amirnetz said:
Fumanchu said:
Squilliam said:
If Wireless costs $10 per SKU, and they sell 7,000,000 Xbox 360 Premium and Elite SKUs then it will cost them an additional $70,000,000 per year. Now the people who don't immediately want online have generally self selected and purchased an Arcade unit. The proportion of Elite/Premium owners who want internet access are a much higher proportion. Their revenue gains would come from Arcade purchasers moving up to Premiums due to the extra feature, extra live subscribers @ $40 per year per subscription as well as online content sold on the marketplace. The cost of wireless has come down and the demand for wireless has come up, it has to happen eventually and this is a way for Microsoft to increase the value of their SKUs without dropping the price.
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They would already be making this up with the current rate of LIVE subcribers to install base, if indeed they receive the full $40 per year per subscription.
Microsoft released a press statement recently indicating that there were ~17million LIVE accounts at present and a MAJORITY of these were 'gold' subscribers. Gold subscribers > 8.5million. This was a couple weeks ago when the install base was hovering around ~27million. This means that the current subscriber to install base is > 31%.
Now take your numbers above - "7million consoles costing them $70million". 30% of 7million = 2.1million gold subscribers. 2.1million x $40 = $84million PER YEAR. You could most certainly expect a significant increase to the current 31% subscription to install base rate should they include wireless, plus 62% are silver members at current so this number should jump exponentially as well seeing as though it's free to sign up as long as you've got Internet connection - so this would be a huge increase to customers browsing the marketplace.
As you mentioned the 50% Arcade - 50% Premium/Elite current sales statistic, should theoretically balance more evenly out between each, so they'd be getting more of a profit from selling more of the higher profit margin skus as well. I think the numbers are there to support such a move.
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Fumanchu is actually proving the opposite point. If only 35% of the 360 owners are paid subsribers then why would Microsoft subsidize the WiFi for 100% of the users?
It is a giant leap to assume that there will be a sunstanital increase of Live subscribers to justify the extra cost. I personally cannot imagine that an significant number of 360 owners are off Live due to the lack of WiFi.
Microsoft would do much better to save the $10-$20 of WiFi cost for a price reduction. Whenever Sony drops $50 of the PS3 price Microsoft will have to drop $50 from the price of its premium SKUs to stay competitive. The $10-$20 of saved WiFi costs will come in very handy when squeezing the 360 costs down. A its not easy at all to reduce the costs and one would not go about to add more to the cost base, unless it really does generate significantly more sales or really makes you more competitve (like a larger disk space).
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Its not 100% it's 50% of users...
- If someone purchases an Arcade and 60gb pack -> net revenue $275 (Aprox)
- If someone purchases a Premium (Wireless) instead of Arcade and 60gb pack-> net revenue $300 with $10 extra expense. (Aprox)
- If someone purchases a PS3 instead of a premium -> net revenue $0
The use of wireless networking is increasing rapidly and the cost of including this functionality is dropping. Soon it will be the primary method of networking in households as the % of laptop users goes over 50%. They have to do it eventually, theres no question at all about that. Most people do not want to run cables throughout their homes. Xbox 360 link was a key feature of the Xbox 1, they now have the opportunity to do Xbox 360 link but wirelessly so people have the incentive to purchase that $100 wireless accessory.
