It is commonly known that Microsoft has what is known as a “Windows” tax on PC’s and laptop’s. This “tax” is the increased price of PC’s with the Windows operating system pre-installed as compared to a PC without an operating system. As I was playing some video games one afternoon, I observed a similar scenario in another business model that Microsoft employs; their Xbox 360 gaming console. I’m sure most people are familiar with Xbox & Xbox Live, but it is the Live subscription that is the focus.
Xbox 360 requires a subscription to Xbox Live in order for gamers to be able to play their games online (via the internet). Microsoft’s biggest competitor in the video games industry is Sony and Sony’s Playstation 3 doesn’t require any subscriptions for their online services. This difference between Xbox & Playstation has been the subject of much debate, but we’re not focused on “which is better.” The purpose of this article is to observe the model through a more economic perspective. For this example, I’ll use any recent game that has released on both the Xbox 360 and Playstation 3 (such as Borderlands 2, Assassin’s Creed 3, or Call of Duty). At retail, video games sell for $59.99 before tax and $65.31 after. This is regardless of which system is was purchased for (Xbox or Playstation). On the disk that was purchased comes the game and all of the features marketed such as campaign, multiplayer, co-op, etc. Now, after spending $65.31 on, let’s say, Assassin’s Creed 3 I would like to play some online multiplayer. This would be possible to do on my Playstation since there aren’t any subscriptions or fees. In the case of Xbox 360 I would need to be subscribed to Xbox Live which offers 1 month, 3 months, and annual rates. These rates are $9.99, $24.99, and $59.99 respectively. Besides the fact that subscribing to Xbox Live for a year is the same cost as a game, my games actually turn out costing more (hence the “Microsoft” tax) in order to play them on my Xbox.
Going back to my example, I would need to incur a minimum additional charge of $9.99, on top of my game purchase of $65.31, in order to access the online multiplayer feature of Assassin’s Creed 3 on my Xbox 360; a feature that was already included on the disk within the original purchase. So it has now cost me $75.30 to access all the features of the game on my Xbox (and only for 1 month) whereas the same game on my Playstation still only cost $65.31 and has full access to everything on the disk. Just as the price increases on a PC when Windows is preinstalled, the price of games on an Xbox 360 is increased because of Xbox Live. While some might say “I knew that” or “so what?” I hope I have brought a new perspective to others.
