First off I’d like to introduce myself to the readers. My name is Marc Price, and I’m a new contributor here at VGRevolution. I’m going to be writing from time to time on some big-picture videogame topics, as well as hopefully providing some reviews in the future.
A few days ago, a rumor sprang up that there was going to be a subsidized $99 Xbox 360, offered by Microsoft, which would come with a subscription that gives users some additional content as well as long-term savings. You can read the particulars at the linked entry, but the specifics of this particular plan are not really that important to me.
What is important, however, is what this means for the industry as a whole going forward.
The next generation of consoles is quickly barreling down upon us. Most likely, there will be new consoles in homes across the country next year (not to mention the Wii U releasing later this year), and it’s also becoming evident that the games industry is at a bit of a crossroads. This generation, being one of the biggest leaps forward in technology both in terms of the games themselves and the infrastructure surrounding them, has been a bit of a transitional time for developers, publishers, platform holders, and users. We have seen the growing pains with things such as Day 1 DLC, online passes, content codes, and others as companies and users try to figure out where they stand in the codependent relationship they have formed.
The thing about having gaming as a hobby is that it’s expensive. Like really, really, expensive. A person who buys one new game per month and subscribes to Xbox Live Gold will spend roughly $800 yearly on their hobby, which equates to about 80 movie tickets (at least it does here in Florida). In trying economic times, people are finding expensive hobbies like gaming harder and harder to justify. Also, as the technology boom hit gaming, costs of development accelerated at a rate which is unsustainable for the future. There are many games now which have budgets approaching the six-figure range, leaving publishers to figure out how they are going to make back their development and advertising costs $60 at a time. It’s not a good situation for anybody, and at some point there has to be a release for all of that built up pressure.
The subsidized Xbox 360 is the first step towards finding a release valve.
Traditionally, hardware sells at a loss, especially in the first few years after release. The components plus R&D costs make the first few years of a system launch all about breaking even as opposed to making money. Money comes from accessories, which are usually sold at a much higher margin for the console developer (hence the ridiculous costs of Sony memory cards, Microsoft hard drives, etc). Additionally, there is the always-present “not enough games for hardware/not enough hardware for games” paradox, where the consumers cannot justify purchasing hardware without having enough good games on it and publishers and developers can’t justify putting money into projects that have low ceilings on sales. Therefore, it’s sometimes hard for new systems to really get rolling as the software pipeline sputters to a crawl (see the 3Ds last year and Vita this year).
A subsidized, system, however, offers a much lower barrier to entry for gamers. If one could get a new Xbox or Playstation for $200 with a 2-year contract (which would include online service), it’s a much more attractive and realistic proposition for getting systems sold than the current “just try to not go over $500″ approach that we seem to have now. A subsidized system has benefits over just a lower up-front cost, too. As the games industry transitions into digital distribution, the support and infrastructure for purchases is going to have to get better and better. Imagine having only digital distribution available to purchase the newest Call of Duty? It would be a mess as people pound the servers in order to download a 6 to 7 gb game. Folding maintenance costs into the monthly service fee would allow both Microsoft and Sony to ensure that people who use their system would be connected to their paid online services, as opposed to people who don’t pay at all for XBL Silver or for the basic PSN services. Sony and Microsoft want to monetize those people. This is a way to do it that actually benefits both sides.
Additionally, by having a subscription which I would assume would need to be activated online Microsoft and Sony have a chance to better control their systems. By doing this they can limit things like piracy, used games, online cheating, homebrew, etc, which, while sometimes benefiting the user, have the unfortunate side-effect of severely damaging the industry and stifling creativity amongst developers and publishers.
I’ll be honest. I want a subsidized system with a subscription plan. I’m already paying $60/year for Xbox Live Gold (and $50/year for Playstation Plus), so lowering my barrier to entry and increasing my back-end costs isn’t really that important. It’s certainly worked out for the cell-phone industry (no way there are that many iPhones sold at upwards of $700 each), so I don’t see why it would hurt to try it. Perhaps it fails spectacularly. Perhaps console makers get greedy (inconceivable!) and decide to make the monthly cost untenable. If a subsidized system requires internet, how do people without access to broadband get access to the systems? These are things that have to be figured out. All I know is that I would feel much better about the future of gaming if we found ways to not force gamers to get second jobs in order to buy systems (and certainly not to brag about it!) and to expand the playerbase for developers to reach more people with wonderful and creative games.
What do you all think? Please leave some feedback in the comments.