Microsoft Reverses Course on Price Increase

Microsoft announced it was doubling its Xbox Live Gold prices on Friday, then reversed its decision later that day.

So last Thursday, I put together the Weekly News Wrap-Up for Saturday’s post thinking that there was not going to be anything likely of note happening on Friday. Boy, was I wrong. Microsoft decided to announce that it was going to double the price of its Xbox Live Gold service, which meant that the $59.99 annual tag was going to become $119.99. Needless to say, there was an uproar over the announcement which then caused Microsoft to rescind the price change altogether. I would have included this in the Saturday report but felt this was something good enough to warrant its own post.

What is interesting to me is why Microsoft felt the need to push for a price increase in the first place. The $60/year tag has been the set price for the service for as long as I can remember. I paid that price for Xbox Live for my Xbox 360 and my Xbox One. And the price difference was not a slight increase. It was a significant one. in April 2020, it was reported that there were around 90 million Xbox Live monthly subscribers. Let’s for example say that 65 million of the Xbox Live subscribers are on the annual $60 plan without any discounts. You’re talking $3.9 billion. Now double that and you’re talking $7.8 billion. Both are large sums of money. The power of multiplication and how to harness it is one of the big reasons that gaming companies are huge today.

Credit: Microsoft
One of the big gaming acquisitions of 2020 was when Microsoft purchased ZeniMax Media for $7.5 billion.

Microsoft made a very notable purchase in ZeniMax Media last September for $7.5 million. ZeniMax is the parent company that houses gaming franchises such as Doom, Fallout, The Elder Scrolls, etc. In my opinion, perhaps that price increase to Xbox Live Gold may have been connected in part to the ZeniMax purchase and some of the other major acquisitions Microsoft has made over the past few years. It would make sense, as it would explain why Microsoft would hike up the price so much. Of course, this is merely the opinion of one on the outside looking in as I do not work within Microsoft.

I do give Microsoft props for being willing to publicly admit that it was a bad decision to move forward with such an aggressive pricing change. And many gamers are not ignorant to the fact that Microsoft is a corporate giant, not a humble independent company. So many consumers perceived the price jump as coming from a place of greed rather than a place of need. It looks even worse when it comes during a time when people are losing their jobs and businesses in this COVID era. Microsoft could have brushed off public opinion and moved forward with the new price model regardless of who they angered. But instead, the company heeded the voices of their consumers and pulled back. That’s very big of Microsoft to do.

Statistics have consistently shown Microsoft struggling to keep pace with Sony and Nintendo.

In the gaming console wars, Microsoft has had it rough the past several years. The Playstation 4 and Nintendo Switch both fared better than the Xbox One in the previous generation. Even now, the Playstation 5 is outselling in the Xbox Series X. Sony and Nintendo hold a considerable advantage in the console market over Microsoft. Their game exclusives are more well-received among consumers and their consoles resonate more with the core gaming audiences. Microsoft has a considerable amount of work to do to close that gap. I hope they do because competition is a good thing.

Speaking of exclusives, Microsoft will need to enhance their current brands and create new ones that make the Xbox a must play system. Forza, Gears of War, Halo, and Ori are all tremendous gaming franchises. But they don’t draw the way the God of War, Ratchet and Clank, Spider-Man, Uncharted, The Last of Us, and Persona 5 do for the PS4. Nintendo’s exclusives are on a whole another level of success. If Microsoft can create exclusive games that make gamers wish they had an Xbox Series X instead of a PS5, then that is when the company stands to turn the tide against its competitors.

What do you all think of the latest Microsoft news? And what will it take for the company to give Nintendo and Sony some better competition?


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