I cover the digital entertainment space for my job at a hedge fund and I've also been a gamer for a very long time before that. My initial thoughts on yesterday's twitter PR debacle are that I'm now very, very interested to see the business model behind the next xbox. If MSFT are doing nothing more than making an always online console and selling it and its games using a conventional distribution model then you might as well give up on getting a PS4 this year ... because everybody and their aunt will want one. I do however have a theory about what MSFT is upto if anybody's interested - this is just some triangulation on my part and not based on any confirmed information I have heard.
What if the next "XBox" is actually a family of streaming devices? There could be a basic TV streaming box, a combination of the basic streaming box and the 360 hardware and a flagship combination of the streaming box and "next generation" hardware at different price brackets. Publishers are media distribution channels just like Netflix, Amazon and Spotify. People could pay an annual subscription (say $80) per big publisher like EA, Ubisoft, Activision and MSFT to access all games released by the publisher in a given year (Smaller publishers could have different packages). Customers would also have to pay a nominal amount (say $5 - $10) per title within its first year of sale (they go f2p after) with the game itself being digital download or physical download via blue ray (just like Netflix lets you borrow discs for a small extra fee). This sort of operation would obviously require a internet connection at all times because customers wouldn't "own" games, just the rights to access them via a xBox. This sort of business model doesn't perclude the $60 ownership model currently in place which could run in parallel for people who don't want to move to a subscription based gaming ecosystem. I've run the numbers and it could work fairly well with enough users. Its also the sort of thing that could take competitors like Sony time to copy because though the tech is pretty easy, the licensing deals with publishers will take time to negotiate.
I've thought about a subscription style model for a while, I think to some degree it would work, but it poses lots of problems right across the board.
If you look at something like PS+, there is an example of a sub system that could be expanded - but the bulk of the product on offer will be older titles so at large they don't affect publisher yearly revenue targets and whatnot. A PS+ subscription going into next generation could offer a resolution to the no native BC in the console, as users could be given the option to a monthly subscription to access PS1/2/3 back catalog- but (outside of Sony first parties) it wouldn't really work for other publishers because they'd be basically throwing money away.
Your solution is to have the user pay a flat fee to individual publishers, like a yearly pass, (say 80$ for larger publishers and 50$ for smaller) to access their new releases for that year, but, I think it's a flawed system, because from a consumer point of view - what guarantee is there that the publisher will release enough products at a good enough standard to warrant the financial investment? What if we see a plethora of bad ports on the next XBOX and so people feel cheated out of their money? And then you're suggesting that the user pay an extra fee for EACH title on top of the publisher fee, which goes against the Netflix style subscription to something altogether different, and sure to be exploited by the publisher - SE tax anyone?
And from the publisher point of view, are they not leaving money on the table by selling X number of titles for $80 when they could be selling one title at $50 each? Sure, we're living in a world where prices do drop considerably and quite soon after launch, but I still think it's a more profitable system than the one you're suggesting.
Continuing to offer retail releases inline with this subscription would only confuse things further, because you need to think about pricing - prices do drop quickly at retail, could it not be that a customer purchases two titles from a publisher in one year, pays $50 for the two combined, and thus has spent less and been provided with enough to satisfy them, and then there's the subscriber who's spent $80 and may only have purchased a couple themselves, and also had to pay the extra fee on top. AND the former has the ability to trade in their games and make some of that money back. There's also the confusion over selling discs at retail for a system that will only play the discs if it is connected to the internet, which most definitely
will cause issues for many uninformed customers.
Then there all of the issues related to licensing in different territories that pose lots of problems internally and would have negative ramifications for customers when they see, for example, that those in the US are offered more/better products for their $80 than someone from a different country. With Netflix, this isn't much an issue because the fee is substantially less, but for $80 (excluding individual game fees) people will notice the difference.
Basically, I think it's a big risk, excluding the elephant in the room that is broadband connectivity across the world, there are loads of different aspects to it that could cause problems. It depends how much MS want to shake things up!