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He speaks, and we freak
(06-15-2013, 07:51 PM)
michaelpachter's Avatar
I've been saying this for two years, so I am definitely hopeful that I'm right about this, but I don't actually KNOW anything about whether this is accurate.

In my view, the "always connected" requirement was put in to ensure that when games are downloaded to the Xbox One hard drive, they aren't copied more than once. Microsoft doesn't appear focused on blocking used games--in spite of all the angst, the impact on new game sales is literally 1 - 2% (net of the benefit to new game sales from used game credits providing currency)--and I think that their intention was to provide "instant" access to game play, which requires that the user not have to swap out discs. Thus, writing to the hard drive followed by a daily Internet connection was deemed by Microsoft to be the answer.

However, Microsoft went a bit further, and decided that the Internet connection would be a broadband connection. They further decided that including Kinect with every Xbox One was in the gamer's best interests, and thought that the value proposition of broadband, a camera and a microphone array was so compelling that gamers would be willing to pay an extra $100 (or €100 or £80) for it. That appears not to be the case, based upon early commentary following E3.

I think the solution is simple: IF I'm right that the Xbox One requires broadband, then I think that broadband Internet service providers have an incentive to subsidize the Xbox One. My broadband provider, Verizon FiOS, charges me $60 per month for a 15 Mbps connection, and I have the option of going much faster for tiers that rise to as high as $150/month. 15 Mbps has been plenty fast for me to access streaming video (probably the most data intensive thing I do on the Internet), but I haven't ever tried to do anything more complex, and am unsure of whether I need a faster connection to use an Xbox One. In my view, broadband ISPs will subsidize the Xbox One in the same way that mobile carriers subsidize smart phone purchases; in the U.S., people pay $200 for an iPhone 5 (regularly $650) and $100 for an iPhone 4S (regularly $500) in exchange for a two-year data service contract that typically costs around $80 per month. I think we'll see a similar offer from broadband ISPs for a $199 Xbox One in exchange for a $60 or higher monthly broadband commitment for two years.

The cable TV offering is more complex (generally not available outside the U.S. at launch), but it is possible that it will work in a similar fashion. At launch, I think we could see the Xbox One serve as the IPTV tuner (in the U.S.), allowing users to tune their cable TV without the need for a cable box. This would likely "save" them $5 per month (per box), and Microsoft might be able to raise the price of Xbox Live for these users. We might see a subsidy either from Microsoft or from a cable TV provider, similar to the one described above.

I know Paul Thurrott has speculated about a higher XBL Gold price in exchange for a subsidy. I think that the subsidized Xbox 360 from a couple of years ago was merely an experiment to set up the ISP or cable TV subsidies described above, and Microsoft was merely trying to figure out how they would work. Again, I wrote about this two years ago, know nothing specific about Microsoft's plans, but I think this makes too much sense to be far from reality.

I'm interested in your thoughts. Posts that say "no subsidy confirmed" or "Pachter's always wrong" are a waste of everybody's time, and I would appreciate my fellow GAFfers calling these members out if they waste your time.

To all the fathers out there, have a great day tomorrow.