Will the Xbox One drive be removed in order for Microsoft to release a $399 console in 2014?
In a related report by The Inquisitr, a Xbox One hardware breakdown shows that the console is actually more expensive to manufacture than the Sony PlayStation 4 despite the performance of the PS4 hardware being significantly better. Although the Xbox One sales beat the PS4 in the US market, analysts believe the higher price point of $499 is a major factor in why worldwide PlayStation 4 sales greatly exceed the Xbone.
In essence, both consoles are gaming PCs with an 8-core Jaguar CPU and GPU integrated via a SoC design, 8 GB of memory, a 500GB HDD, Bluray drive, WiFi, HDMI, and USB 3.0. The main difference is that Sony put more money into the GPU performance and used higher bandwidth GDDR5 memory, while Microsoft chose to use cheaper GDDR3 memory but offset that by using expensive, high-speed eSRAM. All in all, the Xbox One is about $90 more expensive to manufacture.
Now there are rumors that Microsoft will remove the Xbox disc drive, increase the size of the hard drive to one terabyte or more, and drop the price to $399. To a certain extent this makes sense. Although the cost of removing the Xbox One drive would likely be offset mostly by the increase in cost for the larger hard drive, the idea would be for Microsoft to try and position its Xbox Live marketplace as the primary place to purchase games. In fact, it’s rumored that as late as the summer of 2013 Microsoft was still considering whether to remove the Xbox One disc drive for launch.
Despite Sony publicly demonizing the idea, both companies know in the long term that DRM and digital games are the future. Game developers and publishers like Microsoft and Sony stand to gain a very large increase in revenue since the cost of digital games are significantly less, there are less companies eating from the trough, and used games sales become a non-issue (can you say GameStop?). So while the discless Xbox One would be more of a loss leader in the short term, in the long run Microsoft could make the money back quicker through game sales.
Still, Wedbush Morgan analyst Michael Pachter believes this would not be a good business strategy:
“If this rumor is true, it is one of the dumbest ideas of all time. I think that if Microsoft doesn’t have GameStop pushing its content, it’s gong to sell fewer consoles in the long run and it’s going to lose a lot of money. It would demonstrate that Microsoft can afford to release a 1TB Xbox One at $399 with essentially the same production cost as the $499 model with a 500GB HDD and a Blu-ray drive. That would likely cause gamers to believe that the model with a Blu-ray drive is overpriced, or would cause them to believe that Microsoft is greedy.”
Besides removing the Xbox One drive, the only other way Microsoft could decrease its cost to $399 is by removing the Kinect. The huge negative to that decision would be the possibility of game developers choosing to not support the Kinect as much since it would no longer be a standard feature. What do you think?