Update: Following publication of this story, a Microsoft spokesperson offered the following: We do not comment on rumors or speculation.
In practice, your Xbox One is fundamentally identical to a blu-ray player. You purchase the console, but all the content is an additional fee. A rumored Xbox All Access pass would completely change the paradigm, bringing console ownership closer to cable television.
A report from Windows Central follows a tease from Verge writer Tom Warren hinting at a subscription that would bundle an Xbox One console, the Netflix-style Game Pass, and Xbox Live. Two options are rumored, with an Xbox One S costing consumers $22 per month, and the more powerful Xbox One X coming in at $35 per month. Both contracts would last for 24 months, but this doesn’t sound like a rent-to-own program.
Like many cable and fiber optic providers, like Verizon FiOS, a 24-month contract would likely only lock in the price. The hardware, like your set-top box, would still be owned by Microsoft. That isn’t necessarily a bad thing.
In this model, Microsoft could simply offer the option to swap out your hardware for a new model. Instead of going through the $400 – $500 console refresh pain every seven or so years, you’d simply back up your settings and saves, replace your hardware with a new model, and send the old hardware back. Like a cable television subscription, you’d get your hardware, your “basic package” of programming (Game Pass), and Xbox Live.
But what about the costs? At a rumored $22 per month for the Xbox One S subscription, over the 24-month period, you’d be paying $528 (versus $660 to purchase the hardware and included services). The $35 monthly Xbox One X subscription leaves customers with $840 in monthly bills (versus $860 for the same hardware and services using the purchase model).
Something doesn’t add up. The raw numbers heavily favor the consumer, an anomaly for subscription-based and rent-to-own models when compared with a purchase model. We’re missing some context.
There are fine print details that probably didn’t make their way into Windows Central’s report. The All Access program seems similar to cable television packages, which carry fees as part of contract initiation and renewal. Microsoft will also be saving on retail distribution, since All Access members will get their hardware directly from the source. At the start of the life cycle, most hardware is sold at cost or as a loss leader to get the hardware into living rooms. Over time, manufacturers are able to reduce production costs and better those margins. Without the need for retail, Microsoft is able to improve its margins on All Access without having to share with retailers.
The price difference might also be made up in the same way it is now, with consoles as loss leaders. You’re buying (or, in this case, renting) the console at a loss for the manufacturer. However, software purchases and license fees rapidly close the gap. Remember that Microsoft, Sony, Nintendo, and Valve also take 30 percent off the top for every digital purchase.
Xbox All Access sounds like a great deal based on what we know. It’s just that we likely don’t know everything yet. That’s not to say it won’t be a value positive offering, just that it might not be as clear cut as the rumors imply.
Microsoft tested a similar service back in 2012 with an Xbox 360 subscription model. For $99 up front plus $15 per month, customers could bring home an Xbox 360 (4GB of storage) with a bundled Xbox Live subscription on a rent-to-own basis. The option brought the total cost over two years to $459, compared to $420 for a list-price Xbox 360 with 250GB of storage. At the time, paying the $299 list price for an Xbox 360 meant you simply weren’t looking for one of the many discounts on offer, widening the gap in Microsoft’s favor for going the rent-to-own route.
The other piece of the puzzle we don’t have is liability. What happens if your console breaks down through no fault of your own? What if it’s because of poor care, preventable dust build-up, or ventilation issues that overheat the system? Does the subscription cover device failure? And if so, is it total protection? Will there be a replacement fee for mid-contract hardware replacement?
Microsoft isn’t saying anything yet. The company did not respond to GameDaily’s request for comment prior to publication. If All Access does emerge, the devil is going to be in the details. The monthly fee is likely going to be just one piece of what consumers will pay to participate.
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