The lights are on
Earlier this month, Microsoft launched a new program in its U.S. stores that allowed customers to purchase a new Xbox 360 for $99 with an added monthly fee. Microsoft says this is merely a test program, but what could this mean for hardware sales in the future? We spoke to a number of industry analysts to get some perspective.
"It is an interesting proposition and it does offer a strong value to price sensitive consumers," said Jessie Divnich of EEEDAR. "We know this model works within the cellular market, and this could be a big opportunity not just for Microsoft but all future consoles. Especially as the next-generation of consoles move to being more of a service based value add product, rather than a hardware value add."Retailers are going to pay close attention to the feedback from the Microsoft Stores on this new strategy. If successful, we should expect all major retailers to roll out the program in the next 12 months."Michael Pacther of Wedbush Morgan believes this could be the start of a new trend. "I think the key is that the next generation consoles might only be sold this way, so instead of charging $300 – 600 for a console, charge $99 and sign people up to a “data” plan (like mobile carriers), charging enough to cover the cost of the hardware. "Count on seeing that next generation if Microsoft has success with this offer."
Billy Pidgeon of M2 Research said this move by Microsoft isn't surprising considering how well it works with mobile phones.
"What's perhaps more significant is that the $99 hardware two-year sign-up represents a transition towards a higher dependence on a service model," he said. "This would also allow Microsoft to get out ahead of a Google or Apple connected TV service that offers games and other interactive features in addition to multimedia on demand.
"Still, I think it's necessary to add real consumer value -- such as open access to free downloadable or streaming games, video and other multimedia -- to justify a monthly fee in the $10 to $20 range. A play by Google or Apple would likely offer more consumer value for far less, creating a very competitive ecosystem for more dedicated gaming plays."
If consumers continue to expect the most advanced graphics and hardware technology in their newest consoles without paying more than $299-$399, maybe Microsoft is onto something? Are you prepared for a subscription-based hardware future or would you still prefer paying a on-time price? Sound off in the comments below.
on time price