Over the last two generations of consoles, however, prices have actually risen, and today a Playstation 4 or Xbox One is nearly the same price as an average PC.
In some respects, this makes no sense: why hasn’t Moore’s law had the same impact on consoles as it has had on PCs? Moreover, when you consider that consoles now compete with a whole host of new time-wasters like phones, tablets, social networks, dramatically expanded TV offerings, the Internet, etc., it’s downright bizarre.
Let me be very clear: this is a perfectly rational response by Microsoft, and a strategic disaster, all at the same time. The reason the Xbox existed in the first place was to give Microsoft a toe-hold in the living room. Over time the expectation was that the entertainment aspects of the console would make it appeal to not just gamers, but normal consumers as well. Instead, Microsoft has (understandably) been captured by gamers, and the only purpose their original strategic intent has served has been to make them less competitive with said gamers (the Xbox was more expensive and made different processing choices in order to accommodate the Kinect-centric entertainment focus). Meanwhile, no rational non-gamer will buy an Xbox One for
$499 $399 in the face of sub-$100 alternatives like the Apple TV, Kindle Fire TV, or Roku.
Lots of great stuff here by Thompson. Much of this is exactly why I felt like this generation of consoles could be very troublesome for these companies. And yes, why I think Apple has a very real opening here (I may have just been off by a year).
Microsoft isn’t just doing the wrong thing, they’re doing the opposite of what they should be doing if they really want to own the living room.