Last holiday season, Microsoft lowered the price of the Xbox One from $399 to $350 and has (mostly) kept it at that price since then. This was a move intended to help bolster sales of the current-gen console. That hasn’t happened however. Despite the lower price point, the console is still far behind its competitor, Sony’s PlayStation 4, which is outselling it by 2:1.
According to the company’s fiscal third quarter earnings report, the lower price point is cutting into its revenue which were down by 24% compared to last year. The Xbox consoles, both the XBO and the 360, sold roughly 1.6 units, which is down from 2 million in Q3 of 2014. The report reads: “The revenue decline [was] driven by lower console unit [sales] against the prior year postlaunch quarter and increased mix of lower price Xbox Ones.” It should also be noted that sales of the Xbox 360 took a sharp downward turn and this lead to the decline in revenue as well. The last-gen console was still selling relatively well last Q3, but not so this time.
This shouldn’t come as a surprise. A lower priced console that isn’t selling very well will in time cut into profits. It seems that the Xbox One is caught in a catch-22 situation. It’s original price point of $499 was hurting it and it seems that the $349 price point isn’t helping matters. While the company will have (arguably) the strongest holiday season of 2015, that is still many months away and won’t do anything to stop the bleeding in the meantime. What Microsoft can do against Sony at this point is unknown as the Japanese hardware giant’s console is flying off store shelves without any loss of momentum in sight.