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Play now, pay later

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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.

 

twitter Screen Play is on Twitter: @screenplayblog

15 comments so far

  • I got my Vita through Vodafone (My cap is 1.5gb – would use about 200mb, if Vodafones coverage wasn’t so damn shocking I would probably reach the cap) and I don’t regret it one bit, yes I am paying $480 (Minus $15 a month for the data plan) for the 3G Vita, yes it is about $60 over the rrp, but I don’t have to outlay the whole amount in one go.

    In regards to home consoles, I don’t know, It is not the same as a portable device. Would I get a home console on a plan? it all depends on the overall costs and how the telco’s or other business partners deliver the package.

    If I can see that there is some value in it, say $0 to $80 over the RRP, I might consider it. Providing “free” (No money upfront) or reduced tech to the public comes with it’s own risk to the businesses doing it, so I am willing to pay a little bit more for the product if that is what it akes. But you won’t see me doing it for Apple or Microsoft products!!!

    Commenter
    MuZ
    Location
    Sydney
    Date and time
    May 10, 2012, 7:42AM
    • "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."

      Sweet, now Xbox users pay for the privilege of watching the most boring sport in the history of everything ever.

      @Topic
      Unless Sony / MS could offer big savings over the course of the contract I don't see this business model taking off. I am a PS3 owner and while I do use the on-demand TV services (I-View and SBS On-Demand) I have no real desire to use the Quickflix service or any of the other similar services. My PS3 is used to play games, blu-rays and as a media centre (stream music and movies from the Mac).

      Commenter
      Dr Charlesworth
      Date and time
      May 10, 2012, 8:13AM
      • @Dr Charlesworth: I'm looking at these "plans" and I think its a very smart way of MS to try and branch to different type of customers actually. Obviously us more 'hardcore' gamers won't really be too keen on the extra long term expenses but for people on a smaller budget it opens up the opportunity to grab the system for a smaller up front cost. It's pretty much like a lay-buy/rental scheme that you slowly pay off, as Jason mentioned kind of like those phone plans and those worked exceedingly well I mean look at how much mobile has taken over now a days.. I doubt it would have the same amount of every day market penetration w/o the lock-in contracts and just relied on up front unit cost payments.

        It's pretty smart marketing decision IMHO. "Gaming" has slowly become much more mainstream to the point where consoles has slowly become an electronic appliance as opposed to an electronic toy.

        Commenter
        RocK_M
        Location
        I want chinese take-away!
        Date and time
        May 10, 2012, 10:09AM
      • [flameshields up]
        Baseball is more interesting than cricket; the sides change between batting and fielding 18 times a game, the games only last about 3 hours rather than all day or 5 days. 20-20 cricket is just cricket trying to grab some of the market that baseball is catering to.
        I've played both games and baseball is much more engaging. Don't get me wrong, I love me some test cricket but it's something you put on while doing other things.
        GOLF is the most boring sport to watch (of the ones that are televised).

        Commenter
        BlindSquirrel
        Location
        Perff
        Date and time
        May 10, 2012, 11:40AM
      • @Knotpossible
        While we will have to agree to disagree in regards to Baseball you are definitely right about golf. That is a mind numbingly boring sport.

        Commenter
        Dr Charlesworth
        Date and time
        May 10, 2012, 3:24PM
      • I dunno... i still say NASCAR is epitomy of redundantly boring. 200 laps of a circle track.Thats 4 left turns over and over and over and over and over...

        At least golf has some minor variety to it..

        Commenter
        RocK_M
        Location
        I want chinese take-away!
        Date and time
        May 11, 2012, 10:31AM
    • I would consider it for a home console, but only if it came with something that i needed (or want) already -

      i.e. Home internet + PS3 = $XX per month...

      A 360 + Xbox live subscription doesn't really do it for me...

      Commenter
      beatdan
      Date and time
      May 10, 2012, 8:58AM
      • It's an interesting business model, I'm kind of surprised that it has taken until now for Microsoft and Sony to test the waters. I guess they needed the reasons to offer a monthly plan, and now with all these other entertainment services as mentioned, I guess they've found a reason.

        Having said that, I use my Xbox for gaming and DVDs, and that's it - none of the other content really appeals (or I can get it more conveniently elsewhere). But given that I know that I'm a long term gamer, I'd probably be happy to sign up for a contract if it was at the same price or cheaper than buying outright... who wouldn't want to save some money/spread costs over a longer timeframe?

        Commenter
        Swordfactor
        Date and time
        May 10, 2012, 9:25AM
        • I do like the idea of paying over a contract, especially if you are going to be on Gold and it costs money.

          I would not probably do it, but who knows, depends on the deals.

          The US deal is not too bad. If you have gold for the 2 years normally.

          Commenter
          gankul
          Date and time
          May 10, 2012, 9:38AM
          • I'm a bit baffled by this. Yes, paying something off over time costs you more in the long run than it would to just pay up front, just like it does with a mobile phone contract or a car loan or a mortgage or a furniture finance plan. I can't understand why anybody would be shocked that Microsoft's plan costs more than a straight-up cash purchase. What would be the incentive for them to offer a plan that not only delays payment to them, but nets them less money in total?

            Honestly, people just confuse the hell out of me sometimes. People paying $1,600 over two years for a $700 mobile phone are whining about a plan-paid Xbox costing $40 more over two years? Seriously?

            Sorry, I seem to be in grumpy old man mode this morning.

            Get off my lawn.

            Commenter
            DexX
            Location
            MCDexX on XBL, PSN, Steam, and iOS GameCentre
            Date and time
            May 10, 2012, 10:13AM

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