Why Xbox Live Doesn't Take Exact Change 233
With ever-more tempting content on Xbox Live (like the awesome Exit), it's really frustrating to have to 'overpay' and buy Points in bulk. 1up got an official response from Xbox 360 group product manager Aaron Greenberg on that issue, explaining why the service always leaves you with a little bit left over: "The reason why we do that, the core reason, is around credit card transaction fees ... If we do this in bulk, we don't have to burden the consumer with the transaction fees, or ourselves or publishers. It's about keeping infrastructure costs down and I know sometimes it's frustrating because you end up with odd points, but we don't have any plans to change that." Greenberg also addressed why the service limits you to 100 friends on your friends list.
Translation (Score:5, Insightful)
What a load of crap! (Score:4, Insightful)
The iTunes store doesn't have an issue selling me downloads a buck at a time, obviously the credit card fees aren't breaking their balls. WTF Microsoft?
Re:Translation (Score:5, Insightful)
Carnie System (Score:4, Insightful)
Change in Microsoft's pocket (Score:2, Insightful)
The answer lies in the interest... (Score:4, Insightful)
By the way, this is the same reason the Fed's are quite happy to help you over-estimate your income tax burden when you prepay.
It Should Be An Option... (Score:3, Insightful)
I'm fairly confident the real reason they don't allow small increments is the same reason they use points -- to obscure the real cost from the consumer. As an engineer I have virtually no background in physcology, but I can say from personal experience, it's easier to spend 1000 points than $5 (even when the value of points is much greater than the dollar amount). I'm also confident that designing the system so it's easy to end up with an odd amount of points that requires a bulk purchase to do anything again was intentional (eg. I have 200 Wii points right now and the cheapest purchase is 500).
No, there really is something to this (Score:4, Insightful)
So, suppose MS allowed you to buy points in arbitrarily small amounts. This is going to decrease the amount they make because people will do it. There will even be transactions (like people buying 1 point) that they lose money on. This means they have three choices:
1) Make less money. They aren't going to pick this. XBL is not run as a public service, they are in this to make money. As a practical matter they need a net profit here to help offset the costs of the Xbox hardware.
2) Pass the costs on to their developers in the form of lower payments. Bad option, you don't pay enough, people just won't develop for XBL.
3) Pass the cost on to the consumer. This is what would happen.
It is the same problem with micro-payments you've seen elsewhere. If you want to have small payment increments, credit card fees can kill that. This is one solution to the problem. Maybe not the best solution, but then if you've got a better one perhaps you should propose it to them? "Just eat the fees and make less money," isn't a solution.
Please remember: If you disagree with their business model, you are free to not buy their products. The Xbox in general, and certainly XBL and the marketplace, are not necessary to life. You can just not play their game if it is unacceptable to you.
Re:Translation (Score:5, Insightful)
iTunes Music store. Billions of dollars worth of music sold. Credit card companies charge fixed percentages. a $.99 charge costs $0.02 for the transaction.
Also the xbox live credits aren't full dollar amounts either. So you can't get a one-one price ratio. MSFT did this to appear to be cheaper when they really aren't.
This is only about MSFT greed and nothing more. MSFT can collect interest on your money sitting in their bank accounts while you try and figure out a way to spend it.
Re:That's just unfair. (Score:5, Insightful)
Re:No, there really is something to this (Score:3, Insightful)
Rob
Re:Translation (Score:5, Insightful)
Re:Translation (Score:5, Insightful)
I imagine with the Xbox marketplace people tend to make small purchases here and there, not a bunch of little purchases in the same day. So you prepay and the credit card transaction happens just once.
Finally, all of the complaints seem to be very US-centric. With the point system, MS can post a piece of content globally and list the price as 400 MS Points. In the US, I know this is $5. Somebody in another country knows how much points cost in their country. So they don't need to know today's exchange rate, content stays a fixed price, and MS doesn't need to come up with dozens of local prices for each and every piece of content. Right now the only content that isn't a global point value is the video marketplace, since the licensing fees vary by country.
Several reasons, including kids (Score:3, Insightful)
1. Is the per-transaction fee with the merchants, they don't want to do a bunch of tiny transactions and eat fees.
2. Breakage, every point on used in the system is excess profit.
3. Increase spending - companies found that the majority of gift card receivers spent MORE than the card was for. Makes sense, if you get a gift card for $25, and decide between $20 and $30 items, your choice is "lose" $5 and get the $20, or spend $5 and get the $30 to use all the value... that's why they push gift cards for the holidays.
4. Abstraction from cost, you think (I have X points, I need Y, let me get it) and not the cost of the items. It probably helps with the International business to charge constant "points" across regions and just price the points locally. Sure beats having to price everything EVERYWHERE. International pricing isn't simply the exchange rate + VAT once you have real marketing projects. But if they price the points right, they can single-price the stuff, keeping marketing costs down.
5. Accounting Rules. Depending on their accounting rules they may (or may not) be able to book this revenue. If the points never expire, they shouldn't be able to book it, as they collect the cash and have a liability (to provide you with a service), that becomes revenue when you use the points... that's typically why gift cards expire after 1-2 years depending on state (actually, eaten with monthly small transaction fees), so they can start eating up the balance that's sitting on the books as a liability to by taking the transaction fees out.
Since the points are probably non-refundable and the service virtual, they may have convinced their auditors that the revenue is incurred when the points are received, as there is no liability. OTOH: if they pay the content providers on a per-deal basis, this may not apply. But revenue recognition plays a role in these decisions as well.
6. Kids/Allowances, I assume that with passwords, etc., you can only allow the parent to log in and put "points on the account" that the kids can spend. Rather than having to fish out the credit card or give an 8-year old access to it, you can recharge their points weekly/monthly, and know that it's a fixed expenditure. That makes it MUCH easier for parents to control the spending without having to fight with their kids over it. It's easy to say "well that's parenting," but I like to focus my parenting time enjoying my time with my kids and focus my "parenting" on things that will impart values to them, fighting over video games is not at the top of my list.
Much easier to add 1000 points/week to the kid's account and let them stockpile points for things they want than have to have them run to you for each purchase. It's the same reason parents give kids the allowance, it let's them learn money management on their own through trial and error, instead of preaching parents.