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I thought MS always gave like a month or 3 of Live free with new consoles. Additionally, Sony is doing the same with PS4... so I don't see how this idea of limited free Live changes anything.

MS won't do more than a year's worth of Live if anything. But Sony could easily match that.
MS can't really advertise that you get all these free games during that year too as PSN+ also gives free games.

MS best option is to simply bundle the console heavily out the gate with variations of its biggest launch games as well as toss in the headset and charge-n-play accessory.