Over the past few years, the technology leader had been enjoying great success surrounding its Xbox 360 console and the accompanying accessories. But in the last quarter, Microsoft reported that sales dropped 16 percent, prompting the company to turn to a new sales tactic.
To increase interest in the console, Microsoft began selling the four-gigabyte Xbox 360 for just $99 on Monday. In this new bundle, consumers will receive the console and access to the Xbox's Kinect technology via voice-and-movement sensing controllers. Kinect allows gamers to virtually participate in the game, as the Xbox reads a player's movements and translates it into the game. This bundle typically sells for around $300.
So how is Microsoft getting away with the reduced price on the Xbox 360? There is a small catch.
As part of the purchase, consumers must sign up for two years of Xbox Live Gold. With this membership, gamers can connect to the internet and gain access to a plethora of options including high-definition movies and television shows and the ability to play against users across the globe. Xbox Live Gold also gives gamers access to face-to-face chat.
This membership will cost consumers $15 a month, a total of $360 over the course of two years. For gamers planning on buying the service regardless, the savings are clear. But for those who do not need the online features that come with a Xbox Live Gold membership, the deal clearly makes little sense.
The strategy of bundling a service agreement into a purchase price is more commonly seen in the cell phone market. In most cases, consumers buying a new phone must sign at least a one-year contract and many times a two-year service agreement is required. This tactic ensures that a customer cannot leave their plan for new technology that may become available through other providers.
Judging by the number of sales, consumers were still happy to pay full price for an Xbox 360. According to an April press release from Microsoft, the Xbox was the highest selling gaming console in the U.S. in March, marking the 15th straight month Microsoft's gaming system had topped the best-selling list. The Xbox 360 originally hit store shelves in 2005 and according to DigitalTrends.com, Microsoft has sold more than 67 million Xbox 360 consoles.
But Microsoft apparently wasn't happy with just being No. 1. The company wants more and hopes its new pricing system does the trick.
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