Examiner
The Verge reported on Wednesday that Microsoft will begin selling a 4GB Xbox 360 Kinect bundle for $99 subsidized by a $15 monthly fee for two years. If this report turns true, we couldn’t help but wonder if this could be a test run for the next generation Xbox and contacted Wedbush Securities analyst Michael Pachter for his thoughts.
“Yes, absolutely this is a test run for the next generation,” Pachter told us. “If they can get people accustomed to paying $15/month for XBL, perhaps they can raise the price and subsidize console purchases, much in the way the mobile carriers subsidize cell phone purchases by getting consumers to commit to a two year data plan.”
While the next-generation Xbox is likely more than a year off, Microsoft’s goal with the subsidized Xbox 360 appears to be to lower the barrier of entry. “Any consumer with a credit card could do the same thing,” Pachter explained. “ut I think they are trying to appeal to people who may not have credit.
That is indeed true as the 4GB Xbox 360 Kinect bundle and two years of Xbox LIVE comes out to be $420 while the subsidized promotion will total out to $460.
Pachter broke down the numbers by pointing out that the “amount ‘financed’ is only the $200 they don’t get when they sell the console, plus the first year of XBL service (nobody buys two years at a time). So Microsoft is ‘financing’ $260, and they are getting an additional $39 for that. Since the payoff is ratable over two years, it comes out to around an 8 – 9% interest rate.”
And that interest rate will only jump once Microsoft announces a price cut for the Xbox 360 either at E3 or later this year.
http://www.examiner.com/article/analyst-subsidized-xbox-360-for-99-absolutely-a-test-run-for-next-gen-xbox
