbox One for $499.00. I was going to pull the trigger on that deal—until Sony announced it would be selling its PS4 for $399.00. So, while I like my current Xbox over the current PS3, the $100.00 price difference will make consumers, especially those who favor the Xbox, think hard about whether to switch or remain loyal to Microsoft.
Of course, Microsoft could decide to cut its price to make sure it can retain its spot as the top seller of entertainment consoles. Or what I think could happen is that Microsoft may offer some sort of bundling deal that will see the buyer of the Xbox One get some freebies, which is always a good idea when new consoles are launched.
In addition to the console market, the videogame developers will also see a huge boost in their sales, as is generally the case when new consoles are introduced.
What will be interesting are the sales of games online via the console, which have been picking up. The sales of downloaded content and digital games increased 33% year-over-year in the United States and Europe. The key regions for online sales are the U.S., the United Kingdom, France, and Germany, which, when combined, accounted for $10.0 billion in sales in 2012, according to the NPD Group. (Source: Garcia, L., “Digital Video Game Market Growing Across The World,” Gameinformer, April 1, 2013, last accessed June 12, 2013.)
The rise in online digital sales is why companies like Microsoft and Sony are developing advanced consoles that easily allow the buying of content via the Internet. The money is made more through the content purchased via the consoles, and less on the sale of the console. This is why Sony is coming in with a cheaper console, as the company realizes that the money is in the games, movies, music, and other content purchased. Once a company sells its console, there are then expectations of associated revenue streams coming down the line—with its smaller price tag, Sony is hoping to boost console sales.
Just take a look at the new consoles and note the expanding marketplace where you can spend your dollars. You can even buy cards in stores for monetary use on the Microsoft Xbox and Sony PS systems to purchase games in the online marketplace.
So it’s going to be interesting to see how Microsoft reacts to the lower price for the PS4. You know something will happen, as Microsoft doesn’t want to lose out to Sony. (Read “Has Microsoft Found Its Savior?”)