Microsoft’s Xbox One Marketing Battle

The results of the first few months of next-gen consoles are in, and the PlayStation 4 has a sales lead over the Xbox One, at least going in to March. Somewhere over 6 million PlayStation 4 consoles have been sold, while the Xbox One is somewhere over 4 million (at least, prior to to the launch of Titanfall). This was not a surprise to many observers given the $100 price difference between the two consoles, but this was not good enough for Microsoft.

New Xbox head Phil Spencer underscored the importance of the Xbox One to Microsoft in a recent interview. “I go back and I look at Apple and they, on the back of music, became a very relevant consumer brand. Their investment in music early with the iPod and iTunes and everything that they did was an incredible growth opportunity for them and they really sparked consumer delight and innovation in the product, both the industrial design and just the way the whole service worked and I think we’ve got the same opportunity with Xbox here at Microsoft.”

“I think we have that opportunity. I don’t think it’s a lay-up; and I think there’s a lot of work. A lot of things that have to be done, but it would be great to be a part of that. If people look back and said ‘this is when Microsoft committed to gaming across everything that we did led with what we do on Xbox One and that was an important part in their history,'” Spencer added.

How has Microsoft been working to this end, and how has it responded to the sales differential with the PS4 On a number of fronts, but the most important is pricing. Certainly Microsoft wants to avoid a permanent, obvious cut in the Xbox One price, and that’s understandable. If you can boost sales to the desired point without a price cut, your bottom line will thank you. Perhaps the sales picture will look better with a few key releases and some marketing, so don’t give up margin in case you don’t really have to for the long term.

Cue the bundled software promotion, which adds significant value to the Xbox One by bundling in a digital copy of Titanfall or Forza Motorsport 5 for free. That’s a $60 game, effectively reducing the price of the Xbox One by $60, making up more than half of the price gap with the PS4. Best of all, that promotion can be ended at any time,returning the Xbox One to its original margins.

That promotion (which is still going on, with no particular end announced) was good, but Microsoft wasn’t finished there. Major retailers Best Buy and Walmart have the Xbox One at $449 with the bundled game, which effectively makes the Xbox One even cheaper than the PS4. At Costco, the Xbox One bundle with Forza Motorsport 5 is also at $449. Those are promotions offered by the retailer, not Microsoft, yet Microsoft is certainly watching the results carefully.

Microsoft isn’t relying on pricing and promotions to boost the Xbox One. We’ve seen a number of stories coming out of Microsoft’s Build conference, where the Xbox One featured prominently. One of the criticisms leveled against the Xbox One has been that it doesn’t have quite the same graphics horsepower as the PS4, so Microsoft is working to overcome that. At the Build conference Microsoft showed off the benefits of cloud computing for improving Xbox One game performacne, and trumpeted the introduction of DX12 that could significantly boost the Xbox One’s graphics power. In other words, Microsoft is not conceding this point at all to Sony.

The Xbox One is more than just games, though Microsoft is careful to keep the focus on gaming front and center (after the negative response to the initial unveiling that was focused on the console’s media capabilities). The recent announcement of a full slate of original programming for the Xbox One shows Microsoft’s desire to make the Xbox One a significant media machine. It’s important to notice that Microsoft is planning for each show to have interactive features to take advantage of the Xbox One and to differentiate this programming from other shows.

Microsoft continues to provide system updates and tweaks on a faster pace than Sony, bringing new functionality (like YouTube uploads) to the Xbox One and hinting at future capabilities. This is leading up to E3, where Microsoft will be attempting to reset market perceptions and recapture the leading position in the console wars. It’s an ambitious goal, especially when Sony won’t be standing still either. Still, Microsoft has the advantage of greater financial resources, and if the company really is determined they can easily outspend Sony on marketing or anything else.

Microsoft knows it’s under pressure from multiple fronts, on the low end from Amazon Fire TV and the rumored Android TV and revised Apple TV as well as Sony at the high end. Microsoft has staked out a claim on the premium end of the living room market, and it looks like the company is striving to be the leader. Only one thing’s for sure right now: E3 is going to be interesting.