One strategy that Microsoft has done with the Xbox 360 is subsidize the cost of the console, and then have the consumer pay monthly for the Xbox Live service. This is the first time that a home console has done this price modeling. So far, according to Microsoft, it has been a success. Matt Barlow, Microsoft’s general manager for interactive entertainment marketing, has deemed this model profitable and claims it will be ”pivotal to the business”. With this statement and other obvious indicators, there is a strong possiblity that “Durango” will be primarily sold in this manner. Microsoft will subsidize their box, the “Durango”, and have the consumers pay every month for the service, Xbox Live. Here are a few reasons this seems logical.
Reason One: Price of The Console
From rumors, it seems Microsoft is throwing in the whole kitchen sink into their next product. Edge recently reported rumored specs in their article,”The next Xbox”. The article states, “ Xbox games will be manufactured on 50GB-capacity Blu-ray discs, Microsoft having conceded defeat to Sony following its ill-fated backing of the HD-DVD format….our source has also confirmed that the next Xbox’s recently rumoured specs are entirely accurate. That means an AMD eight-core x64 1.6GHz CPU, a D3D11.x 800MHz graphics solution and 8GB of DDR3 RAM. Unlike Nintendo, Microsoft is continuing to invest heavily in motion-control interfaces, and a new, more reliably responsive Kinect will also ship alongside the next Xbox.” I’m not a computer whiz, but I do understand that these components and the possible installation of Kinect will make this a very expensive console. Analyst, Michael Patcher, recently stated in the interview that the new Xbox may cost more than the PS4 because of Kinect and other features. I can’t really picture Microsoft selling a baseline console at around $400-$450. It does not make sense at that price. What does make sense is Microsoft will probably have the new Xbox valued at $500, but if you sign a “contract” you can buy their system for $200.
Reason Two: More Interest In Services
Microsoft has really seemed to be more interested in services than actual games lately. I am sure their studios are working on some launch titles, but for the most part I believe Microsoft is more concerned with Windows 8. They have recently advertised their updated Xbox Music/Video, Apps, and connectivity services. Also, there has also been rumors that the new Xbox will have a tv turner. Microsoft seems to be going all in as a media center.
The new Xbox will overall be more “expensive” than the Playstation Four. It will have the components to stay competitive with the Playstation and will also have the updated Kinect. This will allow them retain third party support and they will be able to keep the “casuals” on board with the new console. They will subsidize the price of the console to $200-$299 IF you buy into their Xbox service plan. There will probably be a tiered subscription service. Gold will still be needed to play online and to have access for media apps. Microsoft will also probably add a whole new “Diamond” category. Diamond will have all the perks of the Gold service, plus it will have DVR and cable capabilities. “Durango’s’ killer app may not be a game at E3, but a cable service. If Xbox worked with a provider like Comcast or Dish, you could have cable/premium channels and all of Microsoft’s service for one price. This will bring Microsoft closer to being a media box in the living room. This strategy could work for them, especially in America. This type of subsidizing has been lucrative for Apple in the phone business. I would not be surprised if Microsoft wants to find out if it will work for them in the gaming business. They may lose some gamers if the tiered system and the watermarked disc rumors are true, but if they go in this direction they will not care about those gamers. They will be banking on the average family not caring about those features. Parents will buy the “Durango” because they can watch cable and use the media services. They will also buy it to occasionally play Kinect with their kids and play Call of Duty: Whatever. Microsoft will announce their new console shortly so we will all see what their next move will be.