Microsoft Pins $99 Price Tag on Xbox Bundle

Microsoft's rumored new Xbox bundle could cost a bit more overall than its current subscription offering, but the barrier to entry is lower. Getting an Xbox and Kinect for an initial outlay of $99 could be an inducement to a lot of consumers to try it out. "It is giving [Microsoft] a way into living rooms where you might not see video games," said tech analyst Scott Steinberg. "The system offers much beyond games, as it a way to stream movies and TV shows."

Microsoft (Nasdaq: MSFT) is reportedly planning to release its Xbox 360 bundle beginning next week for US$99. If rumors are to be believed, it could rival a TV infomercial's promise -- "but wait, there's more" -- by including the Kinect motion control sensor with a 4 GB version of the game console. However, as with the infomercials, there is fine print, which in this case details a monthly subscription fee of $15.

That two-year subscription will offer access to the Xbox Live Gold service, along with the possibility of some additional streamed content that could include sports or cable TV offerings.

Is this really a deal? Not exactly.

"What is up with the $15 a month? Currently the same service is available for $5," said Billy Pidgeon, principal analyst for M2 Research. "Unless they are going to add a layer of service, it isn't worth it."

Currently, a hardware package is available for $299, with two years of gold service priced around $120. That adds up to $420, whereas the same package at $99 with the $15 a month subscription raises the price to $459 for two years.

"Anyone who picks up a calculator, does the math, and still goes with it deserves it to pay more," Pidgeon told the E-Commerce Times. "Microsoft proves that no one went broke underestimating the intelligence of most people."

Extra Life for Microsoft

While the normal lifecycle of a video game console had been five years -- a trend dating back more or less to the first Nintendo Entertainment System, which was released in 1985 -- Microsoft's Xbox 360 arrived in the fall of 2005, and is heading into its seventh year.

It is unlikely that a new hardware console will be announced at next month's Electronic Entertainment Expo (E3), and while video game hardware manufacturers typically drop the price as the system gets long in the tooth, Microsoft has thus far avoided that move. In fact, it was two years ago that Microsoft extended the life with the release of the Kinect motion controller.

Could this be a last push to get another extra life -- as is popular in video games -- for the system?

"It is a brilliant move that plays to Microsoft's strength," Scott Steinberg, principal of TechSavvy Global, told TechNewsWorld. "It is a compelling value proposition -- but actually at $99 could be a great impulse buy for many tech consumers."

The Right Move in a New Direction

While the $99 price could be attractive to many -- at least the mathematically challenged -- it could open new avenues for Microsoft.

For one, that price point could encourage owners of competing systems to give the Xbox 360 a chance, said Steinberg, who added, "It may be a way to erode loyalists of other systems."

However, it could have an even wider reach.

"It is giving them a way into living rooms where you might not see video games," emphasized Steinberg. "The system offers much beyond games, as it a way to stream movies and TV shows. It is like the cellular phone market, where once you are locked in, you're pretty much stuck."

For gamers, it could mean being locked into the Microsoft ecosystem. Those paying $15 a month for the service will likely use it -- and once in, it is hard to get out.

"It could set up Microsoft for the next generation of hardware as well," added Steinberg. "If your streaming, gaming and other content is through this Xbox, you might want to continue with the next Xbox."

The Wrong Move

One truism in games -- and apparently for game system makers -- is that there is always a chance to try something over, or do it a bit differently. Past wrong moves or strategies can be undone to some extent, and if this bundle fizzles, it won't spell doom for the console maker.

"Maybe they are just floating a balloon, but if they are, I'm putting a pin in it," said Pidgeon. "Instead, I think they should make a deal that would put the systems in homes like a cable box. I'd rather pay a rental fee for an Xbox than the Scientific Atlanta cable box. There are, of course, regulations and legal ramifications to get past -- but we are moving in that direction, and that will be the real game changer."

As it stands, Microsoft will likely get press and some sales from this bundle.

"It will do OK, but they have to come up with a better deal," said Pidgeon. "But they are really milking it dry."