| SvennoJ said: Having the option is find but what's worrying is that it can easily lead to justify higher console prices next gen. Some people already stated they would be fine with that. Buy the next gen console for only 149,- and a 4 year contract of 17,99 a month for the base model, 5 year contract for the pro. Or 699,-, 799,- straight up buy. Plus if they have you paying a monthly fee, it's only 1 small step a way from easily adding extra paid services on top. The title is the worrying part, "pivotal" "Microsoft calls Xbox subscription service “pivotal” to its business, hints at inclusion with next-gen, it will one day be extended to the international consumer." I hate my cable provider for this business model, but it seems I'm stuck with it. I cancelled my mobile phone, sick of all the plan bullshit. I was fine with how consoles operated until now, please don't ruin it and go the cable / phone provider way. All they needed to do was not use pivotal, now I'm worried. |
I think it's pivotal in that with the next Xbox Microsoft will be able to reach a broader audience in the financial spectrum by means of offering a console via a susidized payment plan. The subsidized method won't benefit Microsoft on newer hardware. If they're selling hardware at a loss, then offering it to consumers for 9% over the retail cost won't make them more money. It just would save them from losing money. Until the hardware breaks even, subsidization is a significant risk.
They're not going to stop offering a console at retail. They'll still do that simply because they'll lose less money, especially early in the cycle. However, later in the cycle subsidization benefits Microsoft because they're better able to reach a broader audience.
If for instance Microsoft can sell the next Xbox for $400 to a regular consumer, and that regular consumer is willing to pay additional for Xbox LIVE, great. They fit the normal retail model. They have the choice of hardware and they have the choice of whether to sign-up for Xbox LIVE Gold or not. They have all the choices. Those who can't afford the $400 will be be offered a subsidized console price with a required service life for Xbox LIVE at an additional subscription price. Their options are limited, but the benefit is that they're able to obtain the console at a lower price, they're just locked into Xbox LIVE Gold for a period of years.
I don't think it's going to alter the retail model at all. Microsoft has a target price, regardless of the hardware. They've already mapped out the life of the product, made hedges as to how many units they'll sell and by when, and have their contracts aligned so that when they meet those goals they'll see price breaks. As they are able to lower the price, they'll get their costs below the amount they're charging and from that point on begin to earn profit.
I'm and advocate of subsidization. I actually proposed the idea to Microsoft through an unsolicited post during a Beta. I thought it was a good idea then, and I think it's a good idea still. Look at what it's done for the mobile phone market. That industry would not have had the growth it had without subsidization. Trust me, I know. I was selling cellular phones in the early days of cellular phones and everything changed when we could down $99 phones.
