As part of its global game strategy in a market poised to grow to plus $100 billion by next year, Microsoft is shifting into high gear with the recent Xbox One S game console. The new device offers UltraHD support that includes a new UHD Blu-ray drive, a boost to its processing capability and HDMI interface to support 4K video, plus upscaling of 4K games content and support for HDR.
Market research firm IHS said, “It’s the first mainstream games console on the market that supports both UHD Blu-ray and 4K output for streamed and disc-based video,” in a recent press release.
The game market is booming, with roughly 8.5% revenue growth over last year and will generate a total of $99.6 billion in revenues in 2016, according to San Francisco-based market research firm NewZoo.com and their April, 2016 Global Game Market Report. To capture that growing market, the Redmond, Washington based software giant and game console maker also revealed its plans to launch a new game platform codenamed “Project Scorpio” in 2017 (see link in first paragraph).
An IHS tear down analysis of the Microsoft Xbox One S documents a BOM (bill of material) cost increase of just $24 over the previous generation console. “For such a small increase in bill-of-materials cost, the new Xbox One S offers a significantly more attractive proposition to the consumer and that positions it more strongly against the PS4.” according to Piers Harding-Rolls, director of IHS games.
That’s none-too-soon for Microsoft, as the upgrade to UltraHD comes as the company is in catch-up mode with Sony which dominates the space and leaves both Microsoft and Nintendo in the dust. NewZoo reports the PS4 platform lifetime sales at 36.89 million units, compared to 19.77 million and 12.65 million units for Xbox One and Wii U, respectively. More recent market share numbers from New Zoo show the PlayStation 4 beating both competing platforms combined, with PlayStation 4 at 53%, Xbox One at 29% and the Nintendo Wii U at 18%.
Game sales – total Lifetime Game Platform Unit Sales, Source: NewZoo.com
For Microsoft, the new Xbox One S is a bit of a razor + razor-blade model, with games driving profits. The One S MSRP is $399 (2TB model) and, of that, the company makes $75 more than its BOM plus cost of manufacturing (if they sell directly). There’s also a lower-priced $299 version, which uses a lower-density HDD (hard disc drive).
The Microsoft strategy also reaches beyond gaming, as the game console was always meant to serve as a gateway device to the living room. It’s an entertainment hub, if you will, that receives and displays content not just of the gaming kind, but streaming video. Streaming content includes the recent addition of Sling TV and its all important ESPN One, Two et al. that decouples the coveted sports channel from multi-tiered cable or satellite subscription-based services here in the USA. All this plus horizon technologies that include augmented reality have the potential to make the game console the nexus of future TV viewing, now with Ultra HD support in the mainstream.
– Steve Sechrist
