Topic: Microsoft's New Pricing Model

[nickmitch]

http://content.microsoftstore.com/store/xblive2yr-offer/

So, MS is now offering the 4GB 360 with Kinect for $99. The catch? You have to agree to pay for 2 years of Xbox Live Gold. ($360) Much like a cell phone plan, there's an ETF schedule. It's currently on a trial basis, but could take off if successful.

What does everyone think of this new pricing scheme? Think we'll see more of it either this or next gen?

[TJ Spyke]

It's cheaper to but it right away. $300 for that 4GB Xbox 360 with Kinect + $120 for 2 years of Xbox Live Gold for a total of $420 + tax. This bundle has you ending up paying $460. It's like place like Rent-A-Center, make small payments but in the end you pay more. I don't know, I can't see this being super successful. But I like more options for people.

[SixthAngel]

I despise it because I hate the fact that they ask you to pay for live.  They even have services you have to pay for behind the pay wall.  I decided I would never pay for online for a console again slightly before the end of the original xbox's life.

With this out there testing the waters now you can tell it is pretty much their plan to make the next xbox look cheaper.  They will advertise it as 100 bucks cheaper but force you to sign up for live for 3 years.  I just hope that people balk at getting a contract when purchasing a game console or realize the competition lets them play online for free.

[nickmitch]

It's really just designed for people not willing or able to pay $300 for a system, but can make Xbox Live Gold payments for two years. I like that MS is trying to expand the market to lower income levels, but I'm wondering how they'll expect those people to play games. Sticking to XBLA games may run the hard drive thin. Buying used games does nothing for MS, and renting can only do so much for them. It'd be interesting to see if they'll just depend on the subscriptions for the cash flow.

[Chozo Ghost]

The fact you have to pay to play online with the 360 is the sole reason why I choose the PS3 over it. I wonder how many potential customers Microsoft has missed out on as a result of this. I doubt I'm the only one.

[Oblivion]

inb4 Microsoft has better online because I pay for it.

[Chozo Ghost]

inb4 Microsoft has better online because I pay for it.

Probably true.

[SixthAngel]

Hopefully it blows up in their faces when they make "Pay for online" an actual selling point of the console.  It may look good to write the lower price on paper but mom and dad aren't going to want to sign a contract for their kids video games.

[Oblivion]

inb4 Microsoft has better online because I pay for it.

Probably true.

Meh. If there's evidence out there, sure.

[TJ Spyke]

Hopefully it blows up in their faces when they make "Pay for online" an actual selling point of the console.  It may look good to write the lower price on paper but mom and dad aren't going to want to sign a contract for their kids video games.

This is not new, you can already do something like this with rent-to-own places like Rent-A-Center (which does have video game systems too). This is just Microsoft cutting out the middle man (and for a cheaper price than what those rental places have them for).

[nickmitch]

It's more akin to a cell phone data plan than a rental service. You don't get to return the system to MS when you don't want to pay for it anymore (AFAIK).

[Kairon]

Maybe Sony should've done this when the PS3 launched...

[GoldenPhoenix]

Seems to be a bit of a rip off to me considering you can find 12 months of Xbox Live Gold for around $30-40 from various etailers. I could have swore you only paid $10 monthly for a month's worth of Gold anyway (unless this is for another territory).

[TJ Spyke]

It's $60 a year (unless you find a card on sale), which averages out to $5 a month.

[GoldenPhoenix]

It's $60 a year (unless you find a card on sale), which averages out to $5 a month.

I am referring to paying month by month, and they charge $9.99. I am not really understanding how they justify the $14.99 a month, when the month by month payment plan is still $5 less.

[Uncle_Optimus]

After reflecting on this surprising announcement, though I doubt it will make any large splash in the market at this point in the product's life cycle,  I have to say it is a good play on MS' part. This kind of subsidization model is worth trying in the case there is a sizable segment of the potential userbase for whom would like to use the Live service but couldn't justify the upfront cost of the hardware: it lowers the barrier of entry.


As others here have already mentioned, this could make for a good study of the market specifically allowing MS to gauge if their is a subsidization play they could make with the next "Durango" XBox. The ramifications could be as wide spread as convincing MS to improve the hardware beyond what they may be willing under the current console development model, if they felt a large enough base of customers would be willing to sign two-year high margin Live service contracts.
That is a far-fetched statement tho, I admit!


On a somewhat related note, following the link in the OP, I see that the deal is redeemable in local Microsoft Stores only? I did not know they still had those...I imagine there cannot be many?

[ejamer]

Mmm... Some of you guys might be overestimating how savvy the "average" consumer is. If they get a low entry fee, who cares about signing up for years of service?


I also think it's a great move by MS because they are launching a preemptive strike against Wii U and any other competitor planned in the near-term.  Anyone who buys this "deal" has signed on for years, making it far less likely they'll be game for another console a few months later -- especially when they are still making monthly payments on the new 360 they just grabbed.


That said, I think it's a poor deal for consumers. But as long as the low entry point gets people in the door it could end up being a winner for MS.

[nickmitch]

It's $60 a year (unless you find a card on sale), which averages out to $5 a month.

I am referring to paying month by month, and they charge $9.99. I am not really understanding how they justify the $14.99 a month, when the month by month payment plan is still $5 less.

Microsoft is basically just spreading out the cost of the system over the two years. You pay 100 now and the other 200 over the two years of paying a premium for Xbox Live.

[Fatty The Hutt]

The fact you have to pay to play online with the 360 is the sole reason why I choose the PS3 over it. I wonder how many potential customers Microsoft has missed out on as a result of this. I doubt I'm the only one.

You are not the only one.
There is another  Skywalker

[Ymeegod]

Well MSRP pricing on an arcade/kinect xbox 360 is $299 and Xbox live for two years is $120 so $420 total.
Vs $99 plus an monthly fee of $15 for 24 months (making the total $460)  which means you'll save yourself mearly $40 for paying in full up front?  Of course there's discounts and whatnot to consider but still for people short on cash this might be the deal breaker.

Have to wait and see how consumers take to this. 

[Ceric]

Paying that $40 premium to spread the payments out and not have the argument with the significant other about paying for Live could be worth it for some people.

[Uncle_Optimus]

Well MSRP pricing on an arcade/kinect xbox 360 is $299 and Xbox live for two years is $120 so $420 total.
Vs $99 plus an monthly fee of $15 for 24 months (making the total $460)  which means you'll save yourself mearly $40 for paying in full up front?  Of course there's discounts and whatnot to consider but still for people short on cash this might be the deal breaker.

Have to wait and see how consumers take to this. 

Hey maybe its opportunity cost...that money saved upfront can be used to buy Facebook stock or something...
Microsoft is actually targeting a very savvy customer segment! :p

[SixthAngel]

They are expanding this program to other stores now.

Painfully obviously they are planning this for their next system and it if it comes to pass it means I won't even be glancing at the next xbox.

[ejamer]

They are expanding this program to other stores now.

Painfully obviously they are planning this for their next system and it if it comes to pass it means I won't even be glancing at the next xbox.

This isn't (necessarily) a terrible pricing model. It does let MS market and sell more expensive hardware to people who would normally balk at the large up-front cost. As long as you look at the total cost instead of ignoring the the future payments and make a value-based decision based on all the information, you'll do fine.


Of course, the very reason that MS likes this pricing model is that most people don't consider or care about overall cost. It increases profit when people overpay for hardware and are willing to get herded into long-term contracts at potentially unfavorable rates. Just use your head before you buy and decide if it's really worth the asking price.

[ShyGuy]

Do they give you anything for subscription besides Xbl Gold? Hulu? Netflix? ESPN 8 "the Ocho"?