Pachter: Xbox One and PS4 will be sub-$400

Michael-PachterWe don’t know anything about next-gen console pricing just yet, but Wedbush Morgan analyst Michael Pachter weighed in with his predictions for the Xbox One and PlayStation 4 (PDF link) launches later this year.

Based on Wedbush Morgan’s estimations on the cost to build each console, Pachter expects the Xbox One to debut at $399, while the PS4 will come in at an even lower $349. The estimate to build each console is around $325 and $275, respectively, though that seems low to us.

These predictions bring up an extremely interesting debate around console pricing and how companies can make a profit. If the cost to build a PlayStation 4 is under $300, Sony can make a modest profit selling the console at $350 and still undercut Microsoft’s Xbox One platform by a significant margin. This would not only give Sony the edge in pricing, but likely in sales, given the bad press Microsoft has been getting about their new box so far.

XboxD_Logo_Consle_Sensr_controller_F_GreenBG_RGB_2013While we’d love to believe in sub-$400 next-gen consoles, pricing them that low wouldn’t leave much room for price drops in the future, not to mention that it would force down the prices of each company’s existing models significantly. Nintendo’s Wii U is also sitting at $349, and if a competitor comes in at a similar price point for true next-gen hardware, Nintendo should be worrying a lot more than they probably are.

We just don’t see it. The PS3 launched at a base of $599, and while there might be a budget model of the PS4, we can’t see that “budget” price being anything less than $400. The Xbox One, we think, is in the same boat. The original Xbox launched at $399 for its Core model, but that was without storage, WiFi, Blu-ray, or virtually anything else the Xbox One has going for it.

On the topic of Xbox One pricing, Pachter does note that the Microsoft console is more likely to have a subsidized offering by way of a subscription service. By all accounts, pricing for the console has been $499 at full list price and $299 with a 2-year commitment at $15 per month.If the Xbox One is to launch at $399, either the commitment has to be lower, the contract price has to be lower, or a combination of both that alongside a lower monthly fee have to occur.

Unfortunately, with all this speculation, it will likely remain that even after E3 this year. Microsoft and Sony don’t seem poised to discuss specific release dates or pricing just yet, as it is still very early to do so and neither company is likely to have solidified their supply chains, and therefore costs.

Either way, we’ll be reporting to you from E3 2013 in Los Angeles in less than a week, so expect to hear much more as we ramp up to the big show!