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Why The X-Box Network Will Fail
angkor wrote to us an article from The Register that looks at what Microsoft is planning for the X-Box Network. The factual information is educating on it's own - and the analysis of why they think it will fail is interesting as well.
They want you to get on the service and pay a fee per month. This way you are subscribed and you don't own the product. You are only "licensed to use it."
The thing is that this is a proven profitable model. Look at Ultima online. It's pulling in a cool US$million every month with no signs of stopping. And Everquest is delivering on similar dreams of avarice.
It seems to me like MSFT is trying to cash in in the same manner with using a proven business model.
This looks to me more like an end-run around the internet itself. It will essentially run in a tunnel through the existing infrastructure, but at some point in the future, there's no reason that they couldn't migrate on to something else, say a wireless network that had its own protocols, address scheme, etc. Bill Gates has been kicking himself in the ass for the last 10 years because he didn't discover the internet soon enough to dominate it, and he's got to be salivating at the idea of an essentially private user space that he controls lock stock and barrel. If he pursued this for all it was worth, he could do it with his other $39 billion... I wonder what kind of return on his investment he would eventually get?
To ensure perfect aim, shoot first and call whatever you hit the target
Setting up the online gaming infrastructure can be expensive. In the PC world there have been only a handful of success stories. Quake relied mostly on volunteers setting up servers. Blizzard is relying on sheer popularity of their boxed game sales to cover the cost. But others like UO, Everquest, and dozens of others charge $10/month to play.
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So Sony is leaving it up to the developers. Which means some games may be free to play online, and others will cost money.
But the way game consoles work, a consumer buys many games and then might wish to play any given game at any time. This means that unless you are entirely committed to one game, you face the possibility of paying $10/month for half a dozen games, which is a signifigant cost. That means you probably only choose one game to play online, sort of a survival of the fittest. Everquest has become this way on the PC, whereas others like Subspace died from lack of subscribers.
On the other hand Microsoft is taking a different tactic. They'll provide the infrastructure for all games. The developer of the game sells their box, and then turns over the server code to MS to maintain. MS in turn charges one price to the consumer(this might be $50/year, maybe it's $10/month, not sure yet) to access all games online.
This means that popular games will drive XBox sales and sales of the online subscription. But less popular games will be able to share these infrastructure costs and as a result not disappear totally because they only have say 200 users instead of 200,000.
I see Microsoft's model as clearly superior from the customer perspective. The only question is how much, if anything, they charge the game producers. If it's little to nothing, MS will clearly be in a better partnership position.
BTW, Sony's model has been criticized by others a bit more knowledgeable and certainly less biased than the Register:
http://news.com.com/2100-1040-855039.h