Are you addicted to video games? The days of Donkey Kong are long gone. To get your fix these days, you need to experience serious multiplayer gaming. The problem is you don't have a credit card. Or maybe you don't want to use your credit card to sign up for the service. Bummer.
Lucky for you, Microsoft (NASDAQ:MSFT) is angling to be the king of the video game market, and the online aspect in particular, via its Xbox Live franchise -- an extension of the Xbox console unit. So Gates and Company just removed "one of the biggest barriers to entry," the credit card. To access the network, players no longer have to use a credit card to set up an account. Prepaid Xbox Live cards are now available at retail locations. Sweet.
Frankly, given the ubiquity of credit cards, I have to wonder just how big the credit card barrier really was. While it's probably not a problem for older gamers, I guess I can see lots of younger players not having one, and I can see parents keeping a tight leash on theirs.
The issue may not be so much having a credit card or not but about entering credit card numbers online to access a service. Some people really do seem to have a psychological barrier against using their credit cards online.
Either way, Microsoft doesn't want the credit card issue to prevent people from being a part of Xbox Live. Because networks work best when they're efficient and appealing, it's in Microsoft's best interests to make accessing its Xbox Live franchise as easy as possible. Online gaming subscriptions will continue to grow, and with lots of people playing exclusive content, Microsoft can use its time-honored strategy of locking in customers and capturing network effects. Hopefully, this will lead to solid profitability for the company's Home and Entertainment segment down the line (I touched upon this segment in a previous piece on Microsoft's annual earnings report).
Microsoft is really Foolish to go after online gaming because it's a New Economy Zeitgeist. Sony (NYSE:SNE) is also making a push for it, having removed a friction of its own when the electronics giant redesigned the PlayStation 2 console last year to make it slimmer and sleeker and endowed with built-in connectivity (previously you had to purchase a separate network adapter).
Motley Fool Rule Breakers recommendations ShandaInteractive (NASDAQ:SNDA) and NetEase (NASDAQ:NTES) have been wildly successful with this market in China, as well. The overall thesis for online gaming is a compelling one, especially the ancillary opportunities for selling virtual necessities to players (for an explanation of this whole new commerce device, check out Gerald Kim's commentary).
Xbox Live will add value to Microsoft over time if that network can compete better than the other gaming networks. But as I said, to do so, Microsoft will needs lots of players, which removing the need for a credit card may help provide (the service now sports more than 2 million members), but also great content to lock them in.
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Fool contributor Steven Mallas owns none of the companies mentioned. The Fool has a disclosure policy.
