Xbox One Dead in the Water? Or, does Microsoft Still Have an Ace in the Hole

The PS4 appears to be the favored platform across the board right now. Microsoft reacted to a huge backlash from some of their most loyal demographics and critics alike, but promises aren’t enough to regain the trust of the gaming generation. With the Xbox One more than $100 more expensive, you might think that the writing is already on the wall for a flop of a release this fall. Microsoft has more than a few cards left to play, but they’ve already hinted at their most convincing path to the living rooms across the globe.

When Microsoft announced the Xbox One, nearly the entire presentation was focused on non-gaming features. What they didn’t announce is their ace. I predict that in the coming months Microsoft will announce deals with all major cable and satellite TV providers that effectively replace the existing cable box in your home with a Xbox One. Much in the same way that smartphones took off thanks to carrier subsidies hiding the true prices of the expensive new technology, the true cost of the Xbox One upgrade will be hidden in the already expensive monthly cable bill. Suddenly what seemed like a $100 advantage toward the PS4 will look like a $400 disadvantage when consumers think they’re getting a new Xbox for just a few more dollars a month.

Unlike the introduction of the highly desired smartphone, where cell phone service providers paid the full price for the devices up front, the cable companies won’t be as excited to pitch this upgrade from their own custom hardware to a third party device. They’ll sign the deals because Microsoft will pay a per Xbox One unit kickback to the cable providers. This will be a win-win situation for the cable providers because they’ll be able to bank a huge check from Microsoft and raise per customer revenue for years to come, thanks to the ecosystem lock-in effect.

Of course, Microsoft could be bluffing and not have any existing secret negotiations with the cable providers to carry out their plans to dominate the living room entertainment experience. The one thing we all should have learned about Microsoft by now is that they do not just fold and go home without a long, dragged out battle to the death. While I doubt Sony Entertainment become the next Sega, they can’t get lazy and assume that Microsoft is down and out for the round. The future of console video game systems remains to be seen, but we’ve got front row seats this time. Stay tuned.