Microsoft Mulls Hiking Price of Xbox Consoles and Games

Microsoft
(Image credit: Microsoft)

After Sony increased the price of its PlayStation 5 game console earlier this year, Microsoft said it had no plans to hike the price of its Xbox Series X|S systems. But apparently, the company only meant that it did not have such plans for this holiday season. However, due to inflation and rising costs, Microsoft may 'have to' raise the prices of its consoles in the future.

Microsoft's Xbox Series S and Xbox Series X consoles will continue to carry a $299 and a $499 price tag this holiday season, respectively. The software giant will also continue to charge $59 per standard video game and will not increase the price of its games, unlike some of its industry peers. But as we advance, the company might not be able to sell the systems and games at these prices, said Phil Spencer, Microsoft's gaming chief, at the Wall Street Journal's WSJ Tech Live (opens in new tab) conference earlier this week (via CNET News (opens in new tab)).

"Going into this holiday, we thought it was really important that we maintain the prices that we have," said Spencer. "[…] We have to look at the return on our business the cost of the business. We have held price on our console, we have held price on games for us and our subscription. I do not think we will be able to do that forever."

Platform holders like Microsoft and Sony usually reduce the costs of their consoles over time as they optimize bill-of-materials and demand their partners to lower their prices. But with the latest PlayStation 5 and Xbox Series X|S. In 2020 – 2021 demand for chips was unprecedently high, which is why their BOM costs were higher than expected. By now, prices like 3D NAND, DRAMs, and various commodity chips like power management ICs (PMICs) have dropped, but logistics costs have increased. As a result, Microsoft's and Sony's costs might remain unchanged from the 2020 – 2021 period.

But the problem is that they have rarely retailed at MSRP due to shortages of the latest Xbox Series X|S consoles. Even now, almost two years after its launch, Newegg sells Microsoft's Xbox Series X either bundled with a game and accessories or at a higher price than MSRP. Right now, this console sells for $577.40 (opens in new tab). If Microsoft hikes MSRP, it will likely get more expensive, or retailers will have to lower their profit margins to keep selling the systems at current volumes.

What remains to be seen is what Microsoft and Sony plan to do next year. Typically, console suppliers cut the prices of their machines in their third year to increase demand. But if Microsoft hikes the Xbox price in Q1 2023, all it will have to do next holiday season is to return current MSRPs. But will it boost demand from consumers that could not or did not want to afford these consoles at their current prices?

Anton Shilov
Freelance News Writer

Anton Shilov is a Freelance News Writer at Tom’s Hardware US. Over the past couple of decades, he has covered everything from CPUs and GPUs to supercomputers and from modern process technologies and latest fab tools to high-tech industry trends.

  • InvalidError
    Strange how the cost of memory, storage and other parts have dropped by 30-50% despite inflation since these things launched and they are only musing about jacking up prices now. Executives must feel like they have to sneak a price hike in there soon, before inflation levels out and customers won't buy the inflation excuse anymore.
    Reply
  • Giroro
    "$500 + $60/yr forever" is already pretty overpriced for a basic online-locked subscription-based ad-heavy Blu Ray player.
    I don't think people will pay any more than that unless Microsoft has some super secret hidden plans to someday start developing games for their "Disney's ESPN+" Box.
    Reply
  • PlaneInTheSky
    I'm no market analyst, but I think if you price an Xbox Series X at $600+, you're going to lose a lot of potential buyers, especially in non-US regions.

    Console prices were already hiked a lot this gen.
    Reply
  • sycoreaper
    There is a caveat to the $60 price tag you mentioned. Some games will NOT support free upgrades. One such upcoming example is Hogwarts Legacy.

    The Regular Xbox version will not get you the Series-S and X version. You have to pay $70 for that "privilege".
    Reply
  • WrongRookie
    It will be interesting to see what Nintendo has to say about the Switch now as the console has entered it's 6th year already.
    Reply
  • Mandark
    WrongRookie said:
    It will be interesting to see what Nintendo has to say about the Switch now as the console has entered it's 6th year already.
    Oh, don’t worry they’ll come out with a new Console and charge more for it

    as for gaming I think I’m out. Can’t deal with these costs
    Reply
  • George³
    InvalidError said:
    Strange how the cost of memory, storage and other parts have dropped by 30-50% despite inflation since these things launched and they are only musing about jacking up prices now. Executives must feel like they have to sneak a price hike in there soon, before inflation levels out and customers won't buy the inflation excuse anymore.

    This is normal. These components are produced with lithography processes, which have not been at the bleeding edge position for a long time, but are maximally mature and with excellent yields, correspondingly fewer defects than at the beginning of production. Apart from that, the design costs are probably already paid for and it's a crime to keep charging them into the price of the consoles.
    Reply
  • bigdragon
    Corporate greed is out of control. I'd honestly like to see world governments start breaking up the biggest corporations and reigning in executive pay. Prices should be dropping at this point in the console lifecycle -- not increasing. We've allowed companies like Microsoft and Sony to grow too big.
    Reply
  • Tc17
    Admin said:
    Microsoft may have to increase the prices of consoles and games due to economic pressure.

    Microsoft Mulls Hiking Price of Xbox Consoles and Games : Read more


    That's ridiculous. Hardware prices go down over time. The Series X has been out a couple years now. It's price should go down if anything. They always take a loss on consoles anyways, they can afford it now too. It's not what they make their money off of, unlike jacked up PC hardware.

    Any talk of jacking up any prices, including gamepass or games costs will get a LOT of backlash from the public. I guarantee it. It's plain greed. Microsoft is already making billions in profit just from gamepass alone.
    Reply
  • mitch074
    Don't confuse customer prices with factory prices - the former are strongly influenced by intermediary commissions and supplies vs demand, the latter are planned a long time in advance and get their variations with a large delay - current factory prices are now hit by last year's prices...
    Reply