A cheaper disc-less Xbox One?
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Started on this a couple of days ago, and I know Microsoft responded already to kill these rumours so they are likely untrue. And a number of sites have gone back and said there wasn't really anywhere to save $100 aside from dropping Kinect. But, I think they are missing the point and my arguments are still valid. So I'll post this anyway.
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All of this is speculation as always. But there have been numerous rumours that Microsoft will release a disc-less Xbox Ones for $100.
Personally, I suspect that this is just people drawing from earlier confirmed talks that Microsoft toyed with the idea of releasing the Xbox One disc-less originally, combined with the market speculation that they need to release a $399 version of the console to compete with Sony.
I have always agreed that at $499 a $100 price difference is pretty large and will impact their overall sales. So, shaving an extra $100 off that price as soon as possible after the "honeymoon phase" is over will be a top priority.
Many people however cite the fact that blu-ray drive doesn't cost anywhere near $100, and so it is madness to assume that they would remove it and drop the price by that much.
I doubt that they'll make such a move. But it isn't actually as stupid as it sounds.
By now Microsoft has some real numbers to work with. They'll know on average, what percentage of Xbox One buyers will also buy accessories (like an extra controller and the charge kits) and what the average profit for them is on those accessories is. They know how many games the average person will buy in the first couple months of ownership. And from this, they can arrive at what their REAL profit per console actually is. And lets not forget Xbox Live Gold memberships.
I argued from day one, that given the supposed profit margins from the companies that tore down the PS4 and Xbox One gave, that both companies very likely lost money if you look at the console alone. By the time the retailers took a cut and the shipping process and all of the other middle man and incidental costs are accounted for those puny margins were unlikely to have survived. Both companies were counting on people to buy +1's to make their profit.
Profit margins on accessories are huge. Both systems have subscriptions services which for one reason or another, the users of both platforms feel are fundamentally mandatory. Each also likely takes a cut of online games sales through their stores.
And this is where a disc-less drive becomes slightly less bonkers. Without a drive, every game is digital. Which means most games will be purchased through their digital stores (a few may be purchased as redeemable codes from retailers if that is an option). Virtually everyone who buys one of these consoles will buy at least one game. Most will buy more than one. Without a disc drive you make Microsoft your games retailer and make them money that might otherwise go to a retailer.
Removing the drive obviously also reduces production costs. Even if not by $100, then by at least some amount that they don't need to recoup by other means. They also cut down the number of defective units and warranty claims. The optical drive is one of very few parts with moving pieces. Removing it means removing one of the parts with the highest probably of failure. So there are also indirect cost savings.
If the size of the console remains the same with the optical drive remove, it both lowers the heat produced and increases the amount of space for airflow in the case. Which should result in better life and fewer failures of even more components.
And then, lastly are the subscription fees and accessories.
So, in all honesty, even if MS was getting Blu-Ray drives for free and eliminating them and reducing the cost by $100. After the average user buys the console, 3 games, a $60 Xbox Live Gold membership, at least one charge pack and a second controller (with or without charge pack) they probably break even if not doing more than that. If the user then renews their gold membership and purchases more games via the store, they are guaranteed back in the black.
I would wager that there are a lot of people who won't but the gold membership. Especially those who would only buy an Xbox if they could get it for $100 cheaper. But even a cheap person is probably going to buy at least one charge pack and a second controller, and according to the article linked above, 5-6 games over the life of the console.
And those aren't the only sources of revenue. Xbox purchases may result in Xbox Music Pass subscriptions, or movie/TV purchases.
The only source of revenue that is directly related to removing the optical drive is the store purchases. So, all that really matters is whether or not a $100 will draw in enough extra people to make it worth selling $100 cheaper when some may have bought the console at full price. Since some stores, like my local one, are still sold out of physical units, I highly doubt they are anywhere near actually putting plans into place for a move like this.
But, it isn't at all as crazy as many people think. If you focus on hardware costs you miss the big picture.
Started on this a couple of days ago, and I know Microsoft responded already to kill these rumours so they are likely untrue. And a number of sites have gone back and said there wasn't really anywhere to save $100 aside from dropping Kinect. But, I think they are missing the point and my arguments are still valid. So I'll post this anyway.
[/edit]
All of this is speculation as always. But there have been numerous rumours that Microsoft will release a disc-less Xbox Ones for $100.
Personally, I suspect that this is just people drawing from earlier confirmed talks that Microsoft toyed with the idea of releasing the Xbox One disc-less originally, combined with the market speculation that they need to release a $399 version of the console to compete with Sony.
I have always agreed that at $499 a $100 price difference is pretty large and will impact their overall sales. So, shaving an extra $100 off that price as soon as possible after the "honeymoon phase" is over will be a top priority.
Many people however cite the fact that blu-ray drive doesn't cost anywhere near $100, and so it is madness to assume that they would remove it and drop the price by that much.
I doubt that they'll make such a move. But it isn't actually as stupid as it sounds.
By now Microsoft has some real numbers to work with. They'll know on average, what percentage of Xbox One buyers will also buy accessories (like an extra controller and the charge kits) and what the average profit for them is on those accessories is. They know how many games the average person will buy in the first couple months of ownership. And from this, they can arrive at what their REAL profit per console actually is. And lets not forget Xbox Live Gold memberships.
I argued from day one, that given the supposed profit margins from the companies that tore down the PS4 and Xbox One gave, that both companies very likely lost money if you look at the console alone. By the time the retailers took a cut and the shipping process and all of the other middle man and incidental costs are accounted for those puny margins were unlikely to have survived. Both companies were counting on people to buy +1's to make their profit.
Profit margins on accessories are huge. Both systems have subscriptions services which for one reason or another, the users of both platforms feel are fundamentally mandatory. Each also likely takes a cut of online games sales through their stores.
And this is where a disc-less drive becomes slightly less bonkers. Without a drive, every game is digital. Which means most games will be purchased through their digital stores (a few may be purchased as redeemable codes from retailers if that is an option). Virtually everyone who buys one of these consoles will buy at least one game. Most will buy more than one. Without a disc drive you make Microsoft your games retailer and make them money that might otherwise go to a retailer.
Removing the drive obviously also reduces production costs. Even if not by $100, then by at least some amount that they don't need to recoup by other means. They also cut down the number of defective units and warranty claims. The optical drive is one of very few parts with moving pieces. Removing it means removing one of the parts with the highest probably of failure. So there are also indirect cost savings.
If the size of the console remains the same with the optical drive remove, it both lowers the heat produced and increases the amount of space for airflow in the case. Which should result in better life and fewer failures of even more components.
And then, lastly are the subscription fees and accessories.
So, in all honesty, even if MS was getting Blu-Ray drives for free and eliminating them and reducing the cost by $100. After the average user buys the console, 3 games, a $60 Xbox Live Gold membership, at least one charge pack and a second controller (with or without charge pack) they probably break even if not doing more than that. If the user then renews their gold membership and purchases more games via the store, they are guaranteed back in the black.
I would wager that there are a lot of people who won't but the gold membership. Especially those who would only buy an Xbox if they could get it for $100 cheaper. But even a cheap person is probably going to buy at least one charge pack and a second controller, and according to the article linked above, 5-6 games over the life of the console.
And those aren't the only sources of revenue. Xbox purchases may result in Xbox Music Pass subscriptions, or movie/TV purchases.
The only source of revenue that is directly related to removing the optical drive is the store purchases. So, all that really matters is whether or not a $100 will draw in enough extra people to make it worth selling $100 cheaper when some may have bought the console at full price. Since some stores, like my local one, are still sold out of physical units, I highly doubt they are anywhere near actually putting plans into place for a move like this.
But, it isn't at all as crazy as many people think. If you focus on hardware costs you miss the big picture.
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