Microsoft Corp. (MSFT) is again extending its Xbox subscription
plans to additional retailers, an effort to attract more users by
lowering upfront costs of acquiring the game console ahead of the
holiday shopping season.
The company plans to make the $99 offer--which combines an Xbox
360 videogame console and a Kinect motion sensor with a two-year
service contract--also available through Wal-Mart Stores Inc.
(WMT), Toys "R" Us Inc. and all GameStop Corp. (GME) shops in the
coming weeks.
Microsoft's subscription plan, which was initially offered only
through 17 of its own stores, was expanded in June to Best Buy Co.
(BBY) and a select number of GameStop stores.
The company also said it will offer more devices through the
program. Microsoft initially offered an Xbox 360 with a Kinect
motion sensor and a 4-gigabyte hard drive to store movies, music
and games for $99, with an agreement to pay $14.99 per month for
two years of access to the company's Xbox Live online service. The
expanded program will also offer an Xbox 360 with a 250-gigabyte
hard drive for $99. In addition, Microsoft will, for a limited
time, offer the console with 250-gigabyte hard drive and a Kinect
motion sensor for $149.
Microsoft said the pilot program was well-received by customers,
though it declined to say how many ultimately participated.
"We wanted to see if we would get sustained consumer excitement
and willingness from partners to get this in retail," said Matt
Barlow, general manager for marketing in Microsoft's interactive
entertainment unit. The response has been so positive, he said,
that Microsoft plans to maintain it for the foreseeable future, and
to one day offer it to international customers.
The program will also likely remain through any future product
launches, he noted. "This type of program is pivotal to our
business."
The subscription approach is different from typical pricing for
videogame consoles, under which customers typically purchase the
device for a higher price and would choose whether or not to pay
for additional services. The entry-level Xbox and Kinect package
usually retails for $299, while the company's Xbox Live Gold online
service costs $60 per year.
Under the subscription offers, customers agree to pay $14.99 per
month for two years of access to the Xbox Live network, which
allows gamers to play games with one another, watch streaming
videos and access Netflix Inc.'s (NFLX) service, among others.
Selling the Xbox with a two-year subscription required Microsoft
for the first time to create software to check and approve
customers' credit scores. Initially, salesmen in retail stores were
required to enter customer's private information into a specialized
website, a process that took about 14 minutes. Today, Microsoft
said, many customers will be able to enter the information
themselves from home, and they should be able to finish within
eight minutes.
When purchasing in some stores, such as GameStop, customers will
simply need to print out a voucher to hand to a clerk that
indicates they were approved for the program. Others, such as
Wal-Mart, will offer to ship the Xbox to customers as well.
David Dennis, a company spokesman, added that there advertising
for the deal will appear both in stores as well as online. "It will
be a big push," Mr. Dennis said.
Microsoft's subscription pricing, introduced in May, was
considered part of an effort to sustain momentum in a market that
has weakened. Console sales are expected to fall more than 13% this
year, according to Gartner, with a dramatic increase expected in
2013, when both Microsoft and Sony Corp.'s (SNE, 6758.TO)
next-generation consoles are expected to be unveiled. Nintendo
Co.'s (7974.OK, NTDOY)new "Wii U" console will be launching in the
U.S. in November.
While the subscription offer lowers the immediate cost of buying
the console and controller, customers end up paying slightly more
for the device and subscription over two years than paying the full
upfront price for both at once. The model is a familiar one in the
mobile-phone market, where carriers subsidize the cost of
smartphones in hopes of generating more revenue over time through
service fees.
Write to Ian Sherr at ian.sherr@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires