Microsoft’s Phil Spencer explains the new Xbox’s $500 price tag

You might think it’s crazy that Microsoft is once again
introducing a new game console with a $500 price tag.

But it’s just possible the company is being crazy like a fox.

Microsoft is pretty certain there’s a good market for its new
Xbox One X game machine despite its high price point. More
importantly, the company is pretty excited about who’s most
likely to buy the new device.

The kinds of customers who will be attracted to the Xbox One X
tend to be the best game customers of all, Phil Spencer, the head
of Microsoft’s Xbox operations, said in a recent interview with
Business Insider.

Xbox One X
The new Xbox One X console
from Microsoft is capable of powering 4K gaming. It costs $500
and launches on November 7.


“The thing that we should all realize is that that customer buys
a lot of games,” Spencer said. “That customer plays a lot of

That’s a pretty strong argument for why huge companies like
Microsoft and Sony are bothering to create more powerful, more
expensive iterations of their consoles, even if those consoles
serve only a small minority of console buyers.

At first blush, Microsoft offering another $500 console seems
absurd. The Xbox One launched in 2013 with a $500 price tag, one
of the main reasons it lags so far behind Sony’s PlayStation 4 in
adoption. The PS4 debuted at $400 and has seen double the number
of sales as the Xbox One.

Xbox One XMicrosoft

Spencer understands this problem and perception, and he’s not
unrealistic about how sales of the new console will compare with
the Xbox One S, the new base-model Xbox One that costs $250.

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“We’re gonna sell more Xbox One S consoles next year than we will
Xbox One X,” he said.

But as Spencer indicates, there’s a method to Microsoft’s
apparent madness.

The company’s betting there’s a ready audience of folks ready to
buy what the Xbox One X offers. This is a console capable of
outputting games in 4K resolution — the next step after HD. There
definitely are people who have a 4K TV and are itching for a game
console that can take advantage of it.

Metro: Exodus
“Metro: Exodus” is one of
the first games shown running on the Xbox One X. It is, indeed,
very pretty.


Here’s how Spencer described the target audience for the new

“You’ve got a person who really wants a premium experience.

“You ask who is that person today? I’m gonna bet a large
percentage of those people have a current-generation console
already. So in that world, I have to show them an experience
that’s demonstrably better. And that’s where we started with Xbox
One X.

“We get some interest from PC people who have been playing 4K
games on their PCs now for a while, and say, ‘OK here’s a console
that can play a true 4K game with a controller sitting on my
couch.’ And I think a lot of the other people have a
current-generation console and are looking for a premium
experience and something that really looks different.”

While Microsoft is offering gamers a premium experience, it isn’t
charging them a premium to get it, despite the Xbox One X’s
relatively high price. The company
won’t be making any money
from selling Xbox One X consoles.
That’s because the components required to power the level of
graphical fidelity the box offers are expensive. Indeed, the Xbox
One X
looks like a bargain
compared with what you’d have to pay for
a PC with similar capabilities.

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Forza Motorsport 7
Microsoft is releasing “Forza Motorsport 7” ahead of
the Xbox One X — it will take advantage of the console’s ability
to play games in 4K.


But that’s not unusual. Video-game consoles typically aren’t what
make money in the video-game business — it’s the games,
accessories, and services that do. Microsoft most likely makes
far more money from Xbox Live Gold subscriptions, for instance,
than from Xbox One hardware sales.

And what makes the Xbox One X so interesting for Microsoft is
that the kind of folks who buy “premium” consoles like it and the
PlayStation 4 Pro are the kind of folks who tend to buy not only
more games than the average customer, but more accessories and
services too.

Sony has paved the way for a pricier, more powerful console with
its PlayStation 4 Pro. The company says Pro purchases now make up
20% of all PlayStation 4 sales
. Spencer expects similar
adoption for the Xbox One X.

From where he’s sitting, though, that wouldn’t be a problem.