Microsoft is "temporarily" dropping the price on the Xbox One hardware for the holiday season, which means you'll soon be able to pick up an Xbox One without the Kinect for as little as $350.
The system was released under a year ago for $500, and has already dropped in price by $150.
Compare this freefall with the Xbox 360, a system whose first adjustment was to add a larger hard drive for a higher price. It took 18 months for the system to drop in price by only $50. This is what happens when the perceived market leader stumbles badly out of the gate and then gets serious about making up ground.
It doesn't hurt that the price drop announcement was made on the morning that Sunset Overdrive reviews went live, as the game is great. It's going to help move units this season, especially as it's an exclusive. You can't get it on a PlayStation system, there's no version that works on your existing Xbox and there's no PC release. You need to buy an Xbox One to play. Microsoft also has The Master Chief collection to look forward to, which is another product that will likely only exist on the Xbox One.
So what's Sony going to do?
Microsoft is set to have a great holiday season both in terms of value per dollar when buying hardware and the games that will only be coming to the system. Ditching the Kinect, something that was desperately needed, remains a great move that allowed Microsoft greater price flexibility without losing features gamers actually care about.
The all-digital future where players want to watch football through their consoles while yelling voice commands at their television never came to pass, but to Microsoft's credit no one is pretending otherwise. The strategy is evolving rapidly to place the focus back on value and games, an approach Sony has enjoyed since launch.
So what's Sony going to do to fight back? We're going to see some sales and the expected bundles most likely, but the reality is that Sony doesn't have to do anything. The base PlayStation 4 is now $50 away from the lowest-priced Xbox One, and Sony always has its superior horsepower to fall back on in marketing. PlayStation 4's sales lead means that it doesn't have to worry about Microsoft overtaking its installed base during one holiday season.
Sony very correctly guessed that players would be interested in ease of use, price and power when it came to this generation, and they've owned those three categories with the PlayStation 4 while Microsoft has struggled to do the same.
Sony can safely ignore the Xbox One
Removing the Kinect was step one, and beefing up the game library with exclusives was step two, but the reality is that even if PlayStation 4 becomes the system with a slightly higher price it will remain more powerful. Microsoft has very little with which to fight that reality.
Sony can move its marketing to "we're less expensive!" towards a larger focus on "we're more powerful!" to take some of the wind out of Microsoft's sails, not to mention its sales. It's rare that a system launches at a lower price and offers more power, and Sony is going to appreciate that double-edged advantage as Microsoft struggles to take market share from Sony in this generation.
So that's Sony's "secret" strategy this holiday season: They can safely ignore the Xbox One for the time being and see how this price drop changes things. It could be there's a price drop on the PlayStation 4 as well, but there's no evidence that the system needs one to stay competitive.
It's up to Microsoft to put pressure on Sony to make that happen, and the PlayStation 4 is going to stay at $400 until there's some evidence it needs to try to head Microsoft off at the pass.
This is all good news!
Competition is great, and Microsoft being in second place this generation may be the best thing to happen to Xbox fans in some time. Microsoft will become more aggressive in pricing, in features and in signing exclusives.
Microsoft can't coast on past successes, which means it has to work twice as hard to find new ones. That's something that should excite everyone with an Xbox One, or who is thinking of buying one.
Competition is good, and Microsoft has intimidating competition this generation. No one wants to drop the price of their hardware, but the company's willingness to do so this quickly, and to lose features that were pushed for so long as "necessary," shows that Microsoft has the will to fight and the nimbleness with which to do it.
Get out the popcorn.