Why Microsoft Should Stop Charging for Xbox Live

Should Sony charge for its currently gratis PlayStation Network? That's the question some are apparently asking in a kind of fawning, anticipatory way, assuming for not entirely clear and maybe even slightly confused reasons that it would bolster Sony's revenue models. Why? I guess because a company with a financial portfolio as complex as Sony's needs speculative general financial advice from the crowd.

The answer is no, of course, Sony doesn't need to start charging for its PSN, or, so long as we make that analogous to simply "communicating and gaming with others online," doesn't as in ever. But since we're tossing around provocative ideas, how about a consumer-friendly alternative? As in: Microsoft needs to stop charging $50 a year for its Xbox Live online matchmaking service.

This summer, Microsoft rendered its Games For Windows Live online matchmaking service free. Up to this point, it looked like Xbox Live does today. $50 for "Gold" and unfettered online play, nothing at all for "Silver" to more or less stand at the window looking in.

Microsoft wised up to its PC audience by dropping the annual fee, even going so far as to proactively refund subscription fees for then "Gold" subscribers. While it sounds bold and noble, the decision to make GFW Live a freebie was inevitable. Computer gamers and developers alike balked at Microsoft's attempt to throw precedent out the window and slap a tax on traditionally free functionality without a single compelling value-add (I'm looking at you, TrueSkill).

Of course the next question was as inevitable: "What about Xbox Live?"

The answer this summer from Microsoft Senior Global Director of Games For Windows Kevin Ungangst was:

The GFW Live announcement has no bearing at all on what we're doing with Xbox Live, and I think if you look at the Xbox-related announcements we just made at E3, we're going to continue to deliver even more value to Xbox Live gold subscribers. Frankly, Xbox Live members are going to get more people to play with as a result of the GFW Live announcement, and I think that community will get exponentially larger as a result of what we're doing on Windows. They're different services designed for difference audiences that happens to be connected and share a Gamertag.

Which, with respect to Kevin, who's basically carrying Microsoft's water here, was a classic, bullet-point dodge. There simply isn't any extra value in an Xbox Live Gold membership (getting "more people to play with as a result of the GFW Live announcement" certainly isn't something one side should have to pay for). And while the Windows and Xbox architectures are wildly unique, the for-money services we're talking about aren't. The message Microsoft is sending by charging $50 for one and nothing for the other is "Hey PC gamers, you're special, you get a break." To console gamers? "You've been willing to do this up until now, so business as usual."

If there's a point in Microsoft's favor, it's that last one. If people are willing to pay, why change? For lots of reasons. Smart shoppers weigh all the pros and cons before diving into a purchase. The Xbox 360 is always its base price plus $50 times however many subscriber years ($50 seems like chump change, but four or five years starts to add up). How many more systems would Microsoft sell by dropping the online fee? Beats me, but it's certainly not going to stunt platform adoption.

Then there's the micro-transaction argument. Think picture packs and themes, and if we're talking stuff like music games, additional songs or band packs. Think Netflix. Think old games you can download for a couple bucks a pop. Think new games available via digital distribution. Think whatever other partitioned off applications the company cares to innovate into a salable product. Microsoft takes its cut from all of that. Charge for the content, not the vehicle the content's riding in.

And when in doubt, at least turn half an eye to precedent. You can tax something like the internet and risk checking or stifling its growth, or you can find smarter, more creative ways to gather revenue that benefit from its expansion. Computer gamers have enjoyed the ability to interact with their peers without paying above their ISP subscription fees for decades. It's a feature console gamers had essentially been enjoying for free until Microsoft decided to make it fee-based. It's a feature the competition continues to offer with increasing bells and whistles. And remember, Xbox Live isn't World of Warcraft. It's not an MMO or a game you play. The part you're paying for is essentially messaging and matchmaking related. It's "value-add" is entirely mimetic, a point that others who've defended its pricing structure seem to be missing entirely (though in the latter case, I'm not entirely opposed to the idea of re-structuring pricing, if it means making online gaming and messaging free).

Will any of that come to pass? Does Microsoft even care?

Of course they do, though I'm sure they'd care a whole lot more if they weren't doing so relatively well with the service as-is. When you're in pole position, "fairness" sounds like a euphemism for "handout." Strictly business hat on, I can't exactly argue with that.

In the end, it's not a question of what ought to be, but what the market will bear. For now, that's an annual premium for services computer gamers -- with their vastly greater library of games and communication options -- enjoy entirely free.

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