I don't know that this is a bad idea for Microsoft: unless sales stall out, the issues that you address might not be too significant. If comes with three games, which is a great low cost idea for Microsoft, since they don't have to pay anything. Old models being on sale for the same price are a threat, but these systems look like they only come with one game.

Physical copies have benefits, but digital is really popular. Instant gratification, no risk of loss, and other fringe benefits can help greatly.

I also wonder if this is a prelude to going fully disc free in the future for Microsoft on the One S. They just have to stop making the old models.

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