15 Comments

Summary:

Microsoft just released its Q2 results, and it’s clear the 360 has gone from being a drag on financials to contributing in a positive way. But one surefire way to expand the market further is by making the 360 available at the $99 price point.

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Microsoft just released its Q2 results, and it’s clear the 360 has gone from being a drag on financials to contributing in a positive way as the company reduces the cost of the console and sees additional demand due to the Kinect.

But since Microsoft has established that the 360 will be around for another 4 to 5 years, it’s clear that its innovation cycle isn’t finished, as it looks to expand its addressable market. While it has talked about doing so by making the 360 more of an entertainment hub, one surefire way to expand the market is by making the 360 available at the $99 price point.

How could Microsoft get there from here? Clearly by continuing on the cost-reduction route, but it also could do something even more radical: Introduce a $99 disc-less Xbox 360.

As I state in my most recent weekly update at GigaOM Pro:

The $99 price point is a psychological barrier that if crossed will push more consumers toward a discretionary purchase. The company sells the low-end 360 S for $199, but it should consider a new “online-only” 360 without the DVD drive that acquires new games and content solely online through Xbox Live.

It seems crazy for a console, where the disk, or physical media, has been a central part of the equation. But Microsoft has long led the console gaming market in online distribution, so why not go radical and just make a low-end device without the disc?

Here’s another reason to consider it: Both Google and Apple TV are bringing their app markets to to the TV screen. How better to compete than by reemphasizing online software distribution with a lower-cost, disc-less box of its own?

What do you think? Should Microsoft consider a disc-less 360?

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  1. David C. Dean Friday, July 22, 2011

    Game publishers would love this. They’ve been trying to kill the secondary market for *years*.

    GameFly, GameStop and anyone that buys used games would hate this. But I have no doubt we’re headed in that direction. The concept of owning anything has been quickly disappearing from all forms of digital media. Books, music, movies, games…

  2. Yes, if they can support the popular games. At $99 I’d buy one in a heartbeat… if I could play the game other people could play.

  3. William Rayner Friday, July 22, 2011

    A disc less Xbox 360 would be as successful as the PSP Go- I don’t think people would be prepared to pay that much money on a digital download.

    1. The Playstation Go was a failure because it didn’t offer any significant cost savings over the PSP, and Sony’s never done online distribution all that well. Remember – this idea would target casual gamers and people who would want a media hub/streamer, not a full-fledged game console user.

  4. This is one of the worst ideas I’ve ever heard.

    1. Obviously you missed my posts about the Nintendo Loungechair Console or the Playstation Microwave.

      1. This Nintendo Loungechair Console you speak of intrigues me. Does it allow me to game from the beach using sla batteries and wifi? ;)

      2. @David – The beach model is powered by banana boat sun lotion.

  5. If they let XBox Live run on Windows 8, which they probably already have/done/did/doing. Then why even buy an online-only 360? Buy a Windows 8 License and run it on whatever hardware you want.

  6. Boris Lemke Friday, July 22, 2011

    Definitely a good idea! But 99$ seems pretty low. I think it would be around the 149$. But this would be more attractive to players with fast Internet access only(which is not available in every country). Beside that, the disc drive is pretty noisy when running(even for the new S console!!).

  7. My only concern here is that the savings involved with removing the optical drive is more than made up for with the inclusion of the onboard storage which would be necessary in order for gamers to keep more than 1 or 2 games on their console at a time. at LEAST a 40gb would be necessary, IMO. This seems more expensive than a disc-less solution.

  8. M$ should just buy OnLive and run the service through Xbox Live. That way they could scale up graphics without requiring a profit killing console refresh by leveraging old hardware hardware.

  9. Internal storage is one of the most expensive components of the system. The $199 XBox 360 is cheap by economizing that expense with a 4GB hard drive. Optica media is cheap, and the component to read it is one of the _cheapest_ parts of the device.

    If you remove the discs, you need more optical storage. The cost-saving premise of this article doesn’t make any sense to anyoen who has a passing familiarity of the console business.

    1. @Mark – I’m aware you’d need more internal storage, but by eliminating the DVD you’d be able to shrink the entire system and you’d essentially guarantee a 100% connect rate for a $50 premium subscription to Xbox Live Premium. And there’s, quite frankly, not that much of a $ difference today between a 4 GB drive and a 20 GB drive – storage is the most commoditized part of the computing business.

      This article’s premise is as much about moving further along the bell curve into a new segment that otherwise wouldn’t buy a console as it is around cost-reduction. By dropping below $100, pushing towards 100% online distribution, Microsoft would likely reach an entire new audience that might be considering an Apple or Google TV.

  10. I think your idea is a good one. I have more classic games saved on my Nintendo Wii’s hard drive and memory cards than I have physical software for the Wii. The only problem like someone else said is the spotty high speed internet service in the US.

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