Microsoft cut the price of the Xbox One, and now that’s starting to cost it.
Xbox One and Xbox 360 revenues were down 24 percent year over year during Microsoft’s fiscal third quarter, the company reported today. The megaconglomerate’s computer and devices division reported $1.8 billion in revenue, which is down 4 percent year over year. The Xbox was a drag on that, and Microsoft credits lower sales for both the Xbox One and Xbox 360, which sold 1.6 million combined units down from 2 million in Q3 2014, as well as a lower average sales price for the downturn in its gaming division.
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The Xbox One now regularly sells for $350, and that often includes at least one and sometimes two games. That is a big different from the $500 the console originally launched at in November 2013. And that’s the price the console continued to sell at through much of the first part of 2014. Even while the system was selling well, Microsoft decided to cut out the Kinect camera from the box to sell a version for $400 in May to help compete with the $400 PS4 that is flying off store shelves at a record-setting pace (more than 20 million sold worldwide so far). In October, the company went even further and cut the price to $350.
That means the Xbox One was going to struggle to generate as much revenue this year as it did in Microsoft’s Q3 for fiscal 2014.
Of course, it’s not just the price cut. Recent reports from industry-tracking firm The NPD Group has found that sales for the Xbox 360 and PlayStation 3 have taken a nosedive. Microsoft’s older box was likely selling well through parts of last year, but that’s no longer the case. This is also putting a big dent in Microsoft console performance.