Telecommunications companies have been subsidising the cost of mobile phone handsets and locking consumers into long-term contracts ever since they started selling the gizmos to consumers.
Telcos realised the big money was to be made on selling an ongoing service to the customer, not on the one-off purchase of the handset itself.
Console manufacturers and their business partners are now experimenting with similar models, offering consoles for little or no money up-front if they commit to long-term monthly contracts.
Sony's partner Vodafone is offering the Vita handheld on 12 month contracts. Consumers pay nothing upfront, but choose from a variety of monthly data plans starting from $55 a month (a total cost of $660 for the console and 2GB of 3G data allowance per month).
Meanwhile, Microsoft in the US has just begun a pilot program offering the 4GB Xbox 360 console with Kinect for US$99 on a two-year contract that requires the consumer to pay US$14.99 per month for an Xbox Live Gold online subscription.
Microsoft says "this pilot program aligns with our ongoing commitment to test new products and offers to understand how to best serve our customers". I guess that's marketing speak for "we thought it was worth a shot..."
Critics have been quick to do the sums and lambast Microsoft for the pricing of the scheme. The hardware bundle usually retails for US$299.99 in North America, while a Gold Xbox Live subscription is usually $5 per month. The two-year contract means the consumer is paying $40 more than if they paid up-front.
It's not a huge extra impost so the criticism doesn't seem fair, but perhaps Microsoft's new deal is a wasted opportunity to gain market share by seriously tempting budget-conscious late-adopters in the twilight years of the console.
Aggressive pricing would have provided a really interesting test of the subsidy model ahead of the next console generation, which is surely going to have an even bigger emphasis on online network services.
Already the consoles are much more than game delivery boxes, in particular the Xbox 360 and PlayStation 3. The machines now offer a wide variety of entertainment options beyond games, including television, movie and music streaming or downloads, and social networking applications.
For example, Microsoft yesterday launched a Major League Baseball channel in Australia and New Zealand that offers paid subscribers access to over 2400 live or on-demand games in high definition.
The baseball service joins other recent additions like Foxtel on Xbox 360 which includes AFL and NRL games, SBS on Demand, ABC iView, ninemsn video, YouTube and VEVO. A Quickflix service like the one PS3 users can currently use to access television and movie content is also scheduled for later in 2012.
There are now so many ways a console can provide entertainment, and so many ways to part consumers from their money.
With exclusive games now a rarity thanks to the rising cost of games development, online services are also a key differentiator between the platforms.
Today I'm interested to hear whether you would consider locking yourself into a contract when buying your next console.
Would you only consider a long-term contract if it meant a cheaper total price, or if you received other incentives such as access to exclusive content? Or would you just be happy to play now and pay later?
Let me know in the comments section below.
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