MS introducing subsidized 360+Kinect bundle for $99 + 2yr, $15/month XBLG contract

[RancidLunchmeat]

This deal isn't going to help with market penetration even if every XBox with this deal is Live locked. But as the reach is so small, the actaul fiscal benefits to MS are likely to be also small. So I can only see this as a testing of the waters. It's not going to do MS's bottom line many favours. Maybe a better way to get people locked into Live is to have a $99 console with 6 months Live subsscription including free content (like PSN+) which disappears when the subscription runs out?

There are clearly an almost infinite number of alternatives that MS could have offered instead of this particular plan. But this one 1) reduces the cost of entry, 2) increases subscribers to Live! and 3) achieves both without a price drop.

Surely they could simply drop the price of the Xbox to $99, increase their sales exponentially and realize that x% of those purchases will become Live subscribers even without any further prodding on MS's part.

But that would accomplish only 1 and 2, not 3.

And, of course, to clarify the original statement - the motivation behind MS putting an Xbox in every living room is to sell additional services. Those 360s that aren't hooked up to Live aren't worth nearly as much to MS.

 

[ERP]

I heard a recent rumor about MS trying to partner with cable companies, to provide Xbox cable boxes. It was unclear if this was current or next-gen. This seems inline with that strategy.

I do believe that MS thinks the real longterm value is Live subscribers, and this is clearly a way to entice people in. I bet the vast majority of cable subscribers who wouldn't pay $300 or even $200 for an Xbox are paying a LOT more for cable than $15 a month.

Subscription based payment plans are almost always going to be more expensive than just outright purchase, it's fundamentally a loan, and you have to take into account people who will default.

 

[dobwal]

My main issue with this 360 payment plan is not simply the way its structured. But its lack of value. Whats the point of a consumer partaking in such a subscription if it requires a level of credit worthiness that would allow a consumer to use their credit card to acquire the same value cheaper.

The maintenance cost of Live is no where near $60 dollars per user. In fact, any 360 related product sold through a MS store means that MS not only acts as the manufacturer and/or service provider but also a retailer. So, MS is able to take advantage of profit margins that it doesn't normally have when using other retailers to drive sales. Why not use that advantage to add value to the subscription package to make it more attractive and valuable to the consumer. How about 3 years of Live with Kinect/4GB or a 250GB for $99 and $15 a month for 24 months? What about using added value to drive consumers to MS stores like giving subscribers discount opportunities on items sold in said stores.

All MS subscription plan offers is an alternative method of obtaining a 360 that drives subscribers to Live and allows MS to co-opt finance fees normally meant for finance providers. While not offering any real value to the subscriber other than what other methods of finance can provide more cheaply and with more flexibility.

 

[joker454]

My main issue with this 360 payment plan is not simply the way its structured. But its lack of value.

Value is all subjective. If someone is dying to get a 360+Kinect but simply can't afford to, then this $99 offer might be viewed as amazing value to him. There's no point trying to explain value as we'll all view it differently.

 

[dobwal]

Value is all subjective. If someone is dying to get a 360+Kinect but simply can't afford to, then this $99 offer might be viewed as amazing value to him. There's no point trying to explain value as we'll all view it differently.

Value is this case is not subjective, its just the total MSRP of a Kinect/4GB 360 bundle along with 2 years of Live.

Amazing how? The plan doesn't generate enough profit per subscriber to offer this to someone who can't use a credit card to finance the same purchase under similar terms. You have to pass a credit check to make use of this offer. I doubt that MS doesn't require you to submit a credit card to make use of such plan in an effort to make it easy for them to procure monthly payments and the termination fee if you decide not to continue payment.

 

[joker454]

Value is this case is not subjective, its just the total MSRP of a Kinect/4GB 360 bundle along with 2 years of Live.

Amazing how? The plan doesn't generate enough profit per subscriber to offer this to someone who can't use a credit card to finance the same purchase under similar terms. You have to pass a credit check to make use of this offer. I doubt that MS doesn't require you to submit a credit card to make use of such plan in an effort to make it easy for them to procure monthly payments and the termination fee if you decide not to continue payment.

It's amazing because some people will now be able to buy one whereas before it was too much cash outlay at once. Not willing to spend $400 on the spot does not mean someone has bad credit, one has nothing to do with the other. People have a monthly budget, and $400 may exceed that in many cases. This allows it to fit in peoples monthly budgets. Likewise some people don't have credit cards, or simply don't want to use them because 30% interest is too much for them. If you paid off a 360+Kinect purchase on a credit card at the same rate as this financing deal, then you'd be spending much more via the credit card. Not sure why people keep bringing up credit cards, they are terrible examples unless you pay the balance off in full when it's due. But if you can't afford ~$400 in one month then you can't pay off that credit card balance in full. Hence why this deal for some is amazing.

 

[DuckThor Evil]

It also comes with a 2 year warranty unlike a straight purchase (In US anyway).

 

[Shifty Geezer]

There are clearly an almost infinite number of alternatives that MS could have offered instead of this particular plan. But this one 1) reduces the cost of entry, 2) increases subscribers to Live! and 3) achieves both without a price drop.

If this was really an attempt to roll out a Live subscription option and not just a test of such an idea, why isn't the option avaialble to buy online and instead limited to the retail stores?

Value is this case is not subjective, its just the total MSRP of a Kinect/4GB 360 bundle along with 2 years of Live.

That's not true. If someone cannot afford something now, they can either save up for x months without that thing, or get a more expensive payment option that gives them access to the thing now. This is the basis of all credit and loans the world over where the value in having the thing now and for longer is deemed worth the added cost. It's no different to wanting a new HDTV in 2006 to connect your XB360 to, but only having £20 pm disposable income. You could either save up for 18 months to buy a £350 TV, gaiming in SD all that time, or get a hire-purchase TV (or loan for a TV) for £20 month running to £500 over 18 months and be playing in HD for an extra year and a half. The extra cost will be considered good value by some - an extra £150 over 18 months for immediate gains.

 

[dobwal]

It's amazing because some people will now be able to buy one whereas before it was too much cash outlay at once. Not willing to spend $400 on the spot does not mean someone has bad credit, one has nothing to do with the other. People have a monthly budget, and $400 may exceed that in many cases. This allows it to fit in peoples monthly budgets. Likewise some people don't have credit cards, or simply don't want to use them because 30% interest is too much for them. If you paid off a 360+Kinect purchase on a credit card at the same rate as this financing deal, then you'd be spending much more via the credit card. Not sure why people keep bringing up credit cards, they are terrible examples unless you pay the balance off in full when it's due. But if you can't afford ~$400 in one month then you can't pay off that credit card balance in full. Hence why this deal for some is amazing.

What is the attraction of this plan for someone who doesn't own a credit card for financial purposes meaning something other than bad credit? This is still a form of finance. It still requires a credit check and it will ding your credit score when you apply and if you decide to terminate whether through choice or the inability to pay. Its still a form of debt. To a consumer, it really no different than using a credit card except that its more restrictive in terms of a buyer's ability to reduce the interest cost or their overall debt through early payoff.

I'll admit that for someone who may have less than average credit, this is a good plan. But I doubt if MS will provide this plan to someone who has less than average credit. Why? The average credit card rate is 16-17% and would allow you to repay the same purchase under similar terms. Its not financially prudent to finance a loan to someone at the average interest rate if their credit rating doesn't justify such a rate. The potential of returns on this subscription plan are too low to allow riskier borrowers to enjoy. MS will have to contend with people paying $99 for a console and walking off into the sunset and the risk of that happening goes up the lower the credit rating.

I think our point of contention is that I in no way feel like this is "good guy" move by MS.

 

[AlphaWolf]

I think our point of contention is that I in no way feel like this is "good guy" move by MS.

What is bad about offering choice?

 

[dobwal]

What is bad about offering choice?

Nothing is bad about "offering" a choice. The additional choice thats offered may be horrible though.

Not saying MS's subscription plan is horrible. But MS's alternative payment plan to me doesn't seem to offer a real "alternative" for the average consumer.

There are some aspects of the plan that aren't clear that will determine if this plan is a viable choice to a segment of the consumers to me at least. One being that a consumer can subscribe to this plan with no need of a credit card. If that is true then I see its worth as an alternative payment method for those that hate credit card but don't mind financing their purchases. But I am highly doubtful and suspect that in an effort to make payments and termination fees easier to collect, a credit card will be required.

MS to me is a business and this plan offers very little to MS's bottom line if its meant to cater to a small segment of consumers who abhor credit cards but have healthy credit scores. But this would a boon for MS if your average consumer start adopting this method in troves because they think its a cheaper way to acquire a 360.

In other words, I feel if you are an average consumer with average credit scores with a credit card (that they have no qualms about using) with an average interest rate then you should receive something in return for giving up the flexibility of servicing your debt as well as the flexibility to shop for better prices through other retailers when purchasing a 360. Because for the average consumer there are cheaper ways to acquire a 360.

 

[dobwal]

That's not true. If someone cannot afford something now, they can either save up for x months without that thing, or get a more expensive payment option that gives them access to the thing now. This is the basis of all credit and loans the world over where the value in having the thing now and for longer is deemed worth the added cost. It's no different to wanting a new HDTV in 2006 to connect your XB360 to, but only having £20 pm disposable income. You could either save up for 18 months to buy a £350 TV, gaiming in SD all that time, or get a hire-purchase TV (or loan for a TV) for £20 month running to £500 over 18 months and be playing in HD for an extra year and a half. The extra cost will be considered good value by some - an extra £150 over 18 months for immediate gains.

I'm not disagreeing with your assertion. But I'm not using value in a subjective manner. Both relative worth and market price can be used as a definition for value. I am using the latter form of value.

The cash cost to acquire a 360, the cost of acquisition under MS's plan and the cost through traditional financing aren't subjective. The cost of acquisition through MS's plan versus traditional finance using average rates are about the same.

If I were to use value in more subjective terms then I would ask how much do you value the ability to flexibly deal with servicing your debt? Or how much do you value the ability to shop around for better deals through other retailers?

I find value in the ability to the pay off a debt earlier and cheaper if the circumstances permit. Also, I also find value in financing a Kinect bundle for $279 and 2 years worth of Live at $48.41 a year and not at MRSP.

 

[AlphaWolf]

For everyone it's not worse terms than you might negotiate elsewhere. To get much better than 20% rate on a credit card you will likely need to pay an annual fee and have maintained a good credit rating for an extended period. As I said before the terms of this deal work out to around 12-13%, that's not bad in terms of consumer lending.

 

[zed]

depends on the choices

this one of the better ones (other sharks have 1000+% interest thankfully they will be changing the law)
http://www.stuff.co.nz/national/6182035/Fine-print-oversight-has-cost-woman-home

sure its buyer beware, and idiots should be punished (cause theyre not already ) but imagine if this was your grandma

OK WRT MS's case I dont really see anything wrong with it, as its not really that much more, perhaps next console cycle nintendo & sony as well as MS will offer something similar

 

[joker454]

...

You keep viewing this purely in terms of credit, which is missing the point. Some people can't afford a $400 initial outlay, period. It's just too much money, it does not fit into their monthly budget. Yes they can use credit cards, but then they would be paying much higher interest. So why not take advantage of the $99 Microsoft offer which offers better terms? I mean why do people buy stuff from Best Buy or Home Depot using the credit cards those guys offer? Why not just use their Visa card like normal? Because they offer better terms than your typical credit card. It's the same case here. If you really want to harp on credit scores then succsfull completion of financing actually improves ones credit score.

I think our point of contention is that I in no way feel like this is "good guy" move by MS.

I'm not saying this is a good guy move, it's just business like any other. What Microsoft is offering is in no way different than has been offered by others for years. Part of the diffrerence now is rather tahn have someone use a Best Buy card to buy a 360+Kinect and have Best Buy make the interest, etc, Microsoft is trying to get in on the action.

 

[dobwal]

You keep viewing this purely in terms of credit, which is missing the point. Some people can't afford a $400 initial outlay, period. It's just too much money, it does not fit into their monthly budget. Yes they can use credit cards, but then they would be paying much higher interest. So why not take advantage of the $99 Microsoft offer which offers better terms? I mean why do people buy stuff from Best Buy or Home Depot using the credit cards those guys offer? Why not just use their Visa card like normal? Because they offer better terms than your typical credit card. It's the same case here. If you really want to harp on credit scores then succsfull completion of financing actually improves ones credit score.

People use Home Depot or Best Buy cards because they have have deals like same as cash for 3 to 18 months depending on the price of purchased item.

12-15% interest rate would allow to pay off within 24 months. 16-18% would allow you to pay off at 25 months or anything less than 18% would allow you pay less than $16 dollars at month for 24 months. The average credit rate is 16.5% with reward based cards at 17.5 and non reward based cards at 15%.

And this isn't structured as a financing deal even though it is essentially a loan. You won't improve your credit score from paying off MS's "subscription" plan.

And yes I view this strictly in the terms of credit because its essentially a form of financing a debt.

I'm not saying this is a good guy move, it's just business like any other. What Microsoft is offering is in no way different than has been offered by others for years. Part of the diffrerence now is rather tahn have someone use a Best Buy card to buy a 360+Kinect and have Best Buy make the interest, etc, Microsoft is trying to get in on the action.

I agree. I simply see this as MS attempt at co-opting finance fees without really creating a finance arm to support it. But Best Buy and Home Depot don't restrict my ability to pay off my debt in less time at a cheaper cost to myself. I don't mind MS getting some of the action but the terms could be friendlier or they could provide more value to make the restrictions easier to accept.

 

[RancidLunchmeat]

If this was really an attempt to roll out a Live subscription option and not just a test of such an idea, why isn't the option avaialble to buy online and instead limited to the retail stores?

That's an interesting question and I would bet it has to do with the credit check. When I go to Best Buy to buy a DirecTV dish or a new smartphone, those companies have agents that are not Best Buy employees that run credit checks, sign you up for the contracts, etc.

That costs money. With MS handling it in their own stores, the cost of those employees/agents is already a sunk cost in operating the store.

That's just a guess on my part, but it seems reasonable. They'd have to adjust their pricing structure or streamline the credit approval process to release such a thing on a massive scale.

 

[bkilian]

What is the attraction of this plan for someone who doesn't own a credit card for financial purposes meaning something other than bad credit? This is still a form of finance. It still requires a credit check and it will ding your credit score when you apply and if you decide to terminate whether through choice or the inability to pay. Its still a form of debt. To a consumer, it really no different than using a credit card except that its more restrictive in terms of a buyer's ability to reduce the interest cost or their overall debt through early payoff.

How is it considered a form of finance? My phone contract does not show up on my credit report as a debt, and it's exactly the same thing...

 

[RancidLunchmeat]

I think our point of contention is that I in no way feel like this is "good guy" move by MS.

I don't see how it can be the point of contention, when I haven't seen anybody claim that this was some sort of "good guy" move by MS.

Nobody is mistaking this for charity. MS isn't donating 360+Kinect bundles to Sister Mary's Home for Amputees.

They are simply providing an option to people who don't have $400 right now, to purchase the 360+Kinect+Live subscription.

There are lots of reasons why people would find this deal attractive, and they don't all involve people with bad credit being suckered out of their money.

Additionally, there's lots of reasons why MS would choose to offer a deal such as this at this particular time in the 360's life cycle. However, I can't think of any that are altruistic.

 

[Brad Grenz]

No it isn't. Despite being described as such, this deal is not like a hardware subsidy from a cell phone provider. In that case the price you pay for the service is the same whether you take advantage of the hardware discount not. MS is trippling the price of Live Gold in this deal because it isn't just a subscription service, the pricing is explicitly a long term payment plan. It is unquestionably a form of financing, and even if it doesn't appear as such on your credit, you can be sure it will get reported if you fail to make payments and can't pay the termination fee.