"Microsoft will subsidise the street price of its X-Box games
platform, due out next year, and is planning to spend $500 million
in total on making the machine a success. The $500 million will
cover subsidies, marketing and support to retailers and software
developers, and will make X-Box Microsoft's biggest launch ever -
according to Microsoft, that is."
"...the user subsidy is interesting. This admission seems to
have been a Ballmer blurt at the analysts' meeting, and while it's
not an unexpected development, it's worth kicking around a tad.
Game console makers generally do subsidise the hardware, just like
the mobile phone companies and the cable companies, in the
expectation they'll make their money out of software. Microsoft has
clearly been moving in this direction (e.g. with the Web Companion,
which we're sure will be subsidised, like its rival from AOL), and
anyway it would have to do it in order to compete with Nintendo,
Sega and Sony on hardware prices."
"So if Microsoft went for a serious subsidy, the street price
would be 'pretty cheap PC minus X,' where X is the subsidy level.
This alone might not be enough to take out Sony, but we have here
another blurt. Games division senior VP Robbie Bach reveals that
it'll link into WebTV and MSN services, and while this is again
logical beyond the point of obvious, it gives Microsoft a
potentially huge advantage."