E3 is only a week away, and the big story is the same one it was last year: Microsoft's Xbox One vs. Sony's PS4. Last year, we saw an uncommon rout, with media outlets and forums across the internet declaring the PS4 the unquestionable winner both for its popular stance on used games and a $100 price advantage. A lot has changed since then — most notably, Microsoft has walked back on both of those points — but in many ways, the Xbox One is still fighting to recover from the waves of bad press that accompanied its initial announcement. This year’s E3 is once again the company’s chance to reintroduce the Xbox One to consumers. A tie goes to Sony by default. The pressure is on.
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We’re bound to see games. We’ll see a slew of titles from both Microsoft and Sony, including but not limited to Halo 5 and Uncharted. But as I’ve argued before, today’s video game industry is so focused on cross-platform development that exclusives just don’t carry the same weight they used to. And with both companies throwing their weight behind first-party, it’s difficult to imagine a clear winner emerging on the strength of games alone. Sony won E3 last year on its platform, not games. If we see a winner this year, it will be a similar situation.
Microsoft still has a theoretical ace-in-the-hole which could dramatically turn the console’s fortunes, in the US at least. $399 is better than $499, that’s certain — but the company could turn price from a hindrance into an advantage while successfully pushing the machine as an entertainment center. If Microsoft sold the Xbox One at, say $199, we’d be playing a whole different game.
People have speculated that a cable subsidy has been in Microsoft’s plan since the beginning. Some, like Wedbush Securities analyst Michael Pachter, thought it was meant as a launch feature but delayed for logistical reasons. Basically, it would work the same way as carrier subsidies do for phones — a cable company would slice a major chunk off the sticker price in exchange for a guaranteed multi-year contract. Considering how expensive cable can be, and that the Xbox One could potentially target a cord-cutting demographic, the subsidy could start to look pretty good from a cable company’s perspective. The end result is not a cheaper console in the long run, but smartphone subsidies have more than proven that the effect the subsidy has on sticker shock is a powerful market force.
We don’t know how far along these plans are, though we do assume they’re being worked on. These are big deals, encompassing not just the cable companies and Microsoft but also the retailers that sell the machines. There’s no telling what sea of bureaucratic red tape might be holding a subsidized console back.
A subsidy also won’t be a magic bullet. Microsoft quietly retired a more conservative plan that bundled a $99 Xbox 360 with an Xbox Live Gold subscription. But it could give Microsoft some energy moving into the holidays, and it could give it a shot at the broader market it was was hopelessly pursuing with a $499 console. The big problem with the Xbox One, right now, is that in walking back it’s most controversial policies it’s mostly managed to look more and more like the PS4. A cable subsidy could be a way of reclaiming the console’s unique identity — ideally — without making everyone hate it.