Microsoft (NASDAQ:MSFT) can't seem to make up its mind about this holiday season's Xbox One release. Should Redmond focus on making the console a big hit with sales to overshadow the contemporary Sony (NYSE:SNE) PlayStation 4? Or should the thing be designed for maximum profit per unit, high-volume sales be damned?
The tactical errors that would seem to hold the Xbox back include a $100 higher price than the PS4 and some draconian limits on what customers will be able to do with their purchased games. On the other hand, Microsoft quickly backed down from some of its least consumer-friendly content controls and the company is taking a surprising supply chain lead over Sony as well. So maybe all is not lost after all.
And that's where Microsoft throws us for another hairpin loop.
The Xbox One is designed to be the media hub of your living room. Beyond just playing games, the console offers easy and high-quality access to media services like Netflix and Hulu videos, Skype video calls, an NFL video package, and even the OneGuide portal for viewing live and recorded TV content on the 'box. The system also records the last five minutes of your gaming on a rolling basis so you can relive or even share your favorite moments later.
But all of these premium features require an Xbox Live Gold subscription. That's another $5 a month or $60 a year on top of the monthly fees for each individual service, as appropriate.
By contrast, the PS4 will match most of these features for free. There's still a "plus" subscription available for certain features like online multiplayer gaming on the PS4, but you don't have to send Sony a check just to enjoy Netflix on your console -- or to share your recorded gameplay videos.
Sure, many Xbox 360 users have already been conditioned to accept the Live Gold subscription in order to use the console as a media center. But it's not a popular requirement. Anecdotally, I've seen friends of mine dump their Gold accounts and buy a separate Roku or an Apple TV box to handle their Netflix and Hulu duties -- cutting Microsoft out of the loop.
That's enough to convince me that Microsoft will indeed lose some sales to this heavy-handed monetizing move. Why would Joe Consumer pay a premium for the Xbox itself and then another $60 a year just to do what Sony offers at a big discount?
If Microsoft really wants its new console to become the beating heart of America's living rooms, the company would be wise to knock down these silly roadblocks. The Xbox line is one of Microsoft's last success stories in an age of Windows 8 backlash, toothless smartphone sales, and plummeting web browser market share.
Why Microsoft puts some of the Xbox One's core features behind a paywall is beyond me. If you can explain this move, feel free to do so in the comments box below.
The Motley Fool owns shares of Netflix, Microsoft, and Apple. Motley Fool newsletter services have recommended buying shares of Netflix and Apple.They've recommended creating a bear put ladder position in Netflix, creating a bull call spread position in Apple, and creating a bull call spread position in Microsoft. The Motley Fool has a disclosure policy.
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