In recent times, it has pretty much become standard practice that whenever you want a new cellphone you head to your carrier or a partner retailer, pick one out, and lock yourself to the device for one or two years in order to get a highly subsidized discount price.
Recently, with the evolution of mobile broadband, this type of model has seen itself extended to a vast array of devices such as tablets, netbooks, and even e-readers.
Now Microsoft might be bringing this two-year contract model to the gaming world, according to unnamed sources cited from The Verge. According to the new rumor, Microsoft is planning to offer a new $99 bundle (normally valued around $300-ish) of its Xbox 360 game system which includes the 4GB of internal flash, and a Kinect sensor.
All you have to do is commit to two years of a new $15 monthly online service package, which essentially is the standard Xbox Live Gold with a few new exclusive entertainment/multimedia channels thrown in through the company’s partnerships with cable/video companies.
The Xbox 360 is winding done, but undoubtedly this is a brilliant move, at least in my opinion. Traditionally, gaming systems were sold for-profit, allowing companies to make money off of the consoles and the games. Then, in the late-90s, the trend started to shift to a model of selling “at-a-loss” over the philosophy that they’d make up the invested money of the games sold.
This allowed gaming hardware to keep a low enough price to be competitive, yet allow graphics and features that made them at least somewhat comparable with computers for gaming. The problem is that with this last generation, both Sony and Microsoft have felt a serious burn in using this model, as it took them both many, many years to truly turn a profit on their game consoles.
Two years is probably just enough time to put new users in line for the Xbox 720 (or whatever you wish to call it) upgrade. When it arrives, MS could consider selling the system very much like how cellproviders do- Full Cost, 1 year commitment, and 2 year commitment.
This means that they know you’ll use their multimedia services, and they can turn a profit from this and the games you buy. This move could truly give Microsoft an edge in establishing its Xbox brand as a multimedia entertainment device for the living room, and not just a gaming device brand.
Of course this model has down-sides too: IF Microsoft no longer sold at-a-loss unless you committed to a one or two year plan, gamers with bad or no credit might find it difficult to qualify for owning the next Xbox unless they paid full retail price.
Without any subsidizing on the price, this could easily mean a $750-$1000 game system for those that don’t qualify, or don’t want, the commitment. More than likely though, MS will still subsidize all models, it’s just that ones with a two year (and maybe even 1 year) commitment get the steepest discounts.
There is also the possibility that this nothing but pure rumor, though I really think it makes sense. What do you think of the idea of a paying a monthly contracted fee to Microsoft in order to get their game systems cheaper?
Could this position them as a powerful force in the living room?
Don’t like the idea at all? Share your thoughts below.