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

[BRiT]

<rant>
Some folks genuinely make me laugh at their blatant hypocrisy. In this thread folks are using the best bargain prices to calculate the cost of Live, yet in the other threads comparing it against PSN/PSN+ those same folks refuse to use anything other than the full MSRP for live. Anything to paint Microsoft in a bad light I suppose.
</rant>

 

[mrcorbo]

As Shifty has pointed out it this is probably a pilot program to gauge consumers' willingness to accept this type of arrangement and work out any potential problems before committing to a wider deployment. If the intention is to keep the program relatively small initially, I don't think that there is a motivation for them to be aggressively price-competitive with the standard purchasing models.

Anyway, it would probably be more useful to discuss what this program is and what implications that may have for the future (since it's a first of its kind in this space) than discussing what it isn't and what implications that has about Microsoft

 

[mrcorbo]

So with this new subscription plan going on right now. Do you think we'll get next gen consoles with HD 8970 and 4gb gddr5? $600 if you want to pay up front, and $650-$700 if you pay via subscription.

I don't see a $600 minimum entry point for consoles next gen. Whether we may see someone attempt to push a subsidized console with an attached service contract/early termination penalty is a more interesting question, IMO. Pushing the non-contract price too high, though, would be a significant risk. Likely too much of one.

 

[AzBat]

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.

I have to agree with this as well. I love they are trying a new form of payment & it's something I wanted to take advantage as well, but there's no value in this method versus buying it al-a-carte. You have to have a credit card & you have to pass a credit check too. Somebody who has a credit card could use it & not have to worry about a monthly subscription fee or an early termination fee. The original rumor mentioned extra services, but no where is that found in the TOU. If the version of Live included with the deal actually had something that you couldn't get the normal way, then it might have been worth it, but as it is I can't recommend it.

Tommy McClain

 

[AzBat]

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

It did in the original rumor, but it's not mentioned in the TOU. Not saying it's still not included though.

Tommy McClain

 

[AzBat]

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.

Yes, it will get reported to the credit agencies...

7. CREDIT CHECKS.

You authorize us to obtain information about your credit history from credit-reporting agencies at any time. You understand that a credit inquiry could adversely affect your credit rating. You authorize us to report your payment record to credit-reporting agencies.

Seems that if you go the whole 2-years & pay the payments on time it should improve your credit rating. So I could see those who have less than great credit who still have a credit card & may still choose to use this method of payment. Yeah, I keep going back & forth on whether this is a good deal or not. LOL So far I think it depends on the person & their circumstance. It's not a cut & dried issue. Will be interesting to see how successful it turns out for MS. I fully expect to see it expanded to other stores & next-gen.

Tommy McClain

 

[Shifty Geezer]

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.

I don't understand the difference between this and a phone deal. Get a phone on contract and you pay xxx per month. That isn't broken down into $15 pm for phone services no matter what handset you get, and the rest to pay off the hardware, AFAIK. The handset is advertised as being cheap or free, and then xxx on the service deal. I din't see where this is trippling the price of Live! - it's just deferring the hardware costs. The RRP comparisons show the price (including warranty) very similar to one XB360 at RRP and two years Live fees. Where is it said that the XB360 is actually being sold all in at $99 and the rest of the payments are for inflated Live fees?

I see this XB offer as the same as a phone. In fact it's very comparable. If you shop around, you can get a handset and service cheaper than getting a locked-in 2 year contract, as long as you are willing and able to pay up front for the phone.

 

[Brad Grenz]

Because they don't massively increase the cost of the service in order to pay for the hardware "subsidy". In the cell phone case you are getting an sizable, actual discount by making a long term commitment to their normal service. In the case of this Xbox deal, you are making a long term commitment at an increased rate to ensure you pay full price.

 

[Shifty Geezer]

Because they don't massively increase the cost of the service in order to pay for the hardware "subsidy".

But MS aren't increasing the service cost. It's still around $5 a month or whatever it is for Live, and $10 a month to pay off the hardware (including warranty). If you get a phone on contract, it costs more than the service would on its own because you are paying off the hardware. And typically on not very fair terms when it comes to phone use (eg. phone comes with 3G turned on but the kid it was bought for isn't told, and they are hit with a £30 added charge on top of their monthly all-inclusive fees).

 

[Brad Grenz]

Right, so it's a loan and not comparable to a cell phone subsidy. But you're wrong about the cellular plans. They do require you have an active data plan at a certain rate, but the rate is the same whether or not you enter a contract for a couple years to qualify for the hardware discount. There's no chart of what data costs if you're "paying off a phone" or just buying ala carte. The price is the price. There's a basement level for plans that qualify, but there is no dual pricing like you suggest. They don't mind cutting you a $400 break on the iPhone because they don't pay retail to Apple and they're gonna charge you 4 times that much for the base service over the course of that 2 years anyway (and the phone will probably be locked to them as a carrier in perpetuity). MS doesn't have a comparable service in terms of revenue per customer, so they triple the price of the "subscription" at which point you're just paying back a loan for all intents and purposes.

 

[Shifty Geezer]

I'm afraid you've lost me completely. I don't understand why $99 up front and $15 a month for a piece of console hardware with 2 years connection is different to $99 up front and a $15 a month for a piece of phone hardware with 2 years connection. In both cases you can buy the phone separately and get a similar connection deal for less money if you shop around.

 

[AzBat]

It's not directly comparable since Microsoft doesn't have a $15/month Live subscription plan. On cell phones if you were paying $15/month, you could be paying that whether you bought a subsidized phone or not. So with phones the only difference is the 2-year contract. To be directly comparable to cell phones Microsoft would have to sell the bundle for $99 & then you would pay $5/month for the Gold subscription. In essence MS are just increasing the cost of the subscription to cover the cost of hardware, but not giving you additional services over the standard $5/month plan. That's why I don't see value in it over paying it all up front.

Tommy McClain

 

[Shifty Geezer]

Mobile phone subcriptions are inflated to accomodate the price of the hardware. I could spend £10 pm on unlimited texts and 300 minutes phone calls, or £20 pm for exactly the same service only with a handset included. The cost the mobile subscription is thus the connection charge plus the hardware cost, exactly like this XB360 deal. Alternatively, what if MS offered an XB360+Kinect+Warranty without Live! subcription at $99 up front and £10 per month, and then Live subscription at $5 per month? It'd work out exactly the same price. Of course MS don't want to do that because they want owners using their network, just as mobile phone operators don't let you buy the hardware at a monthly rate without also using their network.

 

[ERP]

I think the phone service analogy is a good one, but only outside the US where carriers have to offer unlocked phones and as a result are competitive on service charges that do not include a phone.
In the US the 2 year lockin is pretty much the norm so there actually isn't an easy way to get the "cheaper plan".
It's also similar to the cable companies, you "rent the box" (and in fact never own it), but the assumption is that over the commitment period you're paying for the loss in value of the hardware.

The pricing doesn't seem outrageous to me

I think it's a mechanism that's familiar to customers, like all of these offers it's about breaking someones barrier to entry. Rational, educated buyers with upfront money to those willing to leave a charge on a credit card for 2 years, can just buy outright. Practically a lot of people aren't particularly rational and an initial payment of $99 with a $15 service might seem appealing.

I think it's also a move to start transitioning people to thinking of the IP as "Live" rather than "Xbox", having people think of it as a service with a supplied piece of hardware rather than a piece of hardware with a subscription service.

If they can accomplish the last point I think it positions them very well leaving the next generation.

 

[Shifty Geezer]

I think the phone service analogy is a good one, but only outside the US where carriers have to offer unlocked phones and as a result are competitive on service charges that do not include a phone.
In the US the 2 year lockin is pretty much the norm so there actually isn't an easy way to get the "cheaper plan".

That could explain why I'm not seeing the difference others are suggesting. If in the US, phone+contract is cheaper than phone without, then I can see their point. Here in the UK. I could get an iPhone on 24 month basic contract (unlimted texts, 300 mins) for £866 total over 24 months, or buy an iPhone for £500 RRP (seen it for well under £400) and spend £240 at £10 per month for the same service on giffgaff. Okay, it helps that we have giffgaff as a very price competitive mobile service provider. But this is why I don't see anything different with MS, except their charges are lower than I'd expect for a subscription based hardware deal.

 

[RancidLunchmeat]

I doubt this offer would raise a subscriber's credit score at all.

Their credit will get hit from running the initial credit check, just like any other case. But I doubt this would show on any report during the payment period and would probably never be reflected on the credit report except upon default.

 

[Silent_Buddha]

It all depends on whether MS actually reports whether a buyer is on time with thier monthly payments. As well as to how the contract is structured.

But as long as the MS reports the purchaser's monthly payments and whether they are on time, late, or defaulted, then it will show up in the purchaser's credit report either positively (ontime payments for the duration) or negatively (default on the credit loan/subscription).

If MS doesn't report it to the credit agencies, then and only then will it not show up. However, it is in MS's interests to report it as that is additional incentive for purchaser's to make their payments on time.

And seriously with all the people whining. Once you factor in the one year extended warranty, the interest rate for this "loan" drops to 5-6% annually...Non-compounded. Unlike a typical credit card which is compounded monthly. If making "only" minimum monthly payments a purchaser with a credit card can and will exceed whatever the cards actually annual interest rate is by the time the purchase is paid off. So if a purchaser had a CC with a 24% APR, they'll end up paying far more than 24% interest if they only made the minimum monthly payments. And those types of credit card users far outnumber those that pay off their balance early or monthly.

For any savvy shopper that knows to shop around, this obviously isn't the deal for them. For people that never pay more than the monthly minimum on their lines of credit, this is an amazingly good deal. For everyone in between those two extremes, it's likely in most cases to be a good deal.

So savvy shoppers? Not a good deal.
Shopper typically pays off entire credit card balance monthly? Not a good deal.
Shopper typically pays off credit card balance early? Might be a good deal if they don't manage to pay off the item before 5-6% interest has accrued on their purchase by the time the balance is paid off.
Shopper typically pays minimum monthly on CC or line of credit? Amazing savings and a fantastic deal.

Once again, it's just offering another purchasing option. An option that is great for some, and not so great for others. The people that the deal is not good for will already know it and avoid it. Unless you think savvy shoppers who shop around or pay off their credit balance every month suddenly turn into braindead zombies only for this deal. For all other's it's likely to be a great deal compared to buying on a credit card.

Regards,
SB

 

[mrcorbo]

Major Nelson has announced that the program is being extended to Best Buy and "select" Gamestop locations.

 

[Silent_Buddha]

The initial program must have been fairly successful then if they are now expanding it out to select retail locations to test it out on a larger audience.

Microsoft are being very careful and very conservative in rolling out this pilot program.

Regards,
SB

 

[AlphaWolf]

Oh shocking, no longer MS only. Never would have suspected that.