Microsoft: Smartphone-style contracts will be the Xbox 720’s bread and butter

xbox 720A new Xbox won’t be the only key to reigniting Microsoft’s stagnating game console business. According to the Windows 8 company, the mobile market will also redefine its living room entertainment business. How? Pricing.

The video game business is changing at speed. Video game retail sales have plummeted year-on-year over the course of 2012. The decline in disc-based game sales is reflective of an increasingly digital market; people are still spending on video games, they’re just downloading them in greater numbers and publishers typically don’t share digital sales data. The decline in devoted gaming machines is the real concern hidden in those poor retail numbers. Microsoft in particular is feeling the heat, with Xbox 360 sales in the last quarter falling 29 percent year-on-year. A brand new console might not reignite Microsoft’s game console business though. All devoted gaming machines are feeling squeezed: The Nintendo 3DS portable’s sales fell 18 percent in September. How do you fix this business?

By subsidizing sales with subscriptions, just like smartphones. Rather than charge $400 or $500 for a new game console upfront, Microsoft plans to sell the Xbox 720 at a low price with an accompanying subscription.

In a discussion with the Wall Street Journal, Microsoft interactive general manager for marketing Matt Barlow said that subscription programs will be the core of future Xbox releases. “This type of program is pivotal to our business,” said Barlow.

Microsoft began testing the subscription market back in May when it released a $99 Xbox 360 that through its chain of Microsoft Stores. The console is cheap, but it comes with a mandatory two-year contract requiring monthly payments of $14.99. That includes Xbox Live Gold, but at $180 per year, the device and service end up costing significantly more than if they were purchased individually at flat rates. Following that test, Microsoft began offering the same package at Best Buy, Toys ‘R’ Us, and GameStop.

Since Microsoft only sold 1.7 million Xbox 360s over the period when the program first went into effect, it clearly didn’t help the aging console. It didn’t need to though. All it needed to prove was that the model was viable for Xbox going forward into the next generation.

The question now: Who will be controlling and collecting that subscription fee? Will it be Microsoft or cable companies like Time Warner and Comcast as a number of industry analysts like Morgan Pachter suspect?


Here are all the awesome award-winning indie games from IGF

Indie games are now offering experiences capable of matching -- and often surpassing -- that of big-budget blockbuster titles. The Independent Games Festival recognized the best of them on March 20.

Xbox One X vs. PS4 Pro: Which console is more powerful?

Far from cooling down, the console wars are only getting more intense. We compare Microsoft's Xbox One X to Sony's PlayStation 4 Pro to help you decide which premium console is right for you.

The best of the last generation: Our 50 favorite Xbox 360 games

The Xbox 360 thrived during a generation where games were plentiful. Here's our list of the best Xbox 360 games of all time, including all game genres and even a few special indie hits.

How do Nintendo Switch, Xbox One X compare to each other? We find out

The Nintendo Switch is innovative enough to stand apart from traditional consoles, but could it become your primary gaming system? How does the Switch stack up against the Xbox One?

How do the revised Xbox One and PlayStation 4 consoles stack up?

Microsoft's new Xbox One S and Sony's PlayStation 4 "Slim" have bucked the generational gaming console trend. But which of these stopgap systems is worth spending your paycheck on?

Get in the Dark Zone and blow away the competition with our The Division 2 guide

The Division 2 has three Dark Zones, specialized areas for PvE and PvP combat. Our Dark Zone guide teaches you the ropes, from the recon missions to the leveling system to the dangers and benefits of going Rogue.
Product Review

Acer Predator Triton 500 review

Nvidia’s new RTX 2080 Max-Q is the fastest GPU you’ll find in any laptop, but it usually comes at a steep price. Acer’s Predator Triton 500, starting at $2,500, makes it a little more affordable. But what must you sacrifice in the…

The Division 2

The latest news, guides, tips and tricks, updates, patch notes, and more so you can learn how to level up your game in The Division 2. Related Categories: The Division 2 News | Guides | Features

Get a new Nintendo Switch? You'll need to grab these accessories

The Switch is a capable console right out of the box, but it has its limitations. Thankfully, these Nintendo Switch accessories will allow you to make the most of Nintendo's latest console.

From fatalities to new characters, here's what we know about Mortal Kombat 11

Mortal Kombat 11 releases April 23 for the PlayStation 4, Xbox One, Nintendo Switch, and PC. Here is everything we know about NetherRealm's latest fighting game, including its characters.

Get a head start mastering Apex Legend's newest character Octane with our guide

Apex Legends' newest legend Octane ran so fast in the Titanfall 2 gauntlet that he blew off his legs. Now dropping into Kings Canyon with prosthetics, Octane's ability set is still centered around speed. Here's how to play as Octane.

The Division 2 offers nothing but a funhouse mirror of America

Tom Clancy's The Division 2 improves on the design shortcomings of the original game in several different ways, but its version of Washington D.C. is completely removed from reality.

World of Warcraft's allied races will make you want to start a new character

The Hord and Alliance are seeking new allies in their struggle for control of Azeroth. Rather you pledge your allegiance to the Horde or Alliance, we've got a guide to help you unlock every allied race that's coming in Battle for Azeroth.

How the Google Stadia could lead to a new era of multi-GPU gaming

Google's Stadia could use more than one graphics card to deliver the high-performance visuals it's promised. If that leads to better developer support for multi-GPUs, could that mean gaming with two or more graphics cards could finally be…