The $99 Xbox 360 is not for you

Rm_headshot
Thursday, May 10, 2012

Now that Duke Nukem Forever finally released, one major urban myth remains in the industry: the $100 gaming console. People dream of it. It’s a nice dream to have, like Star Trek transporters that beam you from Cleveland to Monaco for the weekend (or forever) and inkjet printers that don’t die within two years. But outside of a last-generation PlayStation 2, nobody ever nailed that formula.

And they still haven’t.

When we first got whispers of a severely discounted Xbox, I considered picking one up just to put a second box in the bonus room, where my PS3 lives. Then Microsoft finally conceded to the rumors and formally announced the $99 4GB Xbox 360 with Kinect...and a slight caveat -- a mandatory 2-year Live Gold subscription at three times the normal rate. Let's just say my plans changed.

Don’t think Microsoft regrets losing that sale. I’ll be blunt. This subsidized 360 is a scam not unlike a professional magician's card trick and about as malevolent. But to fully understand what’s going on here, first divorce yourself from the idea that this faux-cheap Xbox is in any way intended for gamers.

 

Halo 3

So this is your first time playing Halo? Let me show you how this thing works.

Oh, Microsoft won’t mind at all if you get one, but you’re not the target audience. Note how nobody explained how a $180.00/year subscription might fold into an existing (and automatically renewing) Gold account running at only $60/year. I promise you, those nice Microsoft fellows considered the possibility. They just aren't interested in existing customers. They're out hunting for new customers, and they're doing it in a fairly sneaky manner.

For starters, they've practically eliminated the major barrier to entry...namely the price. The $250 Nintendo Wii snuck under that pain point back in 2006, so it's unlikely anyone will say no to a something that doesn't even go into triple digits. Yes, they'll eventually pony up another $360, but the sticker on the box says $99, and a lot of people just won't factor the long-term cost in. If you don't believe me, ask yourself why nearly every product in existence is marked just five cents below a rounded dollar amount. Anyway, parsing that cost out to monthly increments also cuts the perceived cost down into something entirely manageable.

Kinect
Announcing Hokey Pokey: Evolution.

So let's play it out. You're interested in a $99 Xbox because, hey, that's too cheap to pass up. To get one, you've got to go to a brick-and-mortar Microsoft Store -- it's not available online -- where trained Microsoft employees cheerfully talk you through all the cool things this device can do. They bring you into the fold. And they only ever mention video games in passing.

The Xbox 360 isn't a gaming device. It’s a media center where you get your television, movies, sports, music, everything. Xfinity and HBO on demand. Stream Netflix and Hulu. Rent from Amazon. Get the game on ESPN. With Kinect bundled in, it's also your exercise center and party-game platform, just like the Wii. Only better.

Watch. Microsoft will push the $99 price-point in mainstream channels...Newsweek, Time, TV Guide. They'll aim at people who want all the things an Xbox can do except play games. Though that will happen, just as it did for the Wii...minus the Wii's content mistakes. I expect to hear about a lot of new media partnerships and see a dramatic upswing in downloadable Kinect games. These new customers won't go looking for Limbo, but they might give something a try it it's right there on the dashboard with the words FREE DEMO lit up. If not for themselves, then maybe for the kids who notice Elmo and Cookie Monster waving at them to try Sesame Street: Once Upon a Monster. People will buy them with a wave of their hand.

Down the road, don't be shocked if the Netflix interface suddenly allows you to set up a new account directly from your 360 (using Kinect's voice commands, naturally), with a small kickback going to Microsoft.

Halo Guitar
His solos last three weeks and cure the blind..

So no, flagging sales aren't a factor here. The Xbox 360 outsold all its competition pretty much every month for over a year now. Sony's third-place PlayStation 3 closed the gap between its total units sold in the last two years-- quite an impressive feat -- but I doubt there's much advantage or financial gain to claiming #2 bragging rights behind the Wii. Yes, Microsoft will make a boatload of cash off those subscriptions but think past those two years. New customers will become old customers. In the meantime, they'll learn to casually order things, watch what they want, when they want, and maybe even play a few casual Kinect games together.

And when that two-year contract ends, they'll sign up for another two on the spot.

That's the plan. Possibly it's been the plan for a very long time. The idea of convergence always ran deep in Microsoft's philosophy, going way back to Bill Gates' heyday. One indispensable device in every living room that does everything. And now it only costs $99.

Microsoft might try to scoop up Sony loyalists for the hell of it, and they're definitely looking to undercut the Wii U just as it finally sees daylight, but that's gravy. The steak is everyone who put the Wii on top. It's those who thought the Wii cost too much for too little. It's people who had no idea what they were missing and now wouldn't miss it for the world.

That's not you. If you're a gamer, you're already inside the tent regardless of which platform you favor. Now you get to watch everyone else graduate from VCR to DVD player to gaming console. Welcome to the mainstream. Here's where things start to get interesting.

 
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Comments (8)
Lolface
May 10, 2012

Wasn't the Gamecube $99 for a while? I think Nintendo nailed it. With a lunchbox.

Default_picture
May 10, 2012

I remember years ago, all the discussion about how everyone wanted to have that set top box that was the hub of all entertainment right in America's living room. Microsoft just took another giant step to making that old dream a reality. I suspect they've planned that all along on some level.

You're spot on -- this isn't for gamers and gamers aren't the target audience. This is about getting MS machines into every living room they can and displacing Rokus and Apple TVs and all these other gadgets as the one stop shop for all of these non-gamers' non-gaming entertainment needs. All they're missing now is a 360 with a DVR. 

Default_picture
May 10, 2012

Agreed, most of the biggest tech companies including Microsoft, Sony, and Apple are vying for household dominance. There is a ton of money to be made if you can provide all of someone's entertainment needs.

Default_picture
May 10, 2012

They are extremely smart for doing this. Why? because with new generation consoles around the corner making the 360 cheaper will indeed attract non-gamers to the 360. It won't be long before they do have dvr options and where will Apple tv be? Nowhere. The only thing Microsoft needs to consider is making more features free without a gold membership. This will make more people want to stay with them getting their foot in the door.

100media_imag0065
May 10, 2012

"'And when that two-year contract ends, they'll sign up for another two on the spot."

I don't think it works like this. From what I have heard, buying everything that comes in that bundle the old fashioned way is only $20 or $30 less. So, you are only paying a bit more in the long run. And when that 2 year contract is up, you don't go back to paying it again. The 360 is paid off, you just buy a subscription to Xbox Live.

I really don't see the problem with this at all. I think it's a great idea and I think Sony would be stupid if they don't jump on the bandwagon and get going with a similar deal. And I hope these deals stretch into the next generation as well. Release a brand new console at that cheap of a price, and let people pay off the rest through contracts, is a great idea to me.

As long as they don't get greedy. As long as they don't try and do what every cell phone provider does.

"Oh, you want a larger friends list, well that will be an extra $5 a month."

"What's that? You want more cloud storage, well that will be an extra $10 a month"

"Oh, so you want faster download speeds, you'll have to sing up for a Platinum Membership for that, which is an extra $10 a month"

Hypevosa_symbolsbig
May 11, 2012

So let's do the totals:

$99 bundle total costs: $99 + 24x$15 = $459 total over 2 years

Cost bought alacarte: 4gb 360+kinect=$300 + 24x$ 5= $420

Cost bought alacarte (with sales): $280+ $48x2 = $376

So you're losing between $39 and $83.  However, you're also gaining access to these items for a period of 2 years, and are essentially renting them.  If you look at any place that rents 360s, you'll notice that the $1.65 - $3.46 per month you're paying is insanely cheap by comparison.  Rent 2 own will end up charging you almost a thousand dollars over the course of the year for the same thing minus the gold subscription.

This option is great for anyone who can't afford the large capital investment of instantly buying the xbox and kinect bundle, but has the $15 a month to spend.  Truthfully, they probably should just go without, but this really isn't extorting anyone when you look at the convenience offered.  You want to see extortion, you look at the pay day loan and the rent to own companies and their insane interest margins.

Jamespic4
May 13, 2012

This:

http://www.eurogamer.net/articles/2012-03-14-xbox-10th-anniversary-in-europe-today

I don't know if you're an OG PC gamer Rus, but way back when, as a primarily console gamer, I laughed at the original Xbox. Certainly didn't buy one. Microsoft spent a bajillion dollars on a weird gambit: that it could defeat Sony and Nintendo in the console market.

Nowadays, I do most of my console gaming on my Xbox. I only hook up my Wii (and, I expect, my evnentual Wii U) and my PlayStation when must-have first-party titles arrive. And, weirdly enough, I still think that Nintedo and Sony have the best first-party games/second-party-exclusive partners. But my Xbox is just SO DAMN USEFUL!

To bring it back to the topic at hand: On a gamer side, I think this move with the Xbox/Kinect bundle is unctuous, disgusting, and overly slick. On the business side....brilliant! If Sony thinks they can win the "end of console life" wars or the "10-year console cycle wars" based soley on the power of Blu-ray, they have another thing coming.

Looking to the future, as a consumer, this announcement staggered me, and I'm super afraid that when this pilot campaign succeeds (not if, but when), it will become the de facto operating procedure for Sony and MIcrosoft (probably not Nintendo since they are so slow to adopt new market trends). To me, it's not impossible to imagine a PS5 or a Xbox4 that's priced just like a cell phone: $1,000 without a contract and $300 with one.

Ick.

This announcement makes so much business sense that it's scary. For the rest of us, who just want the newest BioShock, Final Fantasy, or Rocksteady Batman, it's really bad.

Default_picture
June 18, 2012

DUDE, this isn't a scam, it's business.  The Xbox 360 is an aging console, the next Microsoft offering won't be available for another 1-2 years, AND Nintendo is about to launch the Wii U.  Microsoft is doing this to keep new Xbox users rolling in, and to draw off some potential Nintendo customers.

This isn't some conspiracy to steal your money, it's a simple attempt to keep consoles moving out the door, and keep the associated new revenues (game sales/services) flowing.

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