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."

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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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