Subsidizing the Xbox 360

Xbox 360

Yesterday, Tom Warren penned a revelatory post for The Verge in which he uncovers Microsoft’s forthcoming plan to subsidize the cost of the Xbox 360. Foregoing the traditional $299 (and higher) price point, Warren reports that Microsoft is set to announce a $99 Xbox 360 supported by a $15 monthly fee. The console and associative fee afford the end-user a Kinect sensor and two years of Xbox Live Gold.

Regardless of any evident discrepancies between the subsidized pricing model and the current full-price offering, I cannot help but regard this decision as astoundingly shrewd on Microsoft’s part.

Console manufacturers are in the business of selling their respective devices at a loss when first arriving at market. Upon reaching manufacturing parity with cost, manufacturers inevitably gouge the price of their product. In other words, console manufacturers are in a constant game of aggressive marketing toward a variety of demographics — price often being touted as the most important element of this intensive equation.

Despite this incessant price posturing, however, consoles rarely break into the impulse purchase zone until their replacement has arrived in the marketplace. Thus, by subsidizing the existing Xbox 360, Microsoft looks to utterly reshape the gaming landscape.

Boasting extensive media offerings, an enormous library of games, and the Kinect’s wonderful capabilities, Microsoft has a device capable of winning the core battle for the living room. Regardless of the ongoing $15 fee, consumers will purchase the $99 Xbox 360 in droves. In doing so, Microsoft will utterly reframe the Xbox’s target use-case — shifting from video gaming to general entertainment consumption.

Given the choice between a $99 Roku, Apple TV, or Xbox 360, I imagine the vast majority of people would purchase an Xbox 360. Offering a much broader pedigree of entertainment, deep-seated support for streaming media, and many more benefits, the Xbox 360 simply poses far too many positives for the average consumer than does a dedicated Roku or Apple TV.

Perhaps the subsidy model is somewhat misleading but, in my eyes, it is the shape of things to come for the consumer landscape. Whether it’s Adobe’s Creative Cloud subscription, the Dollar Shave Club, the venerable mobile phone contract, or even Netflix’s various offerings, it is clear that the subsidized model of commerce is capable of attracting — and sustaining — customer intrigue.

Concordantly, Microsoft’s recognition of the shifting tide in the marketplace strikes me as a resonant endorsement of a resurgent technology giant, and certainly betrays a latent sentiment of optimism many harbor for the company. Rather than casting an arrogant eye across the technology landscape, Microsoft has assumed the role of a scrappy startup and, in doing so, has adopted an affable demeanor worthy of praise. In recent weeks, Microsoft has endured waves of positive press with regard to Bing, SkyDrive, and, to a lesser extent, Windows Phone — a subsidized Xbox 360 will certainly add to this positivity.

The announcement of the $99 Xbox 360 is expected to occur “next week.”

Xbox Owners Consume More Streaming Media Than Play Online Games

Xbox 360

Tricia Duryee reports for AllThingsD:

Microsoft’s Xbox is no longer just for hardcore gamers, but rather is beginning to attract a more general audience looking to consume movies, TV and music online.

The Redmond, Wash.-based company said today that for the first time, Xbox Live users are now watching more movies and TV and listening to music than gamers are using it to play online games.

Following the Xbox’s recent aesthetic overhaul and user interface redesign, the device has steadily undergone a notable shift toward a media device, rather than a bleeding edge games console. Considering the Xbox’s relative age, such a strategy is an intelligent maneuver, indeed.

Rather than allowing the console to fall into obsolescence — whether perceived or actual — Microsoft has managed to sustain the illusion of maturation and turn the Xbox business into one of the most profitable for the company.

The arrival of HBO Go coupled with the recent statistics regarding the rising prominence of streaming media, the Xbox has become, for many, the pinnacle of their home media setup, and it is only set to improve.

Microsoft's Game of Catch-Up

Microsoft Kinect for Xbox 360

Yesterday evening, I was sitting on my sofa quietly reading. I had my television on in the background, and noticed a recurring ad spot that I had not noticed before. Microsoft has evidently begun to advertise the Xbox 360 for the holidays, and has smartly included the forthcoming Dashboard update as part of the advertising campaign.

What's really striking about the ad campaign is the focus on Kinect compatibility. There's young families talking to their Xbox, asking it to open Netflix, or playing a variety of motion and voice interactive games. It all looks very fluid, casual, and intuitive.

Of course none of this is new. The Kinect has been around for quite some time, and its feature set has been largely unchanged since its introduction. What is striking, however, is the focus upon voice control. If it weren't for the television in the frame, Microsoft's latest ads could almost be mistaken for an iPhone 4S campaign.

When paired with last week's collective uproar following Microsoft's Chief Research and Strategy Officer's claims that Microsoft invented Siri-esque technology over a year ago, Microsoft's flaws become painstakingly obvious.

Amidst rumors of a Siri-controlled Apple television, Microsoft is latching onto its pre-existing technology, and attempting to pre-empt Apple's purportedly serious move into the living room. Microsoft is actively looking to bring more streaming content to the Xbox 360, and with Kinect, that could be a powerful combination, but considering this potential has been there for quite some time, it is odd that they choose to begin promoting it now.

Windows Phone is a good thing for Microsoft, and it does indeed have Tellme voice control technology, but Microsoft has failed to capitalize on this feature, and that alone is truly telling about the company.

M.G. Siegler's response to Microsoft's comments is entitled, "If You Had Invented Siri, You Would've Invented Siri." Siegler rightly highlights Microsoft's propensity for yelling "us too" whenever its competitors release a new product. The question is, if Microsoft did invent Siri-esque technology over a year ago, then why did they not trumpet it? Microsoft attributes Apple's success in the space to good marketing, but that begs the question, where on Earth was Microsoft's marketing of this revolutionary feature? Apple's move toward voice control was inevitable, and yet, Microsoft sat blissfully unaware of the potential in the voice control field, particularly embarrassing considering Microsoft bought Tellme in 2007, and already had the technology implemented.

Voice control has been largely dismissed in recent years. The technology has been finicky, and frustrating to work with. Apple's Siri, however, works in a natural, intuitive manner that upends any preconceived notions of voice implementation. As such, Apple has marketed Siri, and has shown the world what benefits it can bring to your life.

Microsoft has done none of this, and its current scramble to do so is embarrassing.

What really becomes apparent is that even if Microsoft develops a great, market-disrupting product, the software giant lacks the foresight and maneuverability to recognize it. They included Tellme, but it only becomes important once Siri ships? They built the Kinect, but its voice control ability only becomes important once voice control is popularized?

Why couldn't Microsoft be the one to popularize the technology?

Windows Phone 7.5 has been extremely well-received, but you see little of it on television, and you hear few people discussing its benefits. Part of me thinks that Microsoft is unaware of what it has. Prior to Windows Phone 7, their mobile platform was falling apart. Windows Phone 7 (and specifically 7.5) has made the platform enticing to even the most platform-devoted Android/iOS fans. And yet, here Microsoft is, proving its inability to recognize its own benefits. Rather than proudly announcing its features, Microsoft seems to build features on accident, and when the market moves there, later realizes that they've already built something along the right lines. 

Put simply, Microsoft has the means to guide the industry, but seems to lack the forethought to do so.

Following the revelations of the death of the Microsoft Courier, and the apparent fear of market disruption embodied by Windows 8, Windows Phone 7 and the Xbox have become bastions of positivity for Microsoft, in my eyes. The two demonstrate that Microsoft has a latent desire to reinvigorate itself, and to look forward. The inclusion of streaming television in the Xbox 360, and the strong improvements in Windows Phone 7.5 are great things, but, as evidenced by Microsoft's catch-up campaigns, how long will it take for these platforms to succumb to their sluggish parent's failure to recognize talent and potential?