Phil Spencer Says Prices for Xbox Consoles “Aren’t Coming Down”

Xbox head Phil Spencer came to the gamescom conference in Cologne, Germany this week where Xbox has a big presence this year. Microsoft’s Xbox business has been talked about a lot recently with Microsoft restructuring its Activision Blizzard acquisition get it approved by the UK’s CMA. Next week, the first reviews for Starfield, the next blockbuster Xbox-exclusive game and one of the most-anticipated games of the year are also going to generate a lot of conversations.

This is definitely an exciting period for Xbox, and Phil Spencer gave several interviews at gamescom this week. Eurogamer published one of the most interesting ones yesterday, as Spencer discusses Microsoft’s Xbox hardware strategy, including the need for mid-gen refreshes.

The full interview is well worth a read, but Spencer’s comments on Xbox’s hardware strategy are probably what really stood out. In a previous interview with Bloomberg in June, Spencer said that he didn’t “feel an imperative” to do a mid-gen refresh and release a more powerful Xbox console than the Series X. Despite reports of a “PlayStation 5 Pro” possibly coming in 2024, Spencer believes that new console hardware should “have a reason to exist that is demonstrably different than what came before.”

Even though both Sony and Microsoft did mid-gen refreshes in the previous console generation, Spencer believes that releasing mid-gen upgrades can create complexity for both consumers and developers. “If we get into a console world where, every two years, we now have three or four closed ecosystems that are upgrading their hardware every two years, I’m gonna wonder – how is that helping creators or players? To me it feels like we are creating a ton of complexity for creators and players in something that used to be very simple,” Spencer explained.

It probably doesn’t help that Microsoft already offers two current-gen Xbox consoles, the entry-level Series S and the flagship Series X, which competes directly with the PlayStation 5. Both Sony and Microsoft recently raised the prices of their flagship consoles in most markets (except in the US), and Spencer doesn’t see that prices for current-gen consoles are going to come down.

“You’re not going to be able to start with a console that’s $500 thinking it’s gonna get to 200 bucks. That won’t happen. Because the core components that you use – you’re used to Moore’s Law shooting up and to the right – but your components… you can’t buy them anymore as a hardware maker because nobody’s making that kind of RAM or other components. It’s not the way it used to be where you could take a spec and then ride it out over 10 years and ride the price points down. It’s why you see console pricing relatively flat,” the Xbox exec said.

The gaming console market is quite unique as console manufacturers have to sell hardware with razor-thin margins and make the majority of their revenue on game purchases, and now, subscriptions. “The prices aren’t coming down. We see it now, and that’s why we did Xbox Series S,” Spencer emphasized.

The $299 Xbox Series S remains the most affordable current-gen console on the market, and Microsoft will launch a new Carbon Black version with 1TB of storage in September. And despite the fact that a company like Larian Studios, the developer of the critically acclaimed RPG Baldur’s Gate 3 had to delay the release of the game on Xbox to optimize it for the less powerful Series S, Spencer said that having an entry-level Xbox console is still worth it.

“Having an entry-level price point for console, sub-$300, is a good thing for the industry,” Spencer said. “I think it’s important, the Switch has been able to do that, in terms of kind of the traditional plug-into-my-television consoles. I think it’s important. So we’re committed.”

Do you think Microsoft made the right call by releasing the $299 Xbox Series S in addition to the Series X? Or do you think Sony releasing a more affordable PlayStation 5 without a disc drive was a better strategy? Let us know in the comments below.