Microsoft Plans to Release A Second Lower-Tier Xbox This Fall- Report

Microsoft (MSFT) is poised to announce a new lower-tier Xbox to accompany its upcoming console release of the Xbox Series X this fall.

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Reported on June 26, by The Verge, a leaked Microsoft document revealed plans for a lesser-powered next-gen Xbox console reportedly called the Xbox Series S. The console would utilize the main aspects of the more powerful Xbox Series X but with plans to sell it at a lower price. There have been no official announcements from the tech giant about any of its next-gen console prices but it could be near or above $499 based on internal specifications.

In June, Microsoft’s Xbox Chief, Phil Spencer told the BBC, “We want to make sure we’re providing the right value to customers.” He added, “Our strategy does not revolve around how many Xboxes I sell this year.”

According to a report from Eurogamer, Microsoft was originally planning to announce the new console, on June 9, at the now-canceled annual E3 conference. However, in light of the cancelation and slower game development as a result of the pandemic, the tech giant decided to wait until August.

The report states that Microsoft wanted to take advantage of E3’s keynote-like presentation to explain the differences and advantages of the two console versions. With E3 canceled, Microsoft was forced to announce the console with a trailer on December 12 at the 2019 Game Awards. The concern of mixed messaging with two consoles being revealed at the same time caused the company to withhold the lower priced, Xbox Series S.

Sony (SNE) revealed its console competitor, PlayStation 5 (PS5) on June 11 but has not currently announced a price tag for its next-gen console. The PS5 also has high-price tag estimates based on its technical features. Sony has been quietly sending out Nielson surveys to gamers to gain feedback on what the average consumer is willing to pay for a console.

Microsoft had a difficult launch with the current-gen Xbox One. At the 2013 E3 conference, on June 11, the unveiling of Xbox One’s $499 price point was met with boos and loud jeering. Later, on the same day, Sony’s PlayStation 4 console was announced with a lower price of $399 to loud applause.

Since 2015, Microsoft has stopped publishing its sales numbers on its consoles but some estimates put the results at only 46.9 million compared to Sony’s published 108.9 million. Microsoft continues to only publish the amount of Xbox Live user-subscriptions instead.

At a Game Lab Live keynote last month, Xbox Chief Phil Spencer said, “Microsoft’s pricing strategy for the Xbox Series X leans heavily to its subscription package which includes a console, Xbox Live, and Xbox Game Pass for a monthly fee. Xbox All Access is going to be critical to both our launch for Xbox Series X as well as just the overall generation.”

Microsoft’s stock is up 31% year-to-date with a Strong Buy analyst consensus that breaks down into 21 Buy ratings versus 1 Hold rating and 1 Sell rating. The $210.74 average price target implies 1% upside potential for the shares in the coming 12 months. (See Microsoft’s stock analysis on TipRanks).