Microsoft and Sony have turned around their first cards in the next-gen console race, revealing the main technical specs for their next-generation consoles.

While Sony is the market leader in the current-gen with the PS4 and enters the race from a strong position, the question is, how far is Microsoft willing to go to reclaim ground.

It is worth looking back to better understand how we ended up here. Sony dominated the first two generations with the PS1 and the PS2. The first Xbox wasn’t a serious competitor but helped Microsoft to learn. With the PS3 Sony made an expensive mistake by going too far while Microsoft gained a lot of ground with the Xbox 360. With the launch of the 4th generation, it was Microsoft who made a big mistake in the beginning by launching the console together with Kinect. Microsoft wasn’t competitive in terms of pricing and Sony nailed it with the $399 launch price! In combination with the strong lineup of exclusive games, Microsoft had no chance to catch up with Sony in the current generation.

Coming now to the 5th generation. Microsoft made a lot of changes. The man in charge of the Xbox division, Phil Spencer has the gaming DNA. Under his reign MS has acquired several game studios to secure more exclusives, he is pushing new services like Game Pass, xCloud or Xbox All Access. Tech spec-wise the new Xbox Series X is more powerful than the PS5 and that nearly across all aspects incl. CPU speed, GPU teraflops, memory bandwidth or storage size. To be clear, raw hardware power itself doesn’t result in better games.

The question that is left, is the launch price for the Xbox Series X and the PS5. And here is where it gets interesting. My impression is that Microsoft is willing to use its balance sheet (cash!) to fight and take an aggressive stance on pricing. They spend money on M&A, I guess they subsidize services like Game Pass Ultimate, and they did not go cheap on the new Xbox. I wouldn’t be surprised if the price gap between the PS5 and Xbox Series X is much smaller than many expect or that there is no difference at all (maybe cross-subsidizing through bundling with a subscription service).

The launch price will be key to bring Microsoft in a position from which it has a fair chance to effectively compete.