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Xbox Series X could cost $400, analyst predicts, but it's not likely

Wedbush Securities analyst Michael Pachter predicts a $400 price tag for Xbox Series X thanks to Microsoft's deep pockets.

@DeekeTweak
Published Sun, May 10 2020 4:33 PM CDT   |   Updated Tue, Nov 3 2020 11:43 AM CST

The Xbox Series X's high-end specs promise a high price tab. But one analyst thinks Microsoft could take a serious hit on manufacturing costs in an effort to undercut Sony at the start of the new generation. The move isn't very likely, however.

Xbox Series X could cost 0, analyst predicts, but it's not likely 14 | TweakTown.com
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The Xbox Series X is a beastly system with premium components befit of an enthusiast PC. It features a 12TFLOP Navi 2X GPU, a 3.8GHz 8-core 16-thread Zen 2 CPU, 16GB of GDDR6 RAM, and a PCIe 4.0 SSD. That kind of powerful hardware comes with a steep price for consumers, but big companies are able to reduce costs due to mass quantities. Even still, they have to price out their consoles accordingly, but a cheaper price tag could conquer next-gen. So who will take the bigger hit and make their system cheaper?

Wedbush Securities analyst Michael Pachter says Microsoft can afford to take the hit. And honestly, he's right. Microsoft made $30 billion in one quarter alone, and Xbox is less than 10% of total earnings. If Microsoft wanted, they could sell the Xbox Series X for $400. But it doesn't mean they will.

"From what I've seen, Sony will have to charge $500 for the PlayStation 5, but Microsoft has a big balance sheet. If they want to cut the price by $100 and price below and subsidize the first 10 million units, they will," Pachter said in a recent Periscope live stream with Geoff Keighley (around the 10:40 mark).

"I think Microsoft is waiting to have Sony blink first and then they'll reveal the price and the launch date. Very likely sometime in November, very likely $400 and fans are going to get a lot for their $400."

Microsoft could do it if they wanted to. But the real question is: Why would they want to?

Xbox Series X could cost $400, analyst predicts, but it's not likely 3 | TweakTown.com

The reality is Xbox is a small part of Microsoft's earnings. It's functioning well right now because of services, which makes the real money. Hardware is an entry point to services, and companies typically take a hit on hardware as-is. If Microsoft sold the Xbox Series X at $400, they'd be taking an even bigger hit on a segment that routinely makes less than 10% of their revenues.

It's not likely to happen.

Furthermore, Bloomberg estimates that the PCIe 4.0 SSD and GDDR6 RAM alone make up $250 of each system's total manufacturing costs, which are expected to be around $450 per console. So Microsoft would be losing $50 on every Xbox Series X if they sold it for $400.

If Microsoft took this kind of a loss on, say, 5 million consoles at launch, they'd have lost $250 million. That's not the endgoal with Xbox. The main goal with Xbox is to make money, not lose it, and make it in a way that's accretive and synergistic with services and hardware.

No, the Xbox Series X won't be that much cheaper than the PlayStation 5, especially since it's actually more powerful than Sony's next-gen console.

The Xbox Series X is due out Holiday 2020 and will likely cost $500 (or maybe even more).

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Derek is absorbed with the intersection of technology and gaming, and is always looking forward to new advancements. With over six years in games journalism under his belt, Derek aims to further engage the gaming sector while taking a peek under the tech that powers it. He hopes to one day explore the stars in No Man's Sky with the magic of VR.

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