The newest hot complaint among gamers this week isn’t a class being nerfed in Warcraft, nor a game’s launch date sliding. No. It is Microsoft’s pricing increase for their Xbox Live Gold service, slated to take effect November 1, 2010. In the US, prices are going from $50/year to $60/year when purchased annually, and from $8/month to $10/month if purchased monthly. Former prices had been in effect since 2002.
Xbox Live Gold service is required to participate in multiplayer games online with the Xbox and to access premium content such as demos through their online storefront.
Users on Twitter, forums and blog posts expressed their strong feelings.
“Kinda annoyed xbox live is going up in price. No new features and PSN is still basically free. Bad move Xbox” – @redrum662 on Twitter
“WTF! Why is the price of Xbox Live going up? I don’t give a shit about getting ESPN updates!” – @Marina_Dee on Twitter
“So how the crap did I miss the story about Xbox Live Gold going up in price yesterday? Guess I’ll order that PS3 now! #fb” – @thebmatt on Twitter
“Prices didn’t need an increase they were fine. Don’t you guys make enough money?” – xTye on Major Nelson’s blog
“Seriously? You guys better start providing services for Gold users that don’t require us to pay more to other companies to use them (Netflix, ESPN, Last.FM, etc.) or something. What MORE are we getting for paying more?” – Fish Face McGee on Major Nelson’s blog
Fish Face McGee strikes on an interesting question that I feel should help put the price increase into perspective. What more are users getting for their money?
- Higher employee wages – Reports from last year came out that Sony was freezing and even cutting wages for SCEA employees due to poor profitability. Microsoft hasn’t done this, and wages have certainly increased since 2002.
- Higher health care costs - I don’t have the exact numbers, but the cost of providing health care to employees has risen dramatically since 2002. This a very real cost for Microsoft.
- More employees – As the Xbox Live service has grown, so has Microsoft’s employee pool for those working on the service.
- New consoles – We all know that the retail price of a console rarely covers the actual R&D and parts costs at ship date, or often for years down the road. They take a loss on the console with hopes of making up for it later in games and accessories licensing fees, and now with online services. Xbox Live Gold is subsidizing the Xbox 360, and probably R&D going into whatever Microsoft releases next.
- New and better services – It seems about every 18 months we get a new UI for the Xbox, every few months new services such as Facebook, Twitter, Last.fm pop up. While some users claim to not use these services, if you reverted their Xboxes to have an the same Xbox Live experience from 2002, they would be sorely disappointed. They have recently promised to increase their voice quality of Xbox Live, which I see as a major move forward.
- Bigger and better demos – Since 2002 games have gotten bigger and better. The bigger (size) part creates a bigger strain for Microsoft to provide downloads for demos. Certainly technology costs are decreasing, but that doesn’t mean that money isn’t being spent daily to increase their capacity at Microsoft. Just because a new hard drive this year is half the price it was last year does not make it free to buy a new one.
- Inflation – Overall the cost of doing business is increasing. I can only hope for reader that their wages have increased since 2002 by a similar percentage.
- Continued Development – When you bought your Nintendo, Atari 2600 or Commodore 64 years ago you didn’t continuously receive updates from the manufacturer that improved your experience. Modern consoles are dynamic and constantly changing. Bug fixes aren’t free. Luckily today if there is a bug they can generally fix it. Bugs that shipped with the NES didn’t get updated.
While not all of these things funnel directly back to the user’s experience, they do enable Microsoft to create the user experience. Yes, Microsoft is a profitable company. They do have a fiduciary responsibility to their stockholders to create value and increase profits. I don’t see this as a huge cash grab as much as just keeping up with the times. Sony may not have the same model, but they also very well may have different licensing costs to publishers, and their console is still higher priced.
So what are users getting? They are getting one of the best integrated gaming experiences we have ever seen that is constantly growing, expanding and alive feeling. They have multiplayer servers hosted for them, a high quality voice (and video) chat experience, matchmaking, patches, demos, and videos. They have and professional community management team keeping order and punishing cheaters for a better experience. In exchange, Microsoft is asking for 20% more after eight years of service to keep up with the expanding cost of doing business and inflation. Sure, they might have a little profit built in there too- but I think that’s just fine.
Users wishing to get a lower price than normal can buy 12-month Xbox Gold cards from Amazon for as low as $39.99 for a limited time.
