In some ways it makes sense. There are certain
situations where there’s a lot of cost savings involved for both the supplier
and the consumer with subscriptions for services. For those in the gaming
world I’m sure you’re extremely familiar with this system – Xbox LIVE memberships,
subscription payments for World of Warcraft and a couple of
other MMO games. The upside is that there’s no contract that locks you in
– so if someone wanted to cancel their World of Warcraft account for
example, they could do it tomorrow and not pay a single red cent after their
last payment went through. Cell phones carriers are the other end of the
spectrum – selling phones at a huge discount but locking you in for a two year
contract, with an early termination fee ranging from $200 to $350 for a
cancellation. So why is this relevant?
There have been rumors floating around that Microsoft was
going to adopt a similar model to the cell phone one for Xbox 360 units
and LIVE gold subscriptions – selling a subsidized 4GB model then locking the
customer in for two years on contract. And those rumors have been solidified, complete with early
termination fees. Sure the fee isn’t as harsh as mobile carriers, but
they are in the same spirit of a mobile contract. The difference is,
there’s pretty much a guarantee that I’ll be using cellular service for 2
years. Xbox LIVE? Maybe.
The contract is laid out like this – Microsoft will sell you
an Xbox 360 4GB with
a Kinect sensor unit for $99. OK, so far so good. The $99
price is contingent on the aforementioned two year contract of $14.99 per
month. Sounds reasonable on its face until you do the math. Let’s
have a look see. Suppose I go out and buy a retail Xbox 360 4GB unit with
a Kinect sensor. That would cost me $299. Then I buy a retail Xbox LIVE gold membership
for two years. 12-month cards are $59.99 each, putting my 2 years of
membership at retail cost at about $120. My final price, after two years,
is about $420. Now let’s look at the subsidized
bundle. I pay $99 for the Xbox 360 unit.
I then pay $14.99 for 24 months. My final price for my two year contract
is $458.76, which is over $30 on top of retail. After crunching these numbers,
there’s really no incentive. And I’m not even counting sales on sites
like Amazon and NewEgg, where I’ve seen 12-month gold cards go
as low as $40. I’ve done a little additional math of my own factoring in
early termination fees and the users’ total cost for cancelling every month for
each of the 24 months. Simply put, there isn’t any short game play that
would benefit the user financially to bring their total cost below the straight
retail route.
I understand that this plan is structured for the “gotta
have it now but don’t have the scratch” crowd. It’s the exact same thing
with smartphone users who wouldn’t be able to afford buying a smartphone flat
out, or extending the number of years on a car loan to make smaller
payments. You’ll have the product now, but you’ll pay more in the long
run. If you watch the sales and scour the interwebs, you can find cheap
subscription cards and like-new used or refurbished units and spend less than
$400 now, saving yourself more than 50 bucks in the long run.
Plus, two years? What happens if the Xbox 720 comes
out and you’re still in year two of your contract?
Hay, i would love to own Xbox 720. Microsoft products are really user friendly! Sample Contracts
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