Xbox One pricing "too high" says business author

"The Art of Pricing" author Rafi Mohammed says $500 point price for next-gen console has potential to "derail" the system this holiday.

The Art of Pricing author Rafi Mohammed believes Microsoft fumbled an "simple issue" and has priced the Xbox One "too high."

In a new Bloomberg TV segment, Mohammed--who has spent 21 years working on pricing issues--praised Microsoft for reversing its controversial policies, but ultimately said he believes the Xbox One's premium price could "derail" the system this holiday.

"You want to get that console in consumers' hands, and then where you really make the money is off of the games," Mohammed said. "So it was really surprising that they charged such a premium, especially when they had a lot of negatives…like the very restrictive DRM, which they did retract on."

"One of the key things is that they really listened to their consumers and they did backtrack and they reduced the price, but I still think the price is too high," he added. "So it's still a $100 premium."

The PlayStation 4 launches this holiday at $400.

Mohammed said every Xbox One coming bundled with a Kinect 2.0 sensor is a benefit over the PS4, where users must pay $60 for the peripheral. Still, he said he believes Microsoft can decrease the Xbox One's price by making Kinect an accessory, similar to the scenario for Xbox 360 users.

This is unlikely to happen, according to past comments from Microsoft designers, who have positioned the device as an integral component of the Xbox One. Microsoft has also said that it has no plans to revisit Xbox One pricing.

Xbox boss Don Mattrick defended the Xbox One pricing point during E3 this month, saying Microsoft is "over-delivering value" and that $500 is not "ridiculous" based on other technology options consumers have today.

Mohammed is an economics graduate of Boston University, the London School of Economics & Political Science, and Cornell University (Ph. D.) He is the founder of Culture of Profit LLC in Cambridge, Mass.

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2751 comments
2leetchisgod2
2leetchisgod2

I never thought i'd read so much crap about a $100 difference. Most of you probably are holding iphones or some samsung 4g $300+ phone with a $60/month bill. Have at least 1 console, a PC, tablet and laptop probably.. But $100 premium for xbox spread over most likely 7-8 years of the consoles life is just way too much. Don't understand this logic.

hordaak
hordaak

WOW...Alot of the sony fans are saying the ps4 is just a better value, but when it comes to games, the xb1 wins out. Featurewise, everything else the xb1 is ahead. So...I guess you are saving money by getting a ps4. But go ahead and read most of the comments from here on down...and you'll see the argument is about money, and not the system itself or the games. OH I'M WRONG? so..the sony fans keep talking about games and features...and online..and not mostly about money. got it. xb1 for a better system. ps4 to save money. thanks

clarkydm
clarkydm

Its the damn $100 plus the kinects that bugs me, i had one for my 360, sold it all it did was collect dust. I am really close to following all the other sheep strait to sony.

MaskRisen
MaskRisen

I bought the 600$ PS3 when it came out. I had no complaints. Money isn't an issue for me. It will be for some people though, but not that big to make everyone buy a Ps4 over an Xbone. Most people didn't buy a PS3 because they said it didn't have enough "games" for the price. And when it had enough games, it didn't have enough "exclusives". People are going to find excuses, no matter how illogical, to buy or not buy something. Ps3 struggled because the Ps3 was to expensive for Sony to make a profit on the ones they did sell and that hurt more then the lack of total sales because they had to keep the price tag high to help offset the losses.  There is a range of acceptable losses when selling a console, and the Ps3's was just too large at the time of its release. Sony is doing it right this time and not taking a big hit on each Ps4 sold and keeping production cost low to not suffer hits like they did last generation. That will be the reason they succeed this generation. Microsoft isn't loosing with a 500$ price tag because I'm pretty sure they aren't taking huge losses on the console sold. What is the point of selling 1 million consoles if you're losing so much money with each one sold? PS4 may sell more simply because it's 100 bucks cheaper, but Xbone isn't going to be knocked out in the first year of it's release.

UnifiedGamer
UnifiedGamer

I have to agree with Rafi Mohammed, if you asked someone on the street today if they were willing to pay over half a grand for a gaming console you'd mostly like receive a big fat no. Though the difference may only be just $100, that $100 that your spending on the console could have gone toward another game and a controller, or in MS case an xbox live subscription card. MS should drop it's price, the very fact that they are pushing the kinect which is the $100 addition is ridiculous since most hardcore gamers find the kinect pointless or just an extra feature nothing game changing.

crazyintheface
crazyintheface

I don't see the big deal of $100. If $100 is that big of a factor for you, then you probably have no business buying any console. Not trying to be a snob but there are probably more important expenditures in your life if a measly $100 decides what console you get.

zzanzabar
zzanzabar

Here are just a few things Microsoft is overlooking with their Xboxone and its pricing:

Not everyone (like college students) have the ROOM for the Kinect to be effective, so it is actually useless in a dorm room lets say. 

No matter how 'false' the rumor that the Xboxone is ALWAYS looking through the Kinect, do you think the military (a significant consumer base) is going to take the chance?

Once you add tax, a game and another controller (very few people just have ONE controller anymore, or just one game at launch for that matter) then the price is damn near $700 within a week of buying the system (if you wait to by the controller).

That is a little too close to $1,000 (or 750 pounds) for a gaming system.  But according to Microsoft we gamers are getting 'thousands of dollars work of value'.

FIERCEnando
FIERCEnando

Its price here in Brasil is $980. Now THAT'S comething...

Pmsmm
Pmsmm

Well Microsoft isn't acting blindly, yet the fact is the things that they are demanding to gamers are too much, the world is facing a crises and they are demanding 499,99€, of course it may bring the Kinect along with the Xbox yet the PlayStation 4 doesn't bring PlayStation eye along with the console, yet if You buy this equipment you will still be able to pay less.

razor_rj
razor_rj

Think about it as a gaming computer, would you have a gaming computer of that power for that money ? no, then its "cheap". sure its hard for the majority of gamers but the price point is not that far off.

focuspuller
focuspuller

I called the policy change, and now I'm callling this. A price drop before release.

Not that I care either way. That thing is not coming any where near my home.

Qixote
Qixote

Given the sad state of the economy, I am not convinced that families are willing to plop down a half grand for a game console this holiday season.  Yes, it supposedly "does so much more".  But still at its core, it is a game console.  And they still have to pay for the expensive games on top of that.

innocent69
innocent69

Wii U is $100 cheaper than Crapstation 4.....Wii U has free online......Wii U has actual physical games that you can purchase right now. Crapstation has games "in development", therefore Crapstation 4 HAS NO GAMES!!!

BoltNinety
BoltNinety

Its $500. Thats nothing. Didn't the ps3 launch at a far higher price? If you can't afford $500, stick to your wii.

Karmazyn
Karmazyn

for $500 I can get PS4 and one new and two used PS4 games.

ohhdirkadirka
ohhdirkadirka

Microsoft isn't getting anymore of my money. Hell no. PS4 ftw

lostn
lostn

@crazyintheface What if these people had just enough money to cover all the other necessary expenditures they have, but come just $100 short of buying the console? 

It's never as simple as telling someone, if you can't afford this, or don't have that, then go away, we don't want you. When there are enough of these people not buying the console, it affects the options of people who do have the console. It affects decisions publishers make on which platform to develop for if exclusive or lead platform if not. It affects the size of the online community you interact with. Other people's inability to afford the console affects you, albeit indirectly, whether you like it or not.

lostn
lostn

@crazyintheface What if these people had just enough money to cover all the other necessary expenditures they have, but come just $100 short of buying the console? 

It's never as simple as telling someone, if you can't afford this, or don't have that, then go away, we don't want you. When there are enough of these people not buying the console, it affects the options of people who do have the console. It affects decisions publishers make on which platform to develop for if exclusive or lead platform if not. It affects the size of the online community you interact with. Other people's inability to afford the console affects you, albeit indirectly, whether you like it or not.

spartanx169x
spartanx169x

@crazyintheface Its nice that you have so much money you can throw around $100 bills like its nothing. But a lot of people think it is retarded to pay extra for something they are never or at least highly unlikely to use. With the XB1 a lot of people would be buying the Kinect with no plans to use it.

lostn
lostn

@zzanzabar If we're getting thousands of dollars of value, then MS must be taking a MASSIVE loss on each unit sold. That's extremely generous of them. It makes no business sense whatsoever to lose thousands on every unit you sell. Sell a million of these and you've lost billions of dollars!

dasgina
dasgina

I agree. I'll wait and see if it is a quality product. I may pick it up after a year or so. I was always a 2 system guy, I think gaming has changed a lot though. Halo is awesome and m$ does have a lot of exclusive games but so many other similar titles are on multiple systems.  It will be very difficult for me to buy this though based off my experience with my 360.

snxx
snxx

@razor_rj Actually, most PC gamers realize that despite an initial higher price paid for the machine, PC games are cheaper. So, yes, if you include a few games, you can have a gaming computer of that power (actually, you can have a more powerfull one) spending the same or even less. There are more to the price of a platform than just the sheer "entrance ticket". ;)

Pmsmm
Pmsmm

@razor_rj That's true but think about it, by looking at the Xbox One specifications and box content and by looking to the PlayStation's specifications and box content we can see that the PlayStation is a stronger machine, with better RAM, a better Graphic's card which makes the PlayStation 4 a better machine and yet cheaper and the Xbox isn't so good as the PlayStation and it's more expensive even if it brings the Kinect which is an expensive equipment that you are forced to buy while the PlayStation eye is an option that you make

Of course this is just my opinion.

Qixote
Qixote

@razor_rj So you are thinking this thing's price is going to convert pc gamers?  Lol,  Don't think so.  Your oversimplified  view is amusing.

Philmoeslim
Philmoeslim

Bad economy or not people are going to continue to buy. 100$ more isn't Mich to ask from brand loyalty and it is a good value great gaming and all the other stuff I do on my TV pliss more in one box its a game changer. Did ps4 finally show its product?

Rage638
Rage638

@BoltNinety I can say the same thing about half a gand being nothing when my mommy and daddy buy it for me and I never worked a day in my life to earn money. Unless they pay you $500 a week for doing your choores. So yea $500 is nothing.

Black_Pander
Black_Pander

@BoltNinety well, look how much the ps3 struggled. but the main point he's making is that compared to the ps4, the xbox one is a lot more expensive, which is going to play a big role in deciding which to buy

razor_rj
razor_rj

@lostn The same happened on previous generation, its why only the bigger house names remains. They make sales on games not on consoles. 

Philmoeslim
Philmoeslim

Um PlayStation 3 was suppose to have better CPU and ram and all that and it was garbage. Thing I hate about gamers is they complain so much its ridiculous. So what 8 years ago Xbox 360 launched at 400$ people are complaining about 500$ (with a kinect) have you heard of inflation. 500$ is not much money if you know have a job, if you can't shell out 500$ for something that is going to entertain you and hold up for 10yr life span then you don't deserve one. I mean seriously the this Xbox can do so much and everyone complains about used games...if developers didn't have to spend money on sending discs to distributors and them selling them they could sell new games just like they do on PC for waaaay much cheaper because that variable cost is gone. But they got rid of that possibility with removing always online which sucks who doesnt have an internet connection? Also I paid 500$ for the graphics cards in my computer. Regardless of all the complaining people are going to line up and buy.

BoltNinety
BoltNinety

@Rage638 @BoltNinety Never heard that before. Good one. I apologize for having a job that pays well. It pays to go to school kids. Remember that.

Radnen
Radnen

@Black_Pander @BoltNinety It struggled in 2006, which was 7 years ago. Inflation and so have the markets changed since, AND the Xbox One is a much more powerful console.

lostn
lostn

@Broomes70 @lostn @crazyintheface Why should I if I don't have to? They need to give me a good reason to. If Kinect is their reason, then no thanks.

 Now, you go to a developing country where they make less money than they do in your country, and ask them if they can't all save an extra $100 each? When they choose not to buy the console, the installed base does not grow, and publishers start being faced with tougher decisions, which affects YOU even though you CAN afford the extra $100. 

You don't live in a bubble. The rest of the world have different financial circumstances to you, and what the rest of the world affects you believe it or not.

lostn
lostn

@razor_rj @lostn There are losses made on consoles. But not that much. A few hundred at the very worst. The "thousands of dollars of value" is a gross exagerration. The PS4 and X1 have close to the same specs, and the PS4 analysts say is actually being sold for a profit. They use off the shelf parts so there was no expensive R&D spending to recoup. I think based on PS4 profit, the X1 should be not be making a loss either. I don't for a second believe them when they say there are thousands worth of value. If you do a teardown it won't come close to that.

Philmoeslim
Philmoeslim

Yea that sucks they should proly sell it for 399 euros 499$....since euros are worth more but I'm really talking about U.S gamers because 500dollars isn't much at all. And you getting 10 years out of it...and price will drop just wait

Pmsmm
Pmsmm

@Philmoeslim I see that you think that 500$ is not much but like I said before this is just my opinion and here in Europe, more specifically in Portugal, having to pay 499.99 Euros is a lot, and if you went to trade money to be able to buy an Xbox One here in Portugal you would have to trade 652,36$ and with the amount of things in this country that take money from the people it becomes hard to buy a console that costs that much but like I said it is just my opinion and I don't want to start an unfriendly discussion.

Philmoeslim
Philmoeslim

What does any of that have to do with a fedora? And PC gaming is the only gaming were steady professional esports can take place because the majority of games played prof don't release new version every year. Don't get me wrong I love my Xbox and ps3 and play console games but my computer will always look spectacular compared to any console. That's why PC gamers "oversimplify" because console gamers have one option to buy xbone or ps4 PC gamers have about 15 decisions tied to 1000 diff options on what gfx or CPU or motherboard they need to run games at full spec. Its really not oversimplifying the question. BC the question is simple and so is the answer

Pmsmm
Pmsmm

@ThereWillBeNPCs @focuspuller @Qixote For good as that may be, the console will only drop to that price, probably after some time in the market,but until that happens everyone that wants the Xbox One so much will have to wait, but it would be great if it drops to that price.

Philmoeslim
Philmoeslim

Everybody can buy one specially with Obama in office all the poor people can use there handouts to get an xbone . I'll buy food stamps 25 cents on the dollar if anyone needs yo save up.

Rage638
Rage638

@BoltNinety people that have money never brag about it and dont talk about it. But its ok this is the internet you can say w.e you want but we all know you are just another spoiled brat enjoy you xbox1.

Bleach2X1
Bleach2X1

@Radnen @Black_Pander @BoltNinety I also wasn't worried about losing my job every 6 months then either, if it was before 2008 I would have gotten both consoles for $500 each and not worried about it. Hard to grasp the concept of money when your parents pay for everything.