Xbox One X: Analysts concur that $499 is "a tough sell"

On Sunday, Microsoft finally lifted the veil on the final design, date and price point of Xbox One X. On November 7, consumers will be able to buy the super-powered console for $499, but most analysts agree: charging that much for hardware could severely limit the system's consumer appeal.

"As expected, the new device's price point is the most obvious weakness, giving Sony an opportunity to drop its current PlayStation 4 Pro to $350 and raise the stakes," commented SuperData's Joost van Dreunen.

Wedbush Securities' Michael Pachter agreed: "I think that the price point is too high. Consoles have historically failed at this price point, and consumers seem unwilling to accept anything over $399. The X will have even more trouble, because the S is at $249 and so is the PS4. A consumer could buy both the S and the PS4 for the cost of an X, so it makes it a tough decision for anyone who is budget conscious or constrained. I think it will resonate well with the wealthy few who buy it, but think it's too expensive."

"Consoles have historically failed at this price point, and consumers seem unwilling to accept anything over $399"

Michael Pachter, Wedbush Securities

Newzoo's Peter Warman also believes it was a mistake to go with "a significantly higher price than the competing PlayStation, which will make it much more difficult to convince consumers, especially while they are already behind in terms of installed base."

EEDAR's Sartotri Bernbeck allowed for the fact that $499 is a "fair price point" given the technology inside the console, but still felt that it would be "a tough sell for the broader audience of gamers who haven't picked up an Xbox One yet."

Piers Harding-Rolls of IHSMarkit offered a dissenting opinion, however, claiming that, "Xbox enthusiasts will pay significant sums to get hold of the latest and greatest." Harding-Rolls had previously estimated that Xbox One X will sell about 500k units globally this holiday and he believes that will represent about 10% of total Xbox One hardware sales in Q4.

IDC Research director Lewis Ward was in alignment with Harding-Rolls, taking it even one step further by saying Xbox One X is "remarkably affordable given its specs."

He continued, "A similar PC built from scratch would easily cost over $700, so the fact that they got the initial suggested price down to $500 tells me Microsoft really put the screws to their component suppliers and so on. It's hard for me to see any profit margin for Microsoft with the Xbox One X hardware this year and probably into 2018, so this is a very aggressive pricing move in my view and puts some pressure on Sony."

From a console lifecycle perspective, Harding-Rolls also thinks Microsoft is making a smart move to capitalize on its base. "Xbox One X allows Microsoft to monetise its core Xbox audience mid-cycle and at a higher price point," he said. "This should drive profitability if the price point is set to support sales margins. This strategy is less impactful on software sales although may lead to catalogue sales of games that add One X support."

Of course, Microsoft's big focus during the press conference was on showing off "true 4K" gaming with HDR visuals. But was there enough variety for gamers out there? Analysts didn't seem to be overly confident in the lineup.

"Showing off strong fan-favorites like AC: Origins, Metro: Exodus, and BioWare's new Anthem really drove home the point that Microsoft is positioning itself as a go-to device for the insatiable gamer. The emphasis on post-apocalyptic shooter games, however, leaves me wondering if there's a broader opportunity for content," SuperData's van Dreunen said.

"There were no specific announcements that made it immediately clear that Microsoft would topple the momentum Sony has built this console gen"

Sartori Bernbeck, EEDAR

Pachter added, "The conference had a huge quantity of content, but not a lot of compelling exclusives. The first-party titles were largely 'good, not great', with Forza looking to me to be the best. I'm unsure about Crackdown (maybe it will be great), and I thought Sea of Thieves looked quite average. There were a large number of independent titles, but the two games that looked the best (Shadow of War and Anthem) are likely going to be multiplatform. The only game that I thought was a huge win for them was Playerunknown's Battlegrounds, and I think that is probably only a timed exclusive."

EEDAR's Bernbeck felt similarly, commenting that "there were no specific announcements that made it immediately clear that Microsoft would topple the momentum Sony has built this console gen."

Bernbeck continued, "Notably missing from Microsoft's conference were any new, exclusive third or first-party AAA games. 343 Industries was also notably missing, though Rare's Sea of Thieves game appears to be shaping into a fun exclusive."

VR/AR discussion was notable for its absence as well, but that may not be the worst thing in the world, according to van Dreunen: "After seeing a promising augmented reality demo of Minecraft last year, we saw nothing yesterday, suggesting that Microsoft is first doubling down on building its gaming audience base before introducing it to new technology. In an arms race, sometimes a slow-and-steady approach allows for a more cohesive and therefore more powerful offering."