When Microsoft (MSFT) announced the decision to release an Xbox One without a bundled Kinect sensor, reaction was mixed. On one hand, doing so immediately turned the Kinect into an optional accessory instead of an integral part of the Xbox experience. On the other hand, the move let Microsoft cut the Xbox One price to $399, matching that of rival Sony’s (SNE) PlayStation 4. Microsoft announced that in June (the first month the cheaper console option was on shelves), and montly Xbox One sales doubled in the U.S.
Sounds good for the Xbox team, except Sony soon took to Twitter (TWTR) to announce that the PlayStation 4 was the top-selling video game console in the U.S. for June — the sixth month in a row it has taken top spot.
If ditching what had been promoted as one of the console’s key features, slashing the price by $100 and doubling sales isn’t enough to catch the PlayStation 4, will the Xbox One ever catch up?
And does it matter?
The previous generation Xbox 360 and PlayStation 3 have both sold in excess of 80 million units, with Microsoft having an edge of one or two million units over Sony. However, for the first four years of that cycle the Xbox was regularly beaten out by the PlayStation, and as GeekWire’s Todd Bishop pointed out, it wasn’t until 2012 that Microsoft finally had a quarter where the Xbox 360 was No. 1, globally.
In other words, no need to press the panic button. We’re not even a year into a console sales cycle that typically lasts for seven years or more, and if the PlayStation 4 has been the early leader, that doesn’t mean the Xbox One won’t eventually catch up.
As for whether first place matters or not, a dominant console could have more sway in terms of exclusive platform releases, but first place is in many ways a bragging war. Developers are not going to ignore a massive installed base of gamers on the Xbox One, even if the PlayStation 4 continues to lead in this generation of consoles.
You just don’t want to be third. Like mobile platforms, third place is the position where people start to ponder your viability. Apple’s (AAPL) iOS isn’t suffering at all from being far behind Google’s (GOOG) Android in smartphone and tablet market share, but third place Windows subsequently lacks developer support and faces questions about its long-term future.
In this generation of video game consoles, Nintendo (NTDOY) is firmly entrenched in the basement with its Wii U. That’s especially disappointing, considering the original Wii actually beat out both the Xbox and the PS3 with more than 100 million console sales. The WiiU, by comparison, is currently trailing the PS4, despite being released a year earlier.
Regardless of the relative position of the PlayStation 4, Xbox One (and Wii U), Sony, Microsoft and even Nintendo should be celebrating the trends shown by Junes sales numbers for the industry.
At a time when new smartphones and tablets are bragging about console-quality graphics and free games (while the PlayStation 4 and Xbox One are going for a pricey $399 with $60 games), sales of video game hardware are up more than 100% compared to this time last year. More importantly for the PS4 and Xbox, console sales are what’s driving the growth (as opposed to handhelds like the 3DS), with console hardware sales up more than 200%.
And as noted by Forbes’ Eric Kains in his article about the leaked NDP report that’s the source of the June game industry data, sales of previous-generation consoles are now beginning to decline, suggesting more gamers are coming to the conclusion that the PS4 and Xbox One are worth paying a considerable premium for.
In case you were wondering, it looks like video game sales are off slightly compared to last year (down about 3%), but that doesn’t mean there aren’t some smash hits out there. June’s leader was Watch Dogs from Ubisoft (UBI), a title that has sold 8 million copies already, many of those to PlayStation 4 and Xbox One owners.
But the bottom line is that we don’t know if the Xbox One will ever catch the PlayStation 4.
Based on the past 6 months and the fact that ditching the Kinect to match the PS4’s price doubled Xbox One sales but still failed to catch the PlayStation 4, it may not. But at the end of the day, who places first and who places second may ultimately come down to a few million units — an essentially immaterial number, especially when the current pace shows next generation console sales are healthy.
At this point, what should matter more to MSFT than the PlayStation 4 still holding on to first place is that the Xbox One isn’t sitting in the cellar below the Wii U — that would be the time to worry.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.