Zuned: What’s the ‘deal’ with Microsoft Points?

Microsoft’s Zune Marketplace will sell individual songs for Windows PCs and Zune digital media players “through a system called Microsoft Points. The new Microsoft cash system will work by adding money to an account, as with a prepaid phone card. Points will then be deducted from the account with each purchase. A single song will cost 79 points, ‘the equivalent of 99 cents,’ according to Microsoft spokeswoman Kyrsa Dixon,” Candace Lombardi reported in late September for CNET News.

Lombardi reported, “The point system is already used in the Xbox Live Marketplace, and Microsoft plans to host other online stores where Microsoft points can be redeemed, according to Katy Gentes, product marketing manager for Zune. In the United States, points are available in denominations of $5 for 400 points, $15 for 1,200, $25 for 2,000 and $50 for 4,000. That makes $1 worth about 80 points.”

Full article here.

MacDailyNews Take: Several MacDailyNews readers have suggested that we do the math, so here’s the deal:

• 79 Microsoft Points equals 99-cents or one song.
• The smallest amount of Microsoft Points available for purchase is $5.00 or 400 points.
• Each Microsoft Point is worth 1.25-cents.
• So, you give Microsoft your $5 and buy your 5 songs. That’s 395 total points. Microsoft has your 5 points or 6.25-cents “left over.”
• Say you want an album’s worth, or 10 songs? You give Microsoft $10 for 800 points and buy 10 songs for 790 points. Microsoft has your 10 points or 12.5-cents “left over.”
• See where we’re headed? Microsoft is taking money from their pigeons, er… “customers” and placing it in an interest-bearing account to earn themselves more money on their generous customers’ interest-free “loans.”
• Now, if you don’t wish to give Microsoft your money to use for free to generate interest income for Microsoft, you need to figure out exactly how many 79-point songs to buy, so that no points are left over. The magic formula to avoid giving Microsoft a free loan is 79 points x 400 (smallest denomination available for purchase) = 31,600 points or 400 songs at 79 points each. Total cost: US$395. Not very practical, is it?

So, the real point is clear: Microsoft’s “points” are designed to confuse consumers and generate interest income from “left over” amounts. Now you know exactly why “1 Microsoft Point” doesn’t equal “1 U.S. Cent.” Boy, if Microsoft can dupe enough people into this Microsoft Points scheme, those “left overs” will really add up.

To buy even a single 99-cent song from the Zune store, you have to purchase blocks of “points” from Microsoft, in increments of at least $5. You can’t just click and have the 99 cents deducted from a credit card, as you can with iTunes. You must first add points to your account, then buy songs with these points. So, even if you are buying only one song, you have to allow Microsoft, one of the world’s richest companies, to hold on to at least $4.01 of your money until you buy another. And the point system is deceptive. Songs are priced at 79 points, which some people might think means 79 cents. But 79 points actually cost 99 cents.Walt Mossberg, The Wall Street Journal, November 09, 2006

In stark contrast to Microsoft, Apple charges real currency. You buy a song from the U.S. iTunes Store for 99-cents, you pay 99-cents. You can buy one just one song, if you like, and you’ll be charged 99-cents. No left overs. No formulas. No “points” scheme. Just a single, simple, straight-up, honest transaction.

116 Comments

  1. I’m so tired of Microsoft I cannot even tell you. I have been a Windows user since Windows 3.1 and have used every version since then. Two years ago I switched to a Mac. My eyes were opened and I see more and more what crap they do. They are a horrible, horrible company with very little ethics. Now, Bill Gates is at least using his money for good right now, so I don’t want to pick on him. But his company SUCKS. Makes me wonder if he is involved in philanthropy because of his guilt over his past business tactics. Nah.

  2. It gets worse. Apple charges my local sales tax on my iTunes purchases. I would assume Microshaft would do the same, so when I wanted to buy my 5 songs with my 400 points, where wouldn’t be enough points to pay for the sales tax, so I’d have to buy another 400 points to cover the tax. Or, maybe they charge me sales tax when I buy the point. My brain hurts just thinking about it. Stick with Apple. It’s just easier.

  3. Microsoft may also be working to improve their cost margins by reducing credit card transactions fees.

    There is a transaction cost for charging to a credit card. Charging less frequently and at higher amout per transaction can also reduce the transaction costs which Microsoft pays.

    Credit cards are often unaware or forget about the transaction cost paid as a percentage on the retailer’s side.

  4. another good example of how Microsoft designs things with THEIR interests first and foremost, not the consumers/

    there is no consumer advantage to the points system. it simply provides Microsoft an interest free loan from your pocket.

  5. >It gets worse. Apple charges my local sales tax on my iTunes purchases.>NOT TRUE!!

    I bought 1 tune in Cal. from the Apple store. My credit card was charged 99c. I did it specifically to check the total cost of 1 tune.

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