Xbox One X’s Price is “Too Much for the Wallet” According to Michael Pachter; Talks PS4 and Switch

Xbox One X’s Price is “Too Much for the Wallet” According to Michael Pachter; Talks PS4 and Switch

Michael Pachter pulls out his crystal ball, and gives his opinion on the Xbox One X, on whether Sony should be worried, and on the performance of the Nintendo Switch.

During the YouTube Live coverage following Microsoft’s E3 2017 press briefing, Wedbush Securities Analyst Michael Pachter gave his opinion on what we all saw.

Pachter mentioned that he was impressed by the look of 4K on the “amazing” screen in the venue for the press conference, and he feels that the game that looked the coolest was Playerunknown’s Battleground.

He feels that Microsoft did a good job, with a huge amount of content, but the big first party titles (he mentioned Sea of Thieves and Crackdown) probably won’t sell enough.

According to Pachter, the big takeaway is that the Xbox One X costs the same as an Xbox One S plus a PS4 combined, so those who don’t have a console will wonder whether to buy just the new console, or both existing ones. Personally, Pachter would opt for Xbox One S and the PS4, and he feels that the Xbox One X at that price is a “hard sell.”

He also explained that in the US 4K TVs are present in about 10% of households, and it could become 20%, maybe 25% by the end of the year since prices are coming down. Those who don’t have a 4K TV probably go buy one just to play games.

For the same reason, according to Pachter, PS4 Pro hasn’t been selling well because people don’t appreciate the value proposition.

Pachter liked the fact that the conference was “super-focused on software,” but felt that Microsoft dwelled on some that weren’t very compelling a little too long (like Sea of Thieves). That being said, they ended with a “great punch” with Shadow of War and Anthem, but also noted that an Xbox One X isn’t needed to play those games.

He also found it interesting that there were no games like Star Wars, FIFA and Call of Duty, and he feels we’re going to see them tomorrow and then we’re gonna forget all about the Xbox press conference, because “that’s what people know.” Yet, the volume of content was there, and it was generally very high quality.

Talking more about the Xbox One X’s platform, Pachter mentioned that the price is too high. While it’s not too high for what you get, it’s too high for the wallet. We’re four years into the cycle, and consoles are supposed to cost $150. He believes that at $299 the Xbox One X would have been a home run, at $399 people would have toughed it out and bought it, but at $499 it sounds like a brand new console generation, and Microsoft was very clear on making a point that it isn’t.

Pachter would be surprised if 20% of the total Xbox One units sold will be Xbox One X. If next year they sell 10 million overall, he would be surprised if they manage to sell two million Xbox One X units. He feels that the only people that are going to buy it out of the gate are Xbox One owners who want to upgrade, and that depends on the GameStop trade-in deal.

According to Pachter, if the price had been $399, Sony would have responded with a price cut on PS4 Pro tomorrow. Since it’s $499, they probably don’t need one, but he still thinks that they might cut it anyway. PS4 might go down to $249 on a stable basis, probably with a bundled game, and PS4 Pro will probably go down to $349. If Sony manages to cut it down to $299, then Microsoft has a problem.

This could happen tomorrow, but now that Sony is making money, it’s harder to predict what they will do. When they were losing money they were more predictable, but now that they’re making money “they kinda like it.” That being said, they might not react because $499  gives them breathing room.

Asked by host Geoff Keighley whether Sony should worry now that Microsoft has the most powerful system, Pachter responded “that’s the tallest midget, who cares.” Arguing that you can get a PC that’s even more powerful, despite the higher price.

Pachter then explained that the average price of a TV last year (total dollars spent divided by total units sold) was $434. This means that the Xbox One X is more expensive than the TV most people have. At $434 most people have TVs ranging between 32 and 40 inches, so they can’t really tell the difference between 4K and 1080p.

$499 might not seem a lot of money to people like him and Keighley, but it’s still a lot of money. For a worker who makes $20 an hour, it’s hard.

Pachter also talked about the Switch, mentioning that people read it as a really successful console, while he thinks that it’s a really successful handheld. Nintendo released a “super-high quality $300 handheld,” but he hasn’t yet met a person who actually plays it on the TV. Nintendo “continues its handheld dominance, but they don’t have a console.” According to Pachter there is “nobody alive” that is trading in a PS4 for a Switch.

He added that the Switch is a supplement, and can be a starter handheld for kids, but it’s not a standalone console. Nintendo dominates the handheld space, and it’s great that they managed to narrow the gap with console games, but the Switch remains a handheld, so it shouldn’t be in the same discussion as Xbox One and PS4. Yet, Nintendo will sell “a lot” of Nintendo Switch units.