Microsoft Points System for Zune

Daring Fireball notes that Microsoft is creating a "points" system to purchase Zune content. That is, instead of buying a song for 99 cents like you do with iTunes, you'll buy a song for 79 points.

The actual value dollar is the same, 79 points costs 99 real-world cents. This seems weird on the surface, but you have to look at it from the Microsoft mindset. In any other situation, they'd try to undercut the iTunes price. Since they can't do that, they have to change the psychology of the numbers.

There's no reason 99 cents couldn't be matched up to 99 points. So perhaps they're hoping that people will buy a bunch of points that are nearly one cent in value, price songs at 79 points, and hope that most people don't want to do the math, thinking that it's a better deal.

Update: Even though it's priced the same as the iPod, it looks like Microsoft is planning to lose money on each unit it sells. It's almost as strange as the fact that Microsoft is quite open about the fact that the Xbox division loses money.
Design Element
Microsoft Points System for Zune
Posted Sep 28, 2006 — 10 comments below


ctshryock — Sep 28, 06 1893

arstechnica made a good point by saying it obfuscate the real costs of things

Paul F. — Sep 28, 06 1894

Seems confusing to me. Why make it confusing?

Trausti Thor Johannsson — Sep 28, 06 1895

Microsoft makes a point in making everything complicated.

Like marketing a solution, then 3 months later rename that same solution and change all marketing for it, then 3 months later etc....

lookmark — Sep 28, 06 1896

It's even stranger, actually.... since it's a standard model for the game console business to lose money on selling consoles for first year or two, and make it up on licensing games.

But for mp3 players, there's only a tiny amount of income to made selling music.

So, really, MS is willing to lose hundreds of millions in an attempt to try to throw a wrench in way of the iPod juggernaut a bit. (And, actually, I don't blame them; the future of the standard for digital media may be at stake. But it doesn't make the 1G Zune any less underwhelming.)

viperteq — Sep 28, 06 1897

The 79 points actually equals up to 98.75 cents. This system is too complicated: I think there are a lot of people out there that would be willing to buy a Zune, but this point system thing is going to drive a lot of them nuts because they won't be able to figure out how it works. Why *79* points instead of an even *80*? This thing needs some major simplification work done.....

Iain — Sep 28, 06 1898

No, no, no! The 79 points thing is brilliant! See, you can only buy points in bunches of 400, 1200, 2000, and 4000. $1 is worth roughly 80 points.

So, you buy your first 400 points. Grab your first 5 songs for 79 points each, and you've 5 points left over. "Oh no", you say, and buy another 400 points. Now you've got 405. Buy another 5 songs, 10 points left over. Can't waste those points, need to top it up! And they've got you on the merry-go-round forever!

Got to hand it to Microsoft, they're always inventing new ways of screwing the customer.

Preston — Sep 28, 06 1899

It's classic doublespeak.

Julian Bennett Holmes — Sep 28, 06 1900

I think admitting that they're taking a loss on each unit is a marketing strategy so that people think they're getting better value.

This is what they want, I think:
iPod - I'm paying $250 for something that only costs them $150. Rip off!
Zune - I'm paying $250 for something that costs them $300 bucks. I'm getting a good deal!

Shawn — Sep 29, 06 1906

In what other business would investors support a company that PLANS on losing money? Sell any Microsoft stock you own if you haven't already!

Dan Price — Sep 29, 06 1908

This is classic Microsoft - they're using their cash-cow monopoly on the PC to eliminate the competition in other markets that they want to move into; by selling a cheaper and/or inferior product at a loss. MS know that they'll more than make it up in licensing deals. They're trying to create yet another platform with the Zune. For Apple, the iPod accessory market is largely irrelevant; but for MS, that's where the money is. Encourage an ecosystem and milk it for all it's worth; It doesn't matter if the core product sucks.


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