3 reasons the Xbox One will fail in China

The Xbox One will officially be China’s first foreign game console in more than a decade when it launches in September. But will the Chinese market embrace it? I’ve been bearish on consoles in China for quite a long time, and I see no reason to stop now. The Xbox One won’t sell well in China. Here’s why:

1. The price is too high

It’s not clear how the Xbox One will be priced in China, but the $499 US price indicates that there’s no way the console will cost less than 3,000 RMB in China, and the 499 Euro price could mean that it will cost well over 4,000 RMB in China. In fact, there are rumors that the device will be sold for 4,999 RMB ($820) in China. Those are just rumors, of course, but when I contacted Microsoft reps about the rumored price they neither confirmed or denied it.

But whether the price is 3,000 RMB or 5,000 RMB, the Xbox One is certainly not cheap. That’s a huge chunk of change for console gaming’s traditional demographic: 18-30 year old males. China’s college grads can have a tough time finding jobs at all, and when they do, those jobs only pay an average salary of 3,000 RMB per month. That means that Microsoft will be asking many young men—the demographic that drive console purchases—to sink more than a full month’s salary into buying the console. Add in the price of games on top of that, and the prospect becomes even more realistic.

Moreover, the device isn’t likely to be embraced as a status symbol by China’s middle and upper classes the way that other expensive Western products like iPhones and designer handbags have. These status-symbol luxuries are purchased in part to show off in public, on the subway, when hanging out with friends, etc. The Xbox One is a big plastic computer that sits in your living room, impressing no one. It’ll certainly be a luxury buy for some Chinese gamers, but it won’t be a status symbol.

2. The market is already saturated with a superior product

Consoles may be banned in China, but the ban has really just meant that foreign companies can’t sell consoles in China officially. From a gamer’s standpoint, consoles have been widely available in China for years. Right now, there are thousands of gray-market Xbox Ones already available to Chinese gamers in electronics malls and on Taobao. And while the games are still expensive now, once the console is hacked—which is probably just a matter of time—Chinese gray market vendors will be selling hacked consoles and pirated games that cost just a few cents apiece. Microsoft will not be able to compete with those game prices.

Granted, the official Xbox One will finally be able to offer a more enjoyable online experience, and if Microsoft has any brains at all, it will be integrated with popular Chinese web services so that users can do things like stream video from popular Chinese sites and access Chinese social media services via their consoles. But those features won’t be major selling points because the Chinese market is already full of set-top boxes that offer video streaming and other online functionality on the TV for extremely low prices.

A pretty piece of engineering, but not exactly built for MMOs.

3. The games are wrong

As I’ve written many times before, Chinese gamers aren’t generally huge fans of the genres that work best on consoles. MMORPGs and MOBA games dominate China’s top game charts, but neither genre has really found its footing on the console yet. People buy game consoles for the games, but the Xbox One doesn’t play the games Chinese gamers like.

Moreover, almost all of China’s favorite games are free-to-play. Almost no console games are free-to-play. Presumably, Microsoft has some sort of strategy for this, but given that the Xbox One’s current library doesn’t include any high-profile free-to-play games, I’d say it’s going to be quite a while before the console boasts a free-to-play library compelling enough to make Chinese gamers think about splashing a full month’s salary on the device.