Contracts and Consoles

The Verge published an article recently claiming that an Xbox would soon be released for only $99.  One minor caveat: it comes with a 2-year contract a la cell phone.  Termination fees and all.

Now, the subscription service has some benefits, most notably that for the duration of the contract you have access to Xbox Live Gold.  A standard Xbox with 2 years of Live comes out to only $39 less ($459 vs $420) than the subsidized version.

Personally, I don't like recurring payments.  However, they absolutely lower the barrier for entry.  Add in the value of an Xbox Live Gold subscription and this isn't that bad of a deal while making the initial cost affordable to many kids with birthday money or parents on a tight budget.  Sure, the long term cost is slightly more, but that's in the future - what counts is that it costs less now.  America invented razor and blades, and this is a red-ringedblooded American console.  Eat it up, 99%.

The console contract marks the start of a new era.  With tighter integration between connected services and the console, I suspect within a generation or two, buying a console will basically require a contract.  There will be no Xbox Live Gold or PSN Premium - just Xbox and Playstation.  If you've got the console, you've got the sub.  Perhaps there will be a cheap family friendly Nintendo that will try to create a niche, but what Microsoft understands is that the most family friendly thing there is a low starting cost.

This is the flip-side of the longstanding subscription incentive to add value to the people who are already paying - something that has sometimes had backlash from the gaming community.  Now the approach isn't to just add value but also decrease initial cost and lower the barrier of entry.

I don't like it, but it's smart and I think will ultimately be the standard model within 1-2 console generations.