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Xbox could outsell PS4 this year thanks to Scorpio - NPD

Analysts weigh in on what to expect for Microsoft's new console, with some estimating it'll cost $700 or more

Earlier today, Microsoft let the cat out of the bag on its final specifications for Project Scorpio, the new addition to the Xbox console family that's set to launch later this year. It's an impressive-looking machine, and Digital Foundry's Rich Leadbetter certainly seemed swayed by what he saw. That being said, from a market perspective there's a lot left unanswered, including price, showcase software and how the system will manage to grab the attention of anyone outside the hardcore gaming sphere. GamesIndustry.biz tracked down a number of leading games analysts to get their respective takes in the wake of Microsoft's big reveal.

The fact of the matter is, while Scorpio will still look good running games in 1080p, the big draw of owning the machine will be to play truly native 4K games. That puts the console in an even smaller subset of consumers, a niche (4K TV owners) within a niche (hardcore gamers).

"Microsoft once was going to go after a broad consumer base but now they are stuck targeting the bleeding edge of game consumers that want the highest performing hardware and are more concerned with specs than actual games," said DFC Intelligence head David Cole. "In DFC's latest report on upcoming games we noted that more and more developers are opting not to release Xbox One versions of their games this season. Project Scorpio does not give them reason to change that because it is really targeted towards core Xbox fans that are already converted. For Scorpio to succeed Microsoft somehow needs to convince non-Xbox owners to convert."

"Success lies in layering in great new AR/VR experiences while maintaining more or less perfect backwards compatibility with all other aspects of the Xbox entertainment universe"

Lewis Ward, IDC

Many people have pointed out that Scorpio would finally give Microsoft the hardware it needs (apart from Windows 10 PCs) to enter the VR/AR market. And indeed, during GDC the company already indicated that Scorpio would support mixed reality headsets from Acer and others. This could be a compelling reason for some consumers to get a Scorpio, aside from the 4K support. It's basically "catnip for techies," noted IDC research manager Lewis Ward.

"We estimate there's around 100 million UHD-ready TVs in people's homes at this point worldwide but this figure should roughly double by the end of 2018. The 4K TV wave is coming, but it's a slow roll. This is more about future-proofing Xbox One against this inexorable flood, but don't forget that AR/VR experiences will be layered into the mix as well. I think some Xbox fans will buy it not because they can run UHD videos at 60 frames a second but because Microsoft and its partners come out with some compelling VR and AR games and related interactive experiences," he said.

"Success lies in layering in great new AR/VR experiences while maintaining more or less perfect backwards compatibility with all other aspects of the Xbox entertainment universe. Gamers that do not upgrade to Scorpio until version two comes out in 2019 or whatever should face no competitive disadvantage while playing standard HDTV games with Scorpio owners or there will be a revolt that makes the initial Xbox One unveiling backlash look like a mild temper tantrum."

As Xbox boss Phil Spencer said recently, he plans to make sure that games get plenty of time in the spotlight during E3, so you can be sure that Scorpio's portfolio will be fully demonstrated in June. Price, on the other hand, is a big question mark and the answer to that question will go a long way in determining how well Scorpio sells this holiday season.

Wedbush Securities' Michael Pachter commented, "The price will matter, and if it is over $400, it might be a tough comparison to the PS4 Pro. If it is $400 or less, they should start to gain some share... 4K TV owners who are gamers will gravitate to a 4K console. That will become a more meaningful niche this holiday, as 4K TVs are pretty consistently priced under $1000."

"If it sells more than one million units in Q4 2017 I think it will be doing extremely well"

Piers Harding-Rolls, IHSMarkit

A price point of $400 seems somewhat doubtful based on the estimates analysts provided us. RW Baird's Colin Sebastian noted it could be as high as $500 and said that a high price would "limit Scorpio this year to a fairly narrow high-end consumer market."

Piers-Harding Rolls, IHSMarkit's head of games research, remarked, "The high level specs suggest that Project Scorpio will come to market at a higher price point than the PlayStation Pro launched in 2016 at $399/€399/349. Although the ability to deliver native 4K gaming is a boon to Microsoft and its product positioning, we have to be realistic about its sales potential at a higher price point when for many console gamers - those without 4K displays - the improvements will be less significant.

"We expect Project Scorpio to be most attractive to early adopter Xbox One users and to those who want a potential PC-level VR experience from a relatively cheap alternative to a VR ready PC. If it sells more than one million units in Q4 2017 I think it will be doing extremely well."

A $500 price will look like a bargain, if IDC's Lewis Ward turns out to be correct. "I estimate the basic hardware will cost around $650, so if Microsoft wants any kind of margin at all, Scorpio will have to retail for $700 or more. If you look at the Alienware Aurora, which is a solid VR-ready PC, that currently costs about $1,000. I think Scorpio will come in below that, but how much below is unknowable at this point.

"This is a step function difference in performance though. The PS4 Pro can generally run 4K (UHD) video at 30 frames a second. The Scorpio will run video content and games at 60, with room to spare for special effects and spatial audio. It will succeed at bringing AR and VR to the Xbox One platform, just as it's coming to all Win10 terminals, but even if costs, say, $750, that's still roughly double the cost of today's high-end Xbox One S bundle price. Scorpio will appeal to hardcore Xbox fans with money to burn, as long as it ships along with a solid lineup of 4K-ready content. I'm sure we'll see more on this at E3, but I sure hope they at least unveil something along the lines of 'Halo VR,' or perhaps it'll be 'HaloLens AR.'"

In some sense, however, it could be that the price actually isn't that critical. The Xbox One S is bound to come down in price in the future, and Microsoft can easily position its console offerings as a two-tier market.

"Like PlayStation Pro does for Sony, Project Scorpio delivers a significant performance bump compared to the standard Xbox One, which opens up a two-tier product strategy with associated pricing and audience targeting flexibility. In effect, Microsoft will be able to monetise early Xbox One adopters that are keen to have the latest technology earlier in the cycle compared to previous generations, while also having the cheaper Xbox One S targeting a mainstream audience," explained Harding-Rolls.

"Project Scorpio's native 4K gaming potential also brings it into line with more powerful gaming PCs, strengthening Microsoft's content strategy to interconnect both Xbox console and Windows PC platforms through its Xbox Live and Play Anywhere strategies. Third-party publishers that are developing games for both PC and console are progressively developing 4K level content, so the overhead to develop for this new platform is not as onerous as seems at first glance."

Price considerations aside, SuperData CEO Joost van Dreunen sees the Scorpio push as "a strong move" for Microsoft as it seeks to get back into a console race that has been largely dominated by Sony this generation.

"I think Scorpio has the potential to push Xbox One sales ahead of the PS4 in the US in 2017"

Mat Piscatella, The NPD Group

"Microsoft is a distant second to Sony. Sony has managed to build up an impressive amount of marketing with its ongoing hardware releases and the budding success of the PSVR. This has put Microsoft on the back foot," he said. "By bringing console gaming closer to high-end PC gaming, and potentially integrating those two markets, strengthens its position and credibility. It also sets it up to be a base hardware device for its augmented reality efforts. I am a bit worried, however, about the lack of attention for the more casual market. Understandably, the traditional audience segments have been the most profitable, but it is ultimately a finite universe of gamers."

On the battle with Sony, one particularly optimistic forecast came from The NPD Group's Mat Piscatella. The analyst believes that excitement around Scorpio could enable the Xbox business in the US to outsell PlayStation this year. "I remain bullish on the Scorpio in the US market, particularly in the launch year. I think Scorpio has the potential to push Xbox One sales ahead of the PS4 in the US in 2017. Adoption among the core gaming audience could be significant," he said. "And, while this is a niche audience to target, it's the niche which is necessary to put the Scorpio on the path for longer term mass market adoption.

"Ultimately, however, people buy consoles to play great games. No matter how amazing the tech specs are, if attractive content doesn't show up, the mass market won't adopt. In addition, if we happen to have another E3 2006 style 'five hundred and ninety nine US dollars' moment the outlook gets murkier," he added, echoing earlier concerns about price. "Today's announcement was a necessary, and beneficial, big step. But there's still a long way to go."

Of course, if Microsoft is still adhering to the stance it explained to us at last year's E3, then exactly how well Scorpio ultimately sells could prove inconsequential anyway. For Phil Spencer, as long as you're an active member of Xbox Live, he doesn't care which system you're playing on. "Our model's not really built around selling you a new console every one or two years. The model is almost the exact opposite," he told us last year. "Honestly, I'm not focused on doing things purely to outsell PS4 with our Xbox One. We're doing things beyond that."

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Latest comments (11)

James Prendergast Research Chemist 3 months ago
I wonder what Lewis Ward's definition of a 'techie' is. My own understanding is that 4k is overrated and that higher fps and HDR offer a better viewing experience across all resolutions.

It's like the tech industry (production-wise) keeps focusing on bigger numbers instead of better features. I'm still waiting on a decent HDR monitor with adaptive refresh for my pc / console... 1080 or 1440 will be fine, 4k is overkill at most viewing distances when considered with screen size and the ability to have a game run at higher settings will give it a better look.

The Scorpio is a difficult beast to imagine though - either MS will lose a load of money to push it out or its price will be its undoing. We've seen the effect of a modest price increase from 350/400 to 500 for both the ps3 and XBO... I can't see the demand for the scorpio beating that hurdle. Not only that but people who care about gaming and having the best tech will already have a 1000-2000 (insert currency here) pc. They're not going to splash out on a console got a hefty sum when the options for streaming content to a TV are so ubiquitous now...
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Nick Parker Consultant 3 months ago
This is definitely high-end therefore a smaller target market, certainly this year. It's full potential will start to surface in Q4 2018 although I'm sure there'll be some "Wow" stories from users before then.
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James Prendergast Research Chemist 3 months ago
That's sort of what I was getting at. I don't get how scorpio could drive the numbers enough to 'beat' ps4.
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Show all comments (11)
Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.3 months ago
NPD may want to reconsider that projection.
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Richard Browne Partner & Head of Interactive, Many Rivers Productions3 months ago
Far as I can see the only thing that can drive Scorpio numbers is it being the platform for VR/MR titles. But that means $1000 investment and that isn't mainstream.
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Mat Piscatella US Games Industry Analyst, The NPD Group3 months ago
@Jim Webb: It's not a projection, so nothing really to rethink? As noted, if there are games announced in support, and if the price point isn't excessive, and if a number of other caveats are hit, then the Scorpio has the potential to push 2017 sales of XBO ahead of PS4 in the US market. Certainly not a given, and yesterday's announcement did nothing to change any existing forecast. The point is, no one knows enough to have a good grasp on what kind of volume Scorpio could push.

@James Prendergast: If Scorpio can drive 600k+ in US in year 1, there's a possibility for it to be able to push XBO sales ahead of PS4, if some other things happen in the market to help. It's certainly not a slam dunk, and I wouldn't even say it's likely. But it's possible.

Edited 1 times. Last edit by Mat Piscatella on 7th April 2017 5:43pm

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Jeff Kleist Writer, Marketing, Licensing 3 months ago
@James Prendergast: HDR is unavailable on non 4k displays, and frankly a waste of money if you're not using a UHD premium certified display. While cheaper ones may tout the feature, they usually cannot actually achieve it properly. It's like the passive 1080p TV sets that used a lenticular lens to show 3D in half resolution. Yes, they technically worked, but they looked terrible I seriously doubt there will be any 1080p displays made that meet that spec.

I recommend to people a name brand high refresh 1080p set over 4k if you're looking at spending under $1000. Expect to spend $1500-ish for the baseline UHD Premium.
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Paul Jace Merchandiser 3 months ago
"I estimate the basic hardware will cost around $650, so if Microsoft wants any kind of margin at all, Scorpio will have to retail for $700 or more."

Microsoft isn't that foolish/brave to list a single price point that high for their new system. Especially after.....

"if we happen to have another E3 2006 style 'five hundred and ninety nine US dollars' moment the outlook gets murkier,"

I'm pretty sure they learned their lesson from that. It's one of the reasons they are in second place this gen. However, as I've already commented on several times in other threads of this topic, I believe they will do a pricing tier strategy based on hard drive size, just as they currently do for the Xbox One S. So a 500 gb hard drive could run for $450 and 1 and 2 TB would run for $500 and potentially beyond. But they really need to hit at least one price point below $500. It could even be $479 but if Scorpio's price points start at $500 they are going to run into trouble right out of the gate.
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Jeff Kleist Writer, Marketing, Licensing 3 months ago
The real problem with people estimating costs is that they're doing s based on retail prices of modular PC components with many people in the distribution chain each marking it up. Both Sony and Microsoft are making a single integrated product using components that they are buying by the million or have done an IP buyout on. A GTX 1080 costs about $500 retail. The actual cost of making the part is under $50 (just the silicon, no overhead, no distribution, no royalties, no marketing etc).

Microsoft isn't this stupid. $399 is a very possible number if they've decided to go for the jugular, which is certainly a major possibility. E3 is certainly going to be very interesting.
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James Prendergast Research Chemist 3 months ago
@Jeff Kleist: Yeah, that's my problem. I mean, *WHY* is that the case? It's ridiculous. First off, requiring all graphics processors be able to output to a 4K display** to get an HDR experience doesn't make any sense when the feature is independent of resolution and asset clarity*.

Like I said, I would love a 1080p or 1440p display with variable refresh rate (i.e. freesync) with up to 120Hz refresh and HDR up to 32" diagonal size. I feel like that's not a huge ask and would cater to the majority of use-cases for the majority of consumers.


*read "what is appropriate for a given resolution and distance from the screen for the viewer".
**Yes, upscaling is a thing but it's not a get out of jail card for processing purposes on 'low'*** end graphics chipsets.
***In this particular case I consider the RX480 and GTX1060 'low end' even though they are not really.

@Mat Piscatella - That's true... *IF* it can provide those numbers *AND* not cannibalise XBO and XBOS sales. I think that's an important point that was missed out. I sincerely doubt that if the scorpio unit manages those sales numbers that all those consumers will be new and that of those repeat customers all of them won't fund the excess purchase by reselling their original unit which will depress sales of XBO and XBOS units.

In order words, it's a really big long-shot. Okay, maybe it's *possible* in the USA... but worldwide? It's a pipe dream. (Yes, I understand NPD is US-orientated)

@Paul Jace - Yes, but any HDD less than 2TB for a "4K system" is a terrible choice. I've already maxed out my 1TB hybrid drive on my PS4 (originally the 500GB drive was installed on that system) and had to delete multiple game installs and it's not even a "1080p system". Just because the manufacturer can push the price down by eliminating all extra costs doesn't mean they should at the cost of the usability of the system.

@Jeff Kleist - Totally correct. In fact, given the Eurogamer/Digital Foundry revelations we can see that the Jaguar/R9 360 cores that have been modified with system-level customisations with regards to independent processing would be much cheaper (potentially) than modern implementations that may be more generally capable but less specifically focused on their performance.

It seems clear to me that this implementation is punching *WAY* above its weight in technological terms. That's a fantastic thing!

One issue I see with this, though is future backwards compatibility. Sure, the scorpio system is BC with the XBO/XBOS but with this level of customisation/I wonder how easy it will be to build-in that BC to these systems in 4-5 years time when the new console design ekes its way out...

I.e.: Solving these issues in hardware instead of software causes more headaches down the line.

Edited 1 times. Last edit by James Prendergast on 8th April 2017 4:38pm

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Jeff Kleist Writer, Marketing, Licensing 3 months ago
@James Prendergast: I don't think it's an issue building this in. They're sticking with octocore for the foreseeable future, and since the OC industry has been doing this for 30 years, not really a challenge.
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