A $99 Xbox bundle: Microsoft's key to market domination?

The console will reportedly be bundled with Kinect for a price that seems too good to be true. Perhaps it is.

By TheWeek.com May 7, 2012 5:09PM
Ever since the Magnavox Odyssey sold for $75 in the 1970s — roughly $230 by today's standards — most video game consoles have been punishingly expensive, says JP Mangalindan at CNN. But now, Microsoft (MSFT) will reportedly turn that tradition on its head by selling its Xbox 360 console bundled with its popular Kinect motion sensor controller for an exceptionally low price of $99. (Kinect alone typically retails for $149, and the console itself often costs hundreds more.) The catch? Any customer who buys in would also have to purchase a two-year Xbox Live Gold online subscription fee for $15 a month. Xbox sales were down 48 percent in the third quarter of 2012, and a lower price tag could have consoles flying off the shelves — and put pressure on competitors Nintendo (NTDOY) and Sony (SNEJF). (Microsoft owns and publishes TechBiz, an MSN Money site.)

Is this deal as good as it sounds?

It's a brilliant strategy: The gutted upfront price will convince potential consumers "who may have been put off by the Xbox 360's current costs to splurge," say Mangalindan. The truth is, $99 is such a small "psychological threshold to cross" that it's unfathomable that Microsoft won't see a major sales spike, cementing the system's status as the number one gaming console. Plus, customers are locked into the Xbox experience for two years because of the subscription contract, so Microsoft doesn't have to worry about gamers abandoning them. 

But it's a bad deal for customers: Today, you can buy this bundle for around $300, says Jason Cross at Tech Hive, and the cheapest Xbox Live Gold subscription is $120 for two years. That's $420 total. This rumored new bundle, even with the astoundingly low $99 upfront cost, would actually be more expensive over time, totaling $460 after two years of $15-a-month fees are tallied up. Customers will probably still buy into this new bundle — but it's hardly a bargain.

Regardless, it could transform the living room: This isn't just a big deal for gamers, says Drew Bergmark at Platform Nation. It could also woo movie and TV lovers "looking to combat the traditional markets of cable and satellite providers." The web-connected Xbox gives you online access to services like Netflix (NFLX) and Hulu, and if you pony up for their subscription fees, you'd have access to a trove of movies and TV series through your Xbox for just $50 or so each month — far less than the average $95 it costs for cable in a big city. If HBO Go and YouTube get on board, this "could mean a revolution in the living room."

More from The Week

May 9, 2012 11:33PM
This will be huge for Microsoft, they better be ready for the onslaught of new customers coming their way.
May 8, 2012 3:13PM
Lets see? 15x24 seems to equal $360. New math I guess.
The author was rounding...$99 + $360 = $459 (instead of $460)...
May 8, 2012 5:14PM
In response to the last sentence of the article...
HBO GO and YouTube (as well as a bunch of other content providers) are already on board.
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