The Xbox Scorpio gamble

Microsoft’s E3 announcement of Project Scorpio is big news. It’s the first official sign of consoles moving toward a faster, more iterative release cycle. But the announcement is also a big strategic mistake.

Not because of the Scorpio concept itself. Consoles have advantages with a faster release cadence. There’s more wiggle room for innovation and breakthrough gaming experiences. Game compatibility expands; older platforms aren’t immediately left behind.

Yet I see two big errors on Microsoft’s part. They announced Scorpio too early and are targeting a high end, costly specification.

Eighteen months of confusion

Consider other tech releases and the time between announcement and release date. With smartphones, it’s often only weeks away. For other tech devices it might extend to several months. And alongside an announcement there’s often a physical demo product to provide early impressions. At the very least we get a bullet list of tech and feature improvements from the previous iteration.

Microsoft is asking us to wait 1.5 years for Scorpio. And other than a vague performance claim of “6 teraflops”, it’s too early to understand what Scorpio’s tangible improvement is. It might power the Oculus VR. It might pump out native 4K game resolutions. It might make 1080p games run faster. We don’t know.

That lack of clear benefits risks a backlash before release. And the Xbox One S releasing in August complicates the situation further. The final price gap between Scorpio and Xbox One S may make the latter a better value for most gamers. But until we learn more, investing $299 on a console that’s outdated in a year is risky.

And based on Phil Spencer’s muddled E3 interviews, it appears even Xbox reps don’t have a clear message on what Scorpio provides. I don’t blame them; I suspect large parts of the platform are still in flux.

High end performance risks

Scorpio looks like a monster, but as Digital Foundry notes the extra horsepower will make it expensive. PlayStation NEO should be at least $50 cheaper. Given the console market’s price sensitivity, I question how large Scorpio’s potential market is.

That potential $499 and up price tag will be a deal breaker for casual audiences. Games available on Scorpio, NEO, PS4 and Xbox One will mostly overlap. For these audiences, graphics on 1080p sets will be indistinguishable. And consider the price gap; by holiday 2017, the Xbox One S will likely sell for $249 or less. Asking the public to shell out double for Scorpio is a big ask.

Admittedly casual players are not Scorpio’s target audience, but the console may be a poor fit for high end gamers as well. Many have already shifted from console to PC, which looks like a smart bet for those willing to splurge. Reports suggest Scorpio hardware won’t challenge high end PC specs. And Microsoft is pushing formerly first party exclusives to PC with Xbox Play Anywhere.

Even getting PlayStation owners to jump to Scorpio (or vice versa to NEO) for extra power is difficult. PSN and Xbox Live ecosystems have a high lock-in factor; a jump to Xbox means rebuilding games and network friends from scratch. That’s exacerbated with the long tail of game compatibility that iterative consoles promise. And if iterative releases are here to stay, both sides will have more powerful hardware releases on the horizon. It’s more reason to be patient and not jump platforms.

The comfort of Apple’s sell model

This isn’t to imply Sony’s PS4 NEO is a safe bet. Sony needs well thought out PR to justify NEO’s existence. And some of the same arguments made against the Scorpio’s prospects can be levied against the NEO. High end PC enthusiasts will find Sony’s new console even less appealing given the weaker specs.

But PlayStation NEO will have an easier price point to swallow. I suspect we’ll see about a $100 or $150 gap between the NEO and original PS4. For UHD Blu-ray and 4K streaming, along for some performance bumps in new games, that’s not as big a gap to cross if you’re in the market.

In short, Sony will likely hew to Apple’s sales playbook: less price fluctuations, less radical iterations. Consoles are not phones or tablets, but the sell model is familiar. With Scorpio’s early announcement and pricy specs, Microsoft is moving in a different direction. Iterative consoles are already a hard sell; Microsoft’s actions have considerably weakened its pitch.