Microsoft to Introduce Lower-Priced Xbox One Without Kinect

May 13, 2014 2:13 pm ET

(Updates with analyst’s comments in seventh paragraph.)

May 13 (Bloomberg) -- Microsoft Corp. introduced a lower- priced option for its Xbox One, seeking to take back the lead in video-game console sales from Sony Corp.

The new version, which will cost $399 and won’t include the Kinect motion-sensing camera, will be available on June 9 in all markets where Xbox One is available, the Redmond, Washington- based company said in a statement today.

The move reverses a controversial decision by Microsoft to bundle Xbox One with Kinect, increasing the price of the console to $499, or $100 more than Sony’s PlayStation 4. Although Microsoft had insisted it needed Kinect to convince game developers to write software for the motion sensor, Sony’s big lead is prompting Microsoft to change its strategy. The PlayStation 4 outsold Xbox One consoles in the U.S. in March, holding the lead for a third month.

“The vision we have had for Xbox One continues, and that is that the premium experience is with Kinect,” Yusuf Mehdi, Xbox vice president for strategy and marketing, said in an interview. “We did get a lot of customer feedback since launch from people saying ‘I’d like more choices,’ and for some people $399 is an important price point,”

Microsoft will also start giving users more access to entertainment applications such as YouTube, Netflix and HBO GO, changing another policy that annoyed customers. The company had required users to pay for an Xbox Live Gold subscription to use such apps. Starting in June, anyone with an Xbox One and Xbox 360 can use those apps.

Console Wars

Since its November release, sales of the $399 PlayStation 4 video-game console have surpassed 7 million units worldwide as of April 6, Sony said in an April 16 statement. Microsoft has sold more than 5 million of its $499 Xbox One units, the company said the same month. The results point to tight competition as Microsoft and Sony battle each other with their first consoles in seven years and a shift toward social and mobile games.

The unbundled Xbox model may dissuade some developers who were considering writing apps and games that take advantage of Kinect, said Brian Blau, an analyst at Gartner Inc. There haven’t been enough interesting uses for Kinect, he said.

“This means less Kinect on Xbox, less opportunity and less Kinect development,” Blau said. “Clearly they had to do something about the price.”

Microsoft will also start selling a standalone Kinect module for Xbox One later this year, in case those who buy the $399 console want to add it later.

Another option would have been to keep the Kinect and cut the price, Blau said, noting that Microsoft probably didn’t want to incur losses to do that.

“These are fairly riskless moves,” he said. “If they really wanted to go after the game market and leapfrog Sony, they would have just lowered the price and given people the Kinect. They should have done that a year ago and they should have done that today.”