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Kinect-free SKU will be the only price markdown for now, says Microsoft

Despite Sony Corp.'s (TYO:6758) PlayStation 4 (PS4) outselling the Xbox One more than three to one in Q2 2014, Microsoft Corp. (MSFT) said it had no additional plans to further cut the price of its console to drive stronger sales.
 
Rumors of a price cut heated up after the mobile version of the Microsoft Spain website showed an image of a Kinect-free SKU with the price €349.99 -- roughly €50 cheaper than the current Kinect-free SKU.  The surprising price was first reported on by TechRadar, but Microsoft later confirmed that the listing was due to "an error" -- an employee mis-entered the price of the new Kinect-free SKU.
 
So far the Xbox One has only received a single price cut, of sorts.  It's now offering a SKU that lacks the Kinect 2 sensor for $399 USD.  While this is definitely a substantial price reduction it's open to debate whether it's a true price "cut" as the reduction is only realized by dropping one of the console's top selling points (voice and motion control).
 
The fact remains Microsoft is scrapping a key part of its work that it put in during the Xbox One development cycle, and a key part of what it claimed made the console great.

Xbox One Spain price error
[Image Source: Neowin]

Microsoft by its own accounting has room to cut the price further, as it claims to have been making a profit off the $500 USD Kinect SKU (with Kinect 2) since day one.  Given it's almost a year later, Microsoft surely has realized further cost savings since, making it highly likely that the $400 Kinect-free SKU is profitable.  It's likely Microsoft could sell the hardware at a small loss, at worst, for $350 USD.
 
Microsoft's decision to stick to a safer, more cautious pricing scheme despite its poor sales may be second guessed later on if it is unable to find some way to turn the tide against Sony's console.
 
Our analysis of Microsoft's published Xbox 360/Xbox One sales breakdown, combined with its earnings report, Sony's earnings report, the NPD Group, and other sources suggests that despite doubling its Xbox One sales in June, Microsoft was still outsold roughly 2-to-1 by Sony console wise.  Next month brings the Xbox One to nearly three times as many markets -- something that could definitely jumpstart sales.  But if expansion fails to prove the catalyst, Microsoft may be forced to trim its price if it wants to truly have a shot at competing with Sony for the lead this console generation.

Sources: TechRadar, via Neowin





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