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Xbox One at $499: “the price is too high”, says economist

Monday, 24th June 2013 14:06 GMT By Dave Cook

Xbox One will cost $499 / £429 at launch in November, but the cost of entry is too high, economist and author Rafi Mohammed has cautioned. He has stressed that a low console cost would result in more players investing in Xbox One games in a new interview.

Mohammed has worked as a pricing analyst for some 21 years and is author of a book called The Art of Pricing. If there’s one thing he appears to know, it’s how to price a product successfully.

Speaking with Bloomberg TV, Mohammed said of Xbox One, “You want to get that console in consumers’ hands, and then where you really make the money is off of the games.

“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 from. 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. So it’s still a $100 premium.”

Despite the $499 asking price, Microsoft’s Don Mattrick has recently suggested that Xbox One over-delivers on value, and offers thousands of dollars worth of content and features. We’re still not sure what ‘over-delivering on value’ means exactly.

Last week I wrote a blog that discussed the $100 price difference between PS4 and Xbox One, and why it might make consumers flock to Sony’s console in these high-cost, cash-poor times. See what you think here.

What do you make of the Xbox One price? Is Mohammed correct? Is it too high? Let us know below.

Thanks Gamespot.

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34 Comments

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  1. ps3fanboy

    don’t say it out loud… microsofts have just payed 700 millions for upgrades. they can’t afford to lower their prices on the xbone now. there is also rumored that xblivegold fee will raise…

    #1 1 year ago
  2. xBASSxMONSTAx

    Even if it was cheaper than the PS4, I still wouldn’t part my money to Microshaft because they attempted to screw us gamers over. They have left me (a former xbox customer) disgusted at them as a company. I have since canceled my MS gold from my xbox 360 and have since switched to my PS3 like I should of done from the start. Next gen I’m buying the PS4 to go along side my Wii-U. Microsoft can kiss my ass.

    #2 1 year ago
  3. GwynbleiddiuM

    New Jimmy McMillan Campaign slogan: “The Price of Xbox One is too Damn High”

    #3 1 year ago
  4. Silent Killer01

    just remove the kinect and cut $100.

    #4 1 year ago
  5. ZeroVulcane

    @4
    Yeah that’s the only reason why it’s so much higher. Get a PS4 with the PSeye and it’s only like 30$ less.

    #5 1 year ago
  6. Droid

    This guys new nickname is now ‘Captain Obvious’.

    #6 1 year ago
  7. Aullah

    @2 They will pull up the DRM walls after launch. You will see… Dont buy xbone.

    #7 1 year ago
  8. Schwarzerwind

    youdontsay.jpg

    #8 1 year ago
  9. mistermogul

    @2 +2

    #9 1 year ago
  10. frostquake

    Sad to say, but I almost believe it would have been better for Microsoft to stick to their Guns and not change anything! When a company Back Tracks it causes all kinds of Trust issues in a product, and usually kills the product! In this case the stupid thing has not even launched yet! Hardcores will buy, they always do!

    But just going around to stores, Best Buys, GameStops, WalMarts, Sams, and other electronic stores, the sales people are telling consumers, to be Leary of Xbox1 and go with PS4, they recommend a Wait and See what happens thing, not a good way to start a launch of a product that has not launched!

    #10 1 year ago
  11. ps4fanboy

    not at all too costly. i may probably get one but certainly not before PS4

    #11 1 year ago
  12. SplatteredHouse

    dump the kinect. problem solved. Microsoft seems to still be forgetting that they only make money when they sell things consumers want, as THQ discovered to its great cost. MS sell software, OS’ and such, yeah.
    This isn’t a situation like that, because there is no compatibility consideration, or other impediment to me choosing to play games elsewhere.

    #12 1 year ago
  13. tCruzin

    Get over it, the Xbox One is doing fine. If its “too much” for anyone than just buy a ps4.

    #13 1 year ago
  14. jeffb01

    I would like to see Mohammed’s track record (right and wrong)… but overall, I think the biggest problem is I don’t want to be forced to use the kinnect…

    #14 1 year ago
  15. jeffb01

    @ 13 If ms were so fine with people with people just buying a ps4, I doubt that they would of backtracked on their whole game policy a week ago…

    #15 1 year ago
  16. MCTJim

    I say they are both too expensive. $199.99 US would have been fine with me. Drop the prices of the 360 and PS3 to 99.99. Matter solved..everyone happy and many games will be sold at launch along with accessories.

    #16 1 year ago
  17. salarta

    I’d like Mattrick to tell us exactly what features make it thousands of dollars worth of value. At present, he’s claiming that the whole thing is somehow being sold at thousands of dollars deficit on Microsoft’s part just to get it to $500. I know someone could say “value doesn’t equal cost,” but if we start pulling that where value isn’t based on an objective measure then we’re going by subjective thoughts and I could say it’s only got $250 worth of value to it. The value of the XBox One being a subjective matter isn’t such a bad thing normally, except in this case, it’s being said by an official at Microsoft to defend their pricing.

    #17 1 year ago
  18. Kanok

    Too high, because of fuck kinect disaster has made it.

    #18 1 year ago
  19. For Blood

    I think BONDJOJO needs a warning for soliciting and linking to questionable sites.

    #19 1 year ago
  20. Gigabomber

    This guy knows pricing so well, no one’s ever heard of his book: can we stop with the pointless MS bashing articles?

    #20 1 year ago
  21. Lengendaryboss

    @21
    Pointless? No. Bashing? Yes. Duty to provide articles? Yes.

    #21 1 year ago
  22. Dave Cook

    @21 how is this an MS bashing article?

    A man has said something negative about the literal high cost of Xbox One.

    If a man or woman said something negative about the cost of PS4 then we’d also report it.

    It just so happens that in this case, Xbox One is priced higher.

    Does this help at all?

    #22 1 year ago
  23. For Blood

    @Dave

    Some people just wake up on the wrong side of the bed and need something to complain about.

    #23 1 year ago
  24. hitnrun

    $499 is not too much money for a next-gen console. You can always get a rise out of the crowd by telling them that this relatively expensive thing they want should be less expensive, but new consoles are targeted at getting lots of money up front from early adopters, especially since there’s going to be first-year shortages anyway. If you’re an adult with a job and the kind of games-obsessed person who buys consoles in the first year, you would pay $499 in 2013 dollars for your next one, however begrudgingly.

    The problem for MS is that this price doesn’t exist in a vacuum, and Sony came in a full $100 cheaper. They’re taking a loss on the cash they could have gotten from their fanbois to cut into MS’s market share early. I, for one, fully intend on rewarding Sony’s aggressive play for my money. I certainly won’t be sad to leave the 360 GUI behind, either.

    #24 1 year ago
  25. shaolinsword

    It must be really nice to get paid for pointing out the obvious

    #25 1 year ago
  26. OlderGamer

    I have a PS4 preordered. And I have been wondering long and hard about the value of investing at launch vs waiting maybe a year after.

    And it is about price. Just like it is with Xbone.

    Sure PS4 is cheaper, and makes sense.

    But where are the games?

    Destiny is listed at June 2014 on Gamestop. That is a whole year away. I know those dates are placeholders and subject to change. But I really don’t have a hard line on actual days and dates for Next gen games. For either system.

    So I wonder, where is the killer app for either system. Price aside.

    And price DOES matter. But instead of investing 400usd/500usd, plus second controller, and have little to nothing to play…am I better off just buying WiiU games, PS3 games, XB360 games or PC games instead? A fair amount of gaming can be purchased for the price of new hardware alone.

    Dave can you track down release dates? Hardware is nice and all, but it is the games that matter the most to me. esp when considering what system to purchase and when to pull the trigger.

    #26 1 year ago
  27. salarta

    @25: “If you’re an adult with a job and the kind of games-obsessed person who buys consoles in the first year, you would pay $499 in 2013 dollars for your next one, however begrudgingly.”

    If you’re an adult with a job, you might have too many bills to pay to spend an extra $100 for a console. Some people, usually younger ones, like to think that all adults are just rolling in money, but the reality is that there are many adults that love to play games but are still overall struggling financially.

    #27 1 year ago
  28. karma

    #4: “just remove the kinect and cut $100.”

    But the marketing potential from super targeted advertising using kinect to observe what we like, is worth billions. So.. you WILL pay for kinect AND, you will LIKE IT!

    #28 1 year ago
  29. Lengendaryboss

    @29
    That crap clearly doesn’t work on everyone.

    #29 1 year ago
  30. hitnrun

    @28 Anecdotally, sure. Everyone has different priorities. I’m not rolling in money and have large bills, but the scale of my finances has changed such from when I was younger that 400 or 500 for a major, once-in-five-years entertainment purchase is not going to put me off. That’s typical for adults.

    But the point I’m making is not personal. Even if I decide that $500 is too much, there would still be a few million early adopters. Again, this is if Sony hadn’t come in hard at their grill and put them at a comparative disadvantage.

    Put it this way: if Sony came in at $499, would it the Xbone be too expensive? I doubt it, in a world where people stand in line for $800 iPads.

    #30 1 year ago
  31. Brenna Hillier

    @19 it’s a spambot; warnings don’t do much good.

    #31 1 year ago
  32. OlderGamer

    But the thing is value for your investment. I agree with you hitnrun(love that handle btw, I used to have PKers on MMOs named that), however while most of us can get 500usd together, if the hardware is only 400usd, that means we can pick between just hardware for 500usd or hardware and a couple of games for 500usd.

    Take a peak at the bundles sites like Gamestop are promoting. The same 600usd buys a lot more when applied to a new PS4 then it does when applied to a Xbone.

    I think that matters too.

    For me, I am having a hard time justifying either one till more games come out.

    #32 1 year ago
  33. gargus

    Yes 400 dollars for a system that is pretty much the same in terms of hardware (but still more powerful) is nice.

    The fact the big difference is the lack of camera on PS4 which I can still buy if I want for 60 dollars and it still be 40 dollars less than a xb1 with its camera is nice.

    The fact I can get ps+ which gives A LOT MORE than xbl live does, for less is nice also.

    But what it comes down to is politics for me. MS slammed its consumers hard with tons of drm and said “deal with it” and spent weeks, months arguing with consumers as to why they should deal with it, then flip flopped not for the sake of the customer but to get better sales. The fact they put even something simple as netflix behind a paywall and dozens of other reasons why I wont support MS. I wont support them for their terrible lack of respect for the very people who keep them in business.

    Im not a fanboy of any system because I love games. But I also wont support a company that treats its customers like walking wallets and nothing else. If sony did the same thing as MS and MS was the company to give its customers options and showed that they mattered then I would have pre ordered a xb1 instead of a ps4.

    If a company does things that dont make me feel like a valued customer I dont give them money, regardless of who they are.

    #33 1 year ago
  34. polygem

    #2 and #33:

    as if i had written it myself. 100% agree wit that.

    #34 1 year ago