Feature Article

Xbox's Strategy To Dominate Next-Gen: Win The Value War

Xbox has revealed its release plans for Series X and Series S, and with a budget-priced option and All Access payment plans it's aiming to win with sheer value.

Xbox Series X and Xbox Series S both finally have release dates and prices, while Sony is still waiting to share the same details for PS5. But it's clear Microsoft has an approach to the next generation in mind--read on for a breakdown.

Microsoft has finally detailed its next-gen launch plans, offering a pair of consoles and a suite of purchase options. And now that its plans are coming into focus, Microsoft's strategy is growing more clear: It plans to win the generation by offering value options that Sony can't match.

Take the Xbox Series S. The lower-tier next-gen Xbox system could have been next-gen in name only, an underpowered box that serves as a half-step between the current generation and the future. And though it's clearly not quite as powerful as its beefier sibling, the Xbox Series X, it's still a true step into next-gen hardware power.

The hardware specs detailed by Microsoft show the architecture and output between the two systems is nearly identical. The Xbox Series X and Series S have similar CPUs with very similar performance targets. The major difference, according to Microsoft, is resolution. The Series X is able to output in 4K up to 120 FPS, while the Series S caps out at 1440p with the option of 4K upscaling.

Essentially, Microsoft is banking on some percentage of players wanting to invest a little less in next-gen power and not particularly caring about 4K. Given that TVs themselves are a big investment that can more than double the price of diving into next-gen, that's a bet that very well may pay off. And it's allowing Microsoft to offer a next-gen entry point at $300, which actually makes it a good deal cheaper than its current top-of-the-line console, the Xbox One X.

Sony has yet to announce its prices for its two PlayStation 5 models, one of which is all-digital like the Xbox Series S. And Microsoft seems to be counting on Sony being unable to go so low, even with its digital edition.

But even aside from the specific box configurations themselves, Microsoft is also prioritizing a value-based strategy with its payment options. Both the Xbox Series S and Series X are available at an upfront cost--$300 and $500, respectively--but Microsoft is also expanding on its All Access payment plans. Rather than pay hundreds all at once, you can sign up for a payment plan (through a creditor) that will charge you $25 per month for Xbox Series S, or $35 per month for Xbox Series X, each for 24 months. Each All Access plan also includes a subscription to Xbox Game Pass Ultimate for the two-year payment period, which will also include access to an EA Play subscription.

It didn't take long for gamers to crunch the numbers and realize this actually represents a significant savings over purchasing the console outright. You actually pay less money than you would by purchasing the box up-front and then paying for two years of Game Pass and EA Play on a regular monthly or annual basis. How can that be right?

Xbox Series S (All Access)Xbox Series SXbox Series X (All Access)Xbox Series X

Price: $600
($25/month, 24 months)

Price: $300

Price: $840
($35/month, 24 months)

Price: $500
Game Pass: IncludedGame Pass: $360Game Pass: IncludedGame Pass: $360
Total: $600Total: $660Total: $840Total: $860

For one, it's worth noting that the difference is minimal enough that it could be erased at some point during the next two years, simply by Microsoft offering a significant enough sale on an Xbox Game Pass subscription. Subscriptions go on sale fairly regularly, so that could make the dollar value roughly equal. Even then, paying roughly the same amount with no interest charges, at a monthly rate that's easier for most consumers to swallow, should be a tempting proposition.

For many prospective players, that raised the obvious question: Why would Microsoft do that? What's in it for the company, if it's getting the roughly the same or even less money out of me, and getting it even slower?

To understand the answer, we simply have to look at another high-tech marketplace: cell phones. The trend of selling a high-priced piece of tech at a relatively cheap monthly rate was popularized there, and device providers certainly haven't gone broke with the practice. It has a few distinct advantages for the company. It locks you into a payment plan, which means you're signed up for two years of Game Pass Ultimate with no option to change your mind and unsubscribe. Before you sign up for Xbox All Access, you should be very sure you intend to remain a Game Pass subscriber for the next two years.

Perhaps even more valuable for Microsoft's purposes, though, is that the plan gets you into Microsoft's ecosystem and increases the chances that you'll stay there. Making you a Game Pass devotee for life is much more valuable for Microsoft than the extra money it would get from purchasing the same products and services a la carte. Game Pass is its secret weapon for next-gen, to the point that the box itself is less important than past generations.

Finally, and relatedly, we may see All Access become an ecosystem in itself. Microsoft's current strategy appears to be heading towards fairly regular hardware updates, with different series designations all falling under the general Xbox banner. It would be very easy for Microsoft to roll an existing All Access subscription into a new one, letting you re-up for the latest and greatest version of the hardware and renewing the monthly rate you've already grown accustomed to. This would also be similar to the cell phone market, and would keep you in Microsoft's ecosystem that much longer.

Again, Sony has not detailed a similar scheme. It's conceivable that it could introduce this when it details the PS5 price, but Microsoft has gotten a significant head-start by introducing All Access during the Xbox One era.

This may be partly why Xbox head Phil Spencer said he felt so confident about Microsoft's position in the market in regards to price point. Both by offering a budget-priced option with surprisingly impressive specs and by offering a payment plan with digestible monthly fees, the company is giving consumers multiple low-cost options to adopt the next generation. The company has already heavily promoted the strength of its hardware with the high-end Xbox Series X, but it may be winning the value war that makes the biggest difference.

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