Market Insight

Xbox One X Launch Expectation

November 06, 2017

Piers Harding-Rolls Piers Harding-Rolls Director – Research and Analysis Director, Games, IHS Markit

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Xbox One X’s biggest impact will be felt in USA and UK

Microsoft’s Xbox One X arrives on Tuesday 7th November and has been developed to regain legitimacy with early adopter, core console gamers that are heavily motivated by graphical fidelity and content frame rates. A small share of PS4 Pro gamers that are keen to have the most powerful hardware for playing third-party published games are likely to shift their usage across to the new console, which may moderately shift the sales share of games between the two competing platforms.

The company believes that developing a tiered product strategy will also have a positive impact on sales of the Xbox One S as the marketing of ‘The World’s Most Powerful Console’ impacts buying decisions further down the chain.

Xbox One X is poised to give the company a boost in its ambition to compete more effectively with PS4 Pro in strategically important markets of the USA and UK. Other select markets, such as Germany in Europe with its PC gaming heritage, are also forecast to deliver solid launch traction. Overall, however, IHS Markit does not expect Xbox One X to have a dramatic impact on market share between Sony and Microsoft in continental Europe as the market’s current momentum is well entrenched. IHS Markit currently forecasts the Western Europe installed base of PS4 family of consoles to reach 26 million by the end of 2017 compared to 8 million for the Xbox One family of consoles.

Launch performance for Xbox One X

Feedback on pre-order volume for both the limited edition Project Scorpio Xbox One X and for the standard version of the X console has led us to increase our 2017 sell-through forecast for Xbox One X. The Project Scorpio limited edition pre-order strategy has been particularly effective in driving what is expected to be a robust launch week in key sales territories. IHS Markit has therefore increased its 2017 forecast from 500,000 to 900,000 units. At this level, Xbox One share of total Q4 2017 Xbox One console family sales will be close to 20 percent, similar to the performance of PS4 Pro at launch. If Microsoft outperforms and delivers sales in excess of this forecast it will be considered a major launch success.  

Positive impact on hardware ASPs

Sales of the more expensive Xbox One X console will also help mitigate the fall in Xbox One S hardware average sales price which in recent fiscal quarters has undermined the positive impact felt by Microsoft of increased revenues from software and services. As such, Microsoft’s games business-related revenue is expected to increase year-on-year in Q4 2017.

Microsoft needs to bolster software and services to accompany most powerful hardware

In the long-term, increased provision of first-party software and services offer Microsoft the best opportunity to deliver profitable growth for its game division. Now that the Xbox One X is here, Microsoft has acknowledged that it needs to consistently invest more in software and services – either through its existing first-party studios or through acquiring developers – as it searches for more compelling content to add to its stable of established franchises. Microsoft’s content strategy is helped somewhat by its backwards compatibility strategy and its re-release of numerous Xbox One X-enhanced titles, but without continued investment in first-party content Sony is in a strong position to fight back against Microsoft’s market advantage by developing more powerful hardware itself.

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