In this generation of video game consoles, Microsoft’s (NASDAQ:MSFT) Xbox is being soundly trounced by Sony’s (NYSE:SNE) PlayStation 4, despite the more powerful Xbox One X.
Subscription services like Xbox Live have been a success for MSFT, and that model is about to expand in a big way. Microsoft is reportedly preparing to launch Xbox All Access, a monthly subscription that includes Xbox Live, Xbox Game Pass and an Xbox game console.
This could be the key to boosting Xbox console sales, closing the gap with the PS4 and boosting MSFT gaming revenue — now a $10-billion-a-year business that’s become a real factor in helping to drive Microsoft stock.
Xbox All Access
Windows Central reports that Microsoft’s new subscription service, called Xbox All Access, combines two of the company’s popular monthly services — Xbox Live and Xbox Game Pass — with new Xbox One console.
The subscription is for a two-year term, after which the consumer owns the Xbox console. According to Windows Central’s sources, the pricing ranges from $22 monthly with an Xbox One S to $35 per month for an Xbox One X.
In comparison, the cost of Xbox Live is $59.99 per year and Xbox Game Pass goes for $9.99 monthly. Retail pricing of the Xbox One S at the Microsoft Store is $229, while the Xbox One X currently starts at $499.
Xbox All Access is expected to be available only in the U.S. at launch, and could be coming in a matter of weeks — Engadget has it pegged for an end of August announcement.
Why Xbox All Access Has Big Upside for Microsoft Stock
Microsoft is increasingly looking to gaming revenue to help power MSFT stock growth. One key factor holding back the gaming division is poor Xbox One sales.
In this generation of game consoles, Sony’s PS4 has more than doubled the number of Xbox One consoles sold. Besides lower hardware revenue, that has a ripple effect.
Fewer Xbox consoles in use also mean fewer exclusive game titles (developers favor the PS4 with its much-larger installed player base) and fewer players paying for Microsoft’s online services.
Microsoft tried to turn the tables on Sony by launching a major mid-cycle upgrade in the form of the powerful Xbox One X, but that has failed to reverse the trend. It doesn’t help that at $599 at launch (now $499), the Xbox One X was simply too expensive for many gamers.
Xbox All Access could be a game changer.
Bundling the console into a monthly subscription removes the barrier of an initial purchase, making the hardware seem more affordable. That’s the model wireless providers have been following for years, with monthly plans helping to sell an awful lot of smartphones that would be prohibitive to buy upfront.
This has the potential to light a fire under Xbox sales, especially if the service launches prior to the holiday shopping season as expected. Even PS4 owners might be tempted to add an Xbox to their setup if a low monthly fee netted them the console, online play and a library of games.
As Windows Central points out, the prospect of more Xbox owners, plus Xbox Live and Xbox Game Pass subscriptions (which are currently optional for players), would draw the attention of game developers. More games makes the Xbox even more attractive and could help boost sales in the final few years of this generation of consoles.
Winning more Xbox One converts and more game developers as this cycle winds down will help Microsoft kick off its next-generation Xbox console when the time comes.
Gaming is now a $10 billion business for MSFT. But to become the $100 billion business the company is envisioning, Microsoft needs to push more consoles and fully leverage its online advantages. Xbox All Pass is a logical move to accomplish those goals.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
