After Sony increased the price of its PlayStation 5 gaming console earlier this year, Microsoft said it had no plans to increase the price of the Xbox Series X|S system. But apparently the company only meant that it had no such plans this holiday season. However, due to inflation and rising costs, Microsoft may “have to increase” the price of its consoles in the future.
Microsoft’s Xbox Series S and Xbox Series X consoles continue to carry price tags of $299 and $499 respectively this holiday season. The software giant also continues to charge $59 per standard video game and, unlike its industry peers, does not raise the price of its games. But as we move forward, the company may not be able to sell its systems and games at these prices, Microsoft’s head of gaming, Phil Spencer, said at a Wall Street Journal event. WSJ Tech Live (opens in new tab) A meeting earlier this week (via CNET News (opens in new tab)).
“Going into this holiday, we thought it was very important to keep our prices current,” Spencer said.[…] We have to consider business benefits and business costs. We’ve kept our console prices unchanged, and we’ve kept our game and subscription prices unchanged. I don’t think I can do that forever,” he said.
Platform owners such as Microsoft and Sony typically optimize their bills of materials and ask partners to lower their prices, thus reducing the cost of their consoles over time. But on the latest PlayStation 5 and Xbox Series X|S. Chip demand in 2020-2021 has never been higher, which is why the BOM cost was higher than expected. Prices for various commodity chips such as 3D NAND, DRAM, and power management ICs (PMICs) are now falling, but logistics costs are increasing. As a result, Microsoft and Sony’s costs are likely to remain the same from 2020 to 2021.
The problem, however, is that the latest Xbox Series X|S consoles are in short supply, so they rarely retail at MSRP. Nearly two years after its launch, Newegg still sells his Xbox Series X from Microsoft either bundled with games and accessories or priced higher than the MSRP.Currently this console is $577.40 (opens in new tab)If Microsoft raises the MSRP, it will likely lead to higher prices or retailers will have to lower their profit margins to continue selling the system at the current volume.
It remains to be seen what Microsoft and Sony plan to do next year. Usually, the console supplier will cut the price of the machine in his third year to increase demand. But if Microsoft raises the price of his Xbox in Q1 2023, all it needs to do next holiday season is return his current MSRP. But will there be more demand from consumers who couldn’t or didn’t want to buy these consoles at their current prices?