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I'm paying for what? How Xbox Live Gold must change for a new age of free

Mark Hachman | May 2, 2014
It's time for a change. Whether Microsoft's ready to mess with this cash cow is the big question.

Wes Miller, an analyst for Directions on Microsoft, feels that the Xbox Live program is in transition. "Coming back from Build [Microsoft's developer conference, where Microsoft gave away free Xbox One consoles to developers], and then paying for entertainment applications, especially when you can get them for free from any other platform, is a much, much harder service fee to justify," he said.

Other analysts point out that Xbox Live Gold still justifies its existence, since both Sony and Microsoft charge for multiplayer gaming. On the older Xbox 360, Microsoft also offers "Games for Gold," two top-tier games it gives away to Gold subscribers on a monthly basis, for free. Microsoft has yet to launch the service for the One, however.

Brian Blau, an analyst for Gartner, believes that eventually Microsoft and other console providers will make money on a per-app basis, via microtransactions, rather than through a service fee like Xbox Live Gold's. "I personally feel like they're doing this because they can," he said. "They don't have enough content. I know it sounds harsh, but they don't. And until they do they're extracting money any way they can."

Game consoles are dead; entertainment consoles are the future

Remember that two years ago, in 2012, Microsoft crowed that customers were watching movies and listening to music on the Xbox 360 more than they were playing games.

"The original vision for the Xbox was for it to be the heart of connected digital entertainment and it has been amazing to watch the arc," said Otto Berkes, a senior vice president of consumer technology at HBO who helped to launch the Xbox at Microsoft, said then.

Microsoft was rightfully proud of the Xbox's role in the living room as a gateway to the best digital entertainment. And it tried that same approach with the Xbox One. Granted, the One has not been especially well-received: A confusing (and since streamlined) used-game policy saw to that, as well as issues with its user interface and voice controls. According to NPD, the Sony PlayStation 4 has generally outsold the One since the two consoles launched. Still, customers spend nearly five hours per day using the Xbox One, Microsoft executives have said--and I doubt that's all playing games.

I've owned a Sony PlayStation 3 console for years. My six-year-old can turn it on, navigate to Netflix, log in, and find his favorite shows. He's never played a single game on it. All I have to do to add more content, such as Hulu or Crackle, is download a free app. That's the way it should work.

But one shouldn't think of the Xbox as just a console. Strategically, it's Microsoft's presence in the living room, just as Windows is Microsoft's entree into the den and office, and Windows Phone puts Microsoft into your pocket. If Microsoft wants to push its cloud-connected services strategy forward, it simply can't charge for Skype or Internet Explorer. It makes no sense.


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