Currently, Microsoft is running an exclusive offer for their Microsoft Stores. A consumer can come in to any store and purchase an Xbox 360 for $99 that includes a 2 year subscription to the Xbox Live Gold membership service. The catch is that there is a monthly subscription charge of $14.99 that extends 2 years after initial purchase date.
In essence, you are buying a cheaper Xbox to pay for it later in a monthly subscription.
Many in the industry have been overly critical of this move. They can’t find a way that this is beneficial to the consumer. My favorite quote comes from Reverb Games PR Manager Gregory Hutto who said on twitter that “Xbox console subscriptions are the sub-prime mortgages of the gaming industry.” Let’s take a serious look at the console and see what really is being offered to consumers.
For starters, let’s break down what this console is and what costs would be associated with it normally:
- 4 GB Xbox 360 Console with Kinect
- 2 years of Xbox Live Gold membership
Together this lists for a total of $419.97 before taxes. Comparatively, the console subscription comes out to $458.76 before taxes or fees when adding both years subscriptions together. This results in a difference of $38.79 for consumers. Obviously it would just be better to pay up front for your consumer electronic device, though it’s not a great difference.
Some of us however don’t want to pay 100% up front for our luxuries. This demographic is who Microsoft is trying to appeal to for their new model. They are trying to lower the initial price to grow their base in a market that might be slowly reaching it’s saturation point. That much is obvious.
Usually selling a console for under $100 is the signal for the end of a generation. It happened with a number of Sony consoles and seems to be the adopted model for picking up those late stragglers. This is a way for Microsoft to bring in these consumers that have been sitting on the fence.
The issues with this are obvious. For one you are paying more for a basic product. That should be clear to everyone. Like any cell phone or cable plan, this carries an early termination with it as well. While the sliding scale model for early termination is indeed nice, you need to make sure you know what you are doing. At 12 months, you will have paid $278.88 for this console with a cancellation fee of $144 charged to you for ending the contract. That leads you to $422.88 with 12 months paid on the console. While that is cheaper than the $458.76, you are paying the total at an earlier time which probably defeats the purpose of all this.
There is a 30 day grace period that allows you to return the console less the $14.99 for the first month, but most retail outlets have a similar system with a full refund offered.
Clearly there is no immediate benefit to consumers especially when you factor in the deals you can buy at every day retailers that are better versions than MSRP. Microsoft is going to make a profit off of this deal in many different forms. As they should. This is a feature for people that don’t want to put up the initial investment of $299 to a company. Rent-a-center was built off of these people. They are the paycheck to paycheck people.
If you want to buy a 360, the obvious solution is to just buy the darn thing at full price. This doesn’t even include the number of deals for consoles that run all year long for the hardware.
Really though, should we be complaining about this new method of distribution?
No. This isn’t taking a persons option to buy a 360 out right for $299.99. If you want to, you can stand in line at Best Buy and purchase your 4GB console the normal way. This is for those that want to buy their consoles the same way they buy their phones. I don’t see why we should discourage it. It’s only when this becomes the only option for purchase that we should really start to criticize the method of distribution.
Until that point, this is a new option for consumers to purchase their content. It’s not the best way to buy a new Xbox, but subscriptions aren’t the best for a lot of different reasons. For the consumer however, it means they can buy an Xbox for cheaper than they would from a company like Rent-A-Center.
I checked pricing from a local Rent-A-Center store and the 12 month rate for a slightly used console was $103.94 per month for 12 months. This totals out to well over $1,000. This honestly surprised me. If I changed the terms to a 90 day policy, it would change to a total cost of $623. Say what you will about Microsoft, this isn’t exactly the worst deal in town.
The subsidized Xbox isn’t a deal for rational consumers that have enough cash built up to afford it. If you are one of those consumers, you can go and buy the console today from any number of vendors that offer the console at the MSRP. For those who do opt to purchase this console through this method, I recommend you read up on your contract terms, and weigh the options of whether or not to get this bundle through a subscription model like this as opposed to buying outright. Paying 1/4 up front for this package is stretching it when there are a wealth of other options available to you.
This Xbox isn’t worth it, but if you need to purchase a 360 for whatever reason, you now have the option for a subscription model. If you have to follow this method, Microsoft is definitely a better option than Rent-A-Center.