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.    

Funny you mention cellphones, since I got rid of those a long time ago when all these subsidized locked in contract plans became popular. It has not been beneficial to cable tv, I pay twice as much now as 10 years ago and need to buy or rent additional boxes to watch in more rooms instead of a simple amplifier for the whole house.
Here's hoping xbox doesn't go the same way, slowly increasing costs through subscription fees.

But I see your point that it can be a good thing too. If it really catches on then a larger audience should in theory lower overhead costs.

So if i'm reading the comments in this thread right MS rapes and murder your children with this subscription?

Don't forget that they also burn your house to the ground and sell you into slavery as a sex slave (which could be a good thing or a bad thing considering your viewpoint).

You're partly right
http://www.reghardware.com/2008/04/21/arkansas_xbox_360_fire/

No slavery yet, but they will send the swat team to your house
http://news.cnet.com/8301-17852_3-57377796-71/xbox-360-threat-leads-to-swat-team-raid/

Of course the ps3 makes all your information freely available to Russian mobsters and is used by Al quada to plot terror attacks
http://thegamershub.net/2012/03/the-sun-says-terrorists-use-call-of-duty-to-plot-attacks/

Yep, opinion against Microsofts practices = ban. Essentially, if you piss of high penis point members like kowenicki and BenVTrigger they get you banned.

"Saying the Xbox is the most successful console worldwide is straight up lying.

Also, games are now only on fifth position after movies, tv shows, sports and music. Microsoft repeatedly states that Xbox as a gaming console was just a trojan horse to get a foothold in the living room and they will abuse this now. I can't comprehend how people can call themselves gamers and still support this bullshit. Microsoft is burning this industry down just to get into the living room to compete with Apple TV. They don't give a shit about games or gamers."

This is what I was banned for and the reason was "blatant trolling/flaming"

Flamebait and trolling. Posts or signatures slamming a particular platform without basis - be it a specific console, macs, windows, or anything similar - will not be tolerated. This applies to specific games as well as consoles.

• You always have the right to express your opinion, as long as it is relevant to the thread topic, and you do so in a civil manner, justifying what you say. If you want to discuss something other than the thread topic, make your own thread.
• The forums are here for gamers of all persuasions, so unless you're in a thread specifically geared towards platform comparison/discussion, keep your anti-platform comments out of the thread. Note that there is a difference between having a reasonable argument in the correct thread and trolling.
• Similarly, do not create threads, posts or signatures just to bait people of a specific fan group. Bait threads will be locked and you will be moderated for them. If you spend a lot of time making hit-and-run negative threads or posts about a specific platform you will also be moderated at the discretion of the moderators.

I got a feeling that most of the hate from this deal is because

1. This will increase 360 sales and this upsets the Sony camp.

2. MS thought of this first and Sony didn't.

Why would people here condemn MS for giving an OPTION that they know they won't ever do? Why do they care that its taking advantage of debt prone families (which cell companies have done for years). Gamers are the new hosts to "Till Debt Do Us Part"? lol

Its simple: This will boost 360 sales, Live Gold subs, and not PS3. These debates almost always are rooted in lifetime sales.

This is not true at all. Its an evil smart idea, because you can put people into debt and profit off of the interest. I am saying as a person  who works in retail in this economy, that the mass majority of the people will not go for financing. It wont sway them if they cannot afford it. I used to work in a store that gave cash or finance options and the stuff was pretty expensive at times. Also, looking for people with good credit these days isnt very easy.