Having the cheapest console at launch means nothing, imo. These consoles, no matter the price, are going to sell out the first holiday. They won't be able to make enough of them. The core gamers would hypothetically see this in the scenario where MS doesn't compete at the same price/specs as Sony:
Scarlett X - $499
PS5 - $399
Scarlett S - $299
In that scenario, I don't see a lot of people wanting the lowest priced, underpowered system in that first year. Those gamers are going to want higher specs, SSD, more RAM, etc. They'll take the $299 system, but they wouldn't necessarily want it. On the other hand, in this hypothetical, Sony has SKU at retail at the middle 'sweet spot' price that core gamers have grown accustomed to paying and they'd sit there alone. There would be the marginally better $500 Scarlett X for sale, but who would be enticed to jump into a new ecosystem for marginally better? I'm talking about the people that have been gaming on PS4 this gen and might be swayed to a different console if the value proposition is there. For what you would get for $100 extra, I wonder how many would jump ship? I would bet not a whole lot. And at $100 less, how many budget-conscious core gamers would consider it enough of a value to jump ship? I would bet even less.
That first year or so, it's the core gamers buying the brand new consoles. Sandwiching the PS5 with marginally iterative products doesn't get you more of those initial 1st year gamers that are so crucial to mindshare for the whole gen. "$100 more, or $100 less? Meh, might as well stay with Sony." But, if you can make a truly incredibly $600 system that blows the PS5 out of the water you could see some people jump ship. You would also have the $400 system that would compete blow-for-blow with the PS5 at $400 for budget-conscious Xbox One owners so they don't jump ship the other way. I would even hazard a guess MS would take a loss on those consoles to make sure they are slightly more powerful than whatever Sony makes.
