Analysts: Next Generation Consoles Could Cost $99 with Subscription
by William D'Angelo, posted on 04 May 2012 / 4,164 Views
The possibility $99 Xbox 360 with a two year subscription plan could be a sign of things to come, says analysts. The biggest problem with new consoles is the price which can cost anywhere from $300 to $600. Console manufactures can sell their next generation console at a mass market price and it can come with a subscription for its online service. The model has shown to work with cell phones, so it can possibly work with video game consoles.
Analysts speaking with IGN had the following to say about the possibility of a cheaper next generation console subsidized with a subscription fee. "The model for next gen is interesting," said Wedbush analyst Michael Pachter. "It allows the hardware manufacturer to disguise the price of the hardware by bundling with an expensive service offering, not unlike the iPhone that retails for $499, but which costs only $199 with a two-year, expensive data plan."
"I think this could be a long-term strategy," said Mike Olsen, an analyst at Piper Jaffray. "It works with phones and tablets so why not game consoles? I definitely wouldn't be surprised to see Microsoft offering an Xbox Live partially subsidized Xbox 720 when it comes out and this could have significant interest from hardcore gamers that are upgrading to the next console and would have likely subscribed to Xbox Live anyway. Consumers like it because they save money on the hardware and Microsoft likes it because it gets people locked in for two years."
"It is an interesting business model and despite all the risks, I would argue that it would likely accelerate console adoptions, especially during the early phases of a hardware life-cycle when costs are well above $400," said Jesse Divnich from EEDAR.
When asked about the $99 Xbox 360 with two year subscription the analysts had the following to say. "I don't think it's that great a deal for consumers," said DFC Intelligence's David Cole. "You would be smarter to put the machine on your credit card. But if you don't have a credit card, it might make sense."
"My read is that this offering is aimed at the lower-income, late adopter, casual consumer, and I think it will convince many of them to buy a 360 instead of one of the other two consoles," said Michael Pachter.
"It is an interesting proposition, one that the cellular markets depend upon in its entirety," said Jesse Divnich. "If this is supported by every major retailer, I would anticipate a rather large uplift in Xbox 360 sales."
"Any perceived price reduction should lift hardware sales, I think even with a subscription pricing scheme," said Colin Sebastian at RW Baird. "Depending on the subscription price and term, this doesn't necessarily imply a price cut, but could broaden the potential Xbox consumer audience to the value end of the market. Given weak console sales, I think price experimentation is warranted. If this untaps a meaningful new consumer demographic then we could see Sony following suit."
David Cole did point out that "The Xbox 360 offer is just a rumor at this point. Console companies are always throwing ideas around to see how the market reacts."
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