The True Australian Xbox LIVE Experience: Physical vs. Electronic
Where does all our money go?
By DarkArmada
© 2008 Lee Edgerton 
In the first part of this look at Xbox LIVE in Australia, we had a look at what we Aussies are actually paying for. In comparison to what our Yankee friends from up North get for a lot less money than we pay, we see less features. And although yes this seems somewhat unfair, even taking all that into consideration, I still feel that Xbox LIVE is worth my $80 per year.
But a key feature in the marketing of Xbox LIVE has been in the flexibility of payment, the ability to have your account auto-renew every year or be renewed via a subscription purchased in a retail store. Since day dot I’ve had my account set to auto-renew and every year, $80 is taken out of my credit card to refill that 12 month size cup of goodness, but lately I’ve changed my ways…
A quick breakdown of your options – every year you can opt for the physical subscription. You have to head to your local retailer (or buy online), then using the card, be it 12+1 months, a 12-month card or an “Xbox LIVE Pack w/12 months”, you take it home and key in the subscription. Easy, no? The other way is completely electronic, you just leave valid payment details on your account and Microsoft does the rest, drawing funds out of your account each year.
So? What’s your point?
It’s a general understanding that direct debit options offer some form of bonus, be it monetary or convenience wise, to the customer. In the case of Xbox LIVE yes, there is a convenience value-add, it saves you a trip to the shops/online to get your yearly subscription. But is this enough? Well, to look further at this, let’s review both sides…
Electronic Auto-Renew Subscription -
$79.95 per year no matter which way you try and slice it. Sure it’s convenient, but Microsoft sees so much more profit this way. The only cost involved in this method is the 1.5 – 3% commission that Visa/MasterCard take from the transaction, the rest goes straight into Microsoft’s coffers. That’s a possible $78.75AUD in Microsoft’s pocket!
Physical Subscription Pack / Card –
Anywhere between about $45 online for a 12+1 month card imported from the US to $99.95 for a 12 Month XBL pack (at this price, most likely from EB Games, but that’s a different rant!). Sure, you have to actually source the product and purchase it, but you can make huge savings on the general $79.95 price tag. Realistically, Microsoft doesn’t see nearly as much profit in this space. When you take into consideration the cost of manufacturing the cards, packaging them, freight and handling charges as well as the cost of any extras in the box (headsets, free XBLA games etc) plus the retailer’s piece of the action, the profit Microsoft sees would be well below half that of the electronic process…
To sum this up –
Microsoft is basically rewarding you for making them less profit! In a situation where they clean up with close to 95% profit on a SKU, they provide next to no incentives to go this route. Sure, it’s more convenient for the end user, but what else? What’s convenience when you can get 13 months of XboxLIVE for $45 via a physical subscription? One would think that a vendor would promote, market and advertise heavily the most profitable means to them.
For users that auto-renew, why not offer a discount?
For Microsoft to drop the price to $69.95 or even down to $49.95, they’d still see far more profit in this model than in the less profitable physical subscription path. Maybe not a straight out discount, why not a free XBLA game? How about some Microsoft Points? Whatever it is, it seems more attractive to me as a regular subscriber to import a $45 12+1 Month XboxLIVE Supscription card from the US and use the $35 saving to do with what I please, rather than hand Microsoft $79.95 every year without question.
I don’t know about anyone else – but if Microsoft turned around to us Aussies and said “Renew online for 12 months and you’ll be given 2000 Microsoft Points”, I know which way I’d head…
Duh, importing stuff is always cheaper, nice one Einstein! Man, who is this guy?
Yes I understand that and in my next article, I’ll play the broken record on the Australian overpricing of games and what it means to import.
© 2008 Lee Edgerton
Filed under: Console gaming, Xbox 360 Tagged: | 12+1, Microsoft, xbox live, Xbox Live Gold, xbox360
I have always just used the auto-renewal for my subscription.
Mainly for the fact that is easy and I don’t actually have to remember to do it. However last time at renewal I noticed in my bank statement that it was rejected. Reason – my credit card had expired and I hadn’t updated my account details.
So unless I had noticed the rejection on my bank statement I wouldn’t have known otherwise, because there was no notification from MS.
For sake of convenience I am happy to stick with the auto-renewal but I did get the 12 month from the Target Toy Sale recently when it was on special for $59.
And yes, I wouldn’t mind seeing an incentive from MS to do the auto-renewal.
I think the Wii had price and accessibilty for casuals behind it, as well as a more family friendly image from the start.
I’m not saying Microsoft should have taken the same route, but everyone underestimated how important casuals could be and MS thought arcade was the only way to get them to begin with. The 360 is a better machine, but it has a ‘complicated’ feel to it with the online focus etc. that puts off potential gamers.
It didn’t help that the design was flawed so that there were so many reports of faulty machines either.
With the price coming down on the 360 and the amount of game types increasing (besides shooters), they should sell even better in OZ.
@ Fraz
While I agree with you there on some counts, I’d have to disagree on others.
No other company in video games, especially here in Australia is more behind getting the word out to the general public than MS Xbox-Div.
I don’t see SOny, or Nintendo running the high levels of competitions forgamers around Australia like MS do. I don’t see either of them putting the huge amounts of $$ into their community like MS are doing.
The whole Best Virtusl Driver comp is costing HUGE $$. It included funding a fashion show held at the WCG last weekend. WHich in itself took 6 weeks to organize with Ultimo TAFE and the Fashion Design Students there. Bringing in a completely new and fresh approach to the platform.
It got channel 7 and vouge Magazine involved as well as fashion celebs. It had 3 – 4 of the best V8 Supercars drivers involved. The cots of just setting up the whole deal at the WCG was huge$$, let alone the staffing and prizes for the overall event. Do you see Sony or Nintendo doing that . . no.
i attended a HUGE function MS GAME™ and MTV organized where they “gave away” a $AU80,000 Harley Chopper. The event was huge and involved MTC+V celebs, TV and screen media ppl.
Point is, that they put a huge amount into the community. So while we might get our products at a premium, there’s a huge amount the give gamers back that the other two do not.
And to be perfectly honest, I’ve never really paid full RRP on any games I’ve purchased through any store. I simply always ask fo rthe best price possible, and usually most stores WILL reduce the price for me to get the sale.
Not having a go at you mate, simply pointing out other areas that many seem to forget that MS plough into the region. And MS were the main ones behind getting huge adverts on Buses, bus shelters, Billboards, Hordings, Railway stations etc.
Bases
aussies need to get behind xbox more if marketing is to ramp in this country. unfortunately – due to high prices – video game and console sales are heavily based on whatever is the cheaper option – since the nintendo wii is the cheapest here – it wins hands down -that and the fact that they advertise the wii like mad. Probably about 1 x360 ad for every 100 nintendo wii ads
Great point: at a time when many question the validity of even paying anything for Live, Microsoft should be doing everthing possible to encourage ‘direct’ renewal by making it more attractive. Lowering the price and extra months included is ideal.
I think with marketing Australia is a forgotten realm…not important enough to push products at with incentives.