Microsoft Turns to Subscription Model for Xbox

Old-guard tech giant Microsoft Corp. (MSFT) confirmed Monday that it is bundling Xbox One and its best services into one monthly subscription service. The decision reflects a larger trend in the industry to rely more on software and services revenue in place of hardware sales, as consumers get more accustomed to paying monthly for "key tech utilities" like productivity software, music and video entertainment. (See also: Microsoft Warms Up to Former Rival Linux.)

Microsoft will now give consumers the options to lease either a Microsoft standard Xbox One S or the more powerful Xbox One X and pay a monthly fee between $21.99 or $34.99 over 24 months, the same way that some carriers sell high-end smartphones. The monthly installments also covers Xbox Live Gold, which is required for playing multiplayer games online and offers free titles and other benefits every month, as well as Xbox Game Pass, which offers players access to more than 100 games available for download. 

Bough on its own, an Xbox One S costs $299, the Xbox One X goes for $500, and the game subscription service Xbox Game Pass sells for $9.99 per month. 

Future of Gaming to Rely on Subscription Model 

The move demonstrates Microsoft's intent to shift away from one-time hardware purchases, instead seeking to lock in players and generate predictable recurring revenue. The bundle also helps simplify the costs of owning an Xbox, incentivizing some users to try it out before the next-generation of game consoles lures potential buyers, as noted by The Verge. The strategy also protects Microsoft from sinking in a future where games run on expensive servers in the cloud and gaming consoles will be completely replaced by subscriptions. According to TechCrunch, Microsoft is already working on launching a low-powered system to stream games from the cloud. 

In order to sign up, customers will need to buy the bundle at a participating Microsoft Store and sign up for a Dell Preferred account, which will work as a line of credit similar to what is required from smartphone leasing programs. (See also: Microsoft Surpasses Alphabet in Market Value.)

Do you have a news tip for Investopedia reporters? Please email us at
Take the Next Step to Invest
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.