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Forums - Microsoft Discussion - Microsoft's Real-Money Xbox Live Transition A Costly Move

theprof00 on 10 July 2013
Adinnieken said:
theprof00 said:
Adinnieken said:
SvennoJ said:
Eurogamer also reports 800 msp games going from 6.80 to 8.99, that's a 32% price hike.
And doesn't not having to produce and distribute live cards more then offset the 3% credit card charge?

Exchange rate reason is bullshit too. The Canadian dollar has been on par with the US dollar for years, even been worth more then the US dollar, while MS points have always stayed 20% more expensive over here.
It's $7.25 here for 500 points, already more expensive then psn equivalents. That would be 7.37 pounds for an 800 points game by todays exchange rate.
Anyway I would be happy if XBLA prices in Canada get on par with PSN, 14.99 for a 1200 point game instead of 17.40

There is always an exchange rate penalty.  Do you think banks on any level just provide services for free?  NO.  There is a fee for every financial transaction that involves an exchange of foreign currency.  Microsoft is a US company.  Regardless of whether it does business in the UK or Canada, the company has to at some point perform an exchange of currency, for which it incurs a fee.

This is one of the reasons why US companies refuse to do business with consumers outside of the US.  Not to mention the shipping expense, as well as import fees.  Nevertheless, once you get over those two shockers, the retailer then finds out the bank took a cut.

Don't believe me?  Take your ATM card, go across the border, and use it in the US to withdraw US funds.  The first hit you'll take is likely a $3.00 ATM fee, which is expected, but then next up will be a currency exchange fee. 

Explain how the transactions are different now, instead of using vague overarcing scenarios.

Previously, to my understanding, what a customer would do, is go to xboxlive or go to game store and buy a card using a credit card or cash.
For the xboxlive direct point purchase, MS pays a CC fee. For the store, MS sold to a distributor, and then that distributor sold them to the store, and then the store pays a CC transaction fee when someone comes in and buys the card with a CC.

What has changed in terms of costs to MS?
It cost more to buy an ms points card in UK than it did in the US, because of the currency. What's so different now?

If you bought your Microsoft Points through Microsoft, you paid face value.  It was NEVER a good idea to buy your Microsoft Points from Microsoft, same with the Xbox Live subscriptions.  Retail cards are sold MSRP, that is they're sold with margin.  Microsoft and Nintendo both did this.  Sony did not, Sony's cards are face value cards.  As I described elsewhere, a 1600 MP card may cost you $20, but it cost the retailer $15.00.  That margin, gives the retailer the ability to take a profit, incur some expenses, and even put the cards on sale. 

Anyway, when you go onto Xbox LIVE and purchase that content you're purchasing that content from an American company.  Microsoft, in order to accept that purchase in local funds (GBP), has to perform a currency exchange.  Or more correctly the bank who is performing the transaction does.  With Microsoft Points, the same issue existed if you purchased your points from Microsoft, but if you went retail (which was actually the more popular method of obtaining points) there was, as stated above , margin for the retailer to absorb any fees.  Which for them the currency exchange would not be one of, since they're a UK business doing business in the UK.

With Microsoft Points, VAT was included in the price of the Microsoft Point cards.  Now with real-world currency, prices need to reflect VAT as well.  This means that any content has to reflect a 20% VAT if the price of the goods wasn't previously aligned (because I'm sure there's margin in XBL goods too).  In the US, this means each and every State will be different.  Where as previously, I didn't pay taxes on goods because in my state MP cards are exempt from taxes, I will be charged sales tax for the Xbox LIVE purchase because Microsoft does business in my State and by law because they do they have to charge sales tax for online purchases.  For some states, this won't have an impact, they either already pay or they have laws against online sales taxes.  But for the vast majority of people across the US this is gonna bite.  You won't see it in the XBL price, an item will be price the same regardless of where you live, but when you go to check out, the price will reflect any sales tax.

Microsoft Points were, in every way, better.  Only stupid people thought they were worse or a scam.

And when you bought a card with points, it also reflected tax. This doesn't make any sense. There's no difference whatsoever.

Also, points cards had added VAT tax, hence why the prices were higher. You'll still be paying the same thing.

That margin will still exist! Just because it has a dollar value doesn't mean there's no margin.

 



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Adinnieken on 10 July 2013
theprof00 said:
Adinnieken said:
theprof00 said:
Adinnieken said:
In what should be absolutely no surprise to anyone. The whole reason why Microsoft made the move to Microsoft Points was because it was cheaper. By using a common currency and selling that currency world-wide in local denominations, Microsoft was able to avoid having to pay credit card fees.

So, yeah I could easily see price increases of 3% to cover the cost of credit card transaction fees. Not to mention, there'll likely be exchange rate fees that are figured into the costs.

Nope. Not surprised that MS is raising prices.

Also, MS doesn't pay those CC transaction fees. Remember, MS sells to distributors, and distributors sell to stores. Stores always pay transaction fees associated with purchases made through CC. There is literally no difference in moving from points to currency. Everything is still bought and paid for the same way.

Surprised? You still shouldn't be. The only thing that has changed is that you pay more.

EDIT: Oh wait, there is one change now, I guess, now you can't go on Ebay and buy 25$ worth of points from America and pay for it using a strong currency. That's gone.

1 Um on Xbox LIVE Microsoft pays those fees.  We're talking Xbox LIVE.

2Also Microsoft Point cards had an MSRP.  1600 MP = $20, however they also had margin.  Meaning Microsoft, as well as Nintendo, sold their cards to retailers for less than the face value.  So while YOU paide $20 for 1600 MP card, the retailer only might have paid $15.00.  Subsequently, they have a 30% margin.

3So yes, the retailer may have paid a CC fee if you paid with a CC, but that only cut into their margin. 

4Microsoft stated back in 2000 or 2001 when it announced its plans to go with it's own virtual currency, that the two reasons it did was because of exchange fees and credit card fees.  And the stated problem with those thing things was that both drove up the cost of content.

1 Yeah, so nothing has changed. You do know that users still had to pay with their cc to buy points through LIVE
2 Yeah, and there won't be a difference here, either. The cards will say 20$, the retailers will pay 18$, the distributors 17$.
3 Right, so nothing has changed.
4 *shakes head* You do know that the whole reasoning behind it was that MS would rather have you pay 20$ one time, than 5$ four times.
It saves them roughly 50 cents or so...and yet, they'll still be selling the dollar value cards, and will likely have you purchase in quantities on LIVE.

They still pay the same percentage, it's just now they'll be skipping the smaller charge, which is usually about 10-15 cents for a big retailer.
So even if you spent that 20$ buying 20 1$ items, the most they'll lose out on is about 5%, meanwhile, your cost went up 35%.
And trust me, there are still ways to push sales around, like not expensing until the end of the month, and other tactics like simply holding your cc info, so they can collect all at one time.

It's not rocket science.

1.  If you used a credit card to pay for Microsoft Points on Xbox LIVE, yes, Microsoft absorbed that credit card fee.  Again, the MAJORITY of consumers did NOT use Microsoft to purchase their Xbox LIVE Points through.  They used retail cards.  Yes, you could easily pay $20 for a 1600 Microsoft Point card, but you could also pay $17.00 for that card on sale.  Thus, if you bought your Microsoft Points through Microsoft you paid more for them than if you purchased them through retailers.  So, from a consumer perspective Microsoft Points were a value proposition.

2.  No, it isn't the same.  As with Sony, a $20 card cost the retailer $20.  The whole reason why Microsoft and Nintendo sold their cards at wholesale was to ensure retailers would carry them.  Sony encountered resistence because retailers don't make any money on a $20 Sony card.  Also, there are no distributors involved.  Microsoft, Nintendo, and Sony all sell directly to the retailer and supply them directly.  There is no wholesaler.  In order to ensure the ability to guarantee payment, they own the process.  From manufacturing, stamping, pressing, to retail.  This is why Microsoft, Nintendo, and Sony all take a chunk of each game sale.  The own and manage the entire process.

3.  Again, see above.  The card now will cost the retailer $20, not $15.  The retailer loses margin, so they no longer have the room to sell it at a discount.  If someone buys it on a credit or debit card, they take an automatic 3% loss.  There is now less incentive for retailers to carry cards for Xbox LIVE purchases.

4.  Again, no.  The biggest issue Microsoft had with using local currency is the fact every non-US transaction would incur an exchange fee.  If I buy Microsoft Poiints via Amazon.co.uk, in the UK, my £34 pays for 5200 Microsoft Points.  If I use a credit card, yes Amazon still pays that fee, but because Amazon UK is selling them and  I'm paying for the Microsoft Points card in GBP there is no exchange fee. 

Microsoft offers Microsoft Points online as a means of convencience, not because it's the better value.  The fact that Major Nelson highlights sales at retail for subscription cards and Microsoft Point cards should be a clue that Microsoft understands that the better value IS retail. 

I agree, it isn't rocket science, but it requires more knowledge of how things actually work than you possess.  You know nothing of how exchange works, you obviously know nothing about how console manufacturers own the process. 

This is my fucking problem.  People like this that actually think they know what they're fucking talking about but don't.  I'm sorry TheProf, you don't.  If something costs Microsoft more money, guess what it's going to cost consumers more money.  That's just the way it works.  In an effort to keep costs low for things like DLC and other online content, Microsoft came up with their virtual currency to avoid those costs directly influencing online prices.  Yes, if you bought 1600 Microsoft Points via Microsoft, you paid more than you could potentially pay at retail.  Likewise with subscription cards.

Not to mention, the red tape involved with taxation.  If the MSRP for the content doesn't go up for me, the final price will because now I have to pay taxes on that purchase.  I avoided it before, I can't now.  Before, Microsoft Point cards were untaxed.  Now, because every transaction is in real currency, I'll pay taxes.

Microsoft Points were better for gamers.  They might not have been as concvenient as using local currency, but they benefitted the consumer in every way when it came to what you paid in the end.  You paid less with Microsoft Points in the end than you did with local currency.



Adinnieken on 10 July 2013
theprof00 said:
Adinnieken said:

If you bought your Microsoft Points through Microsoft, you paid face value.  It was NEVER a good idea to buy your Microsoft Points from Microsoft, same with the Xbox Live subscriptions.  Retail cards are sold MSRP, that is they're sold with margin.  Microsoft and Nintendo both did this.  Sony did not, Sony's cards are face value cards.  As I described elsewhere, a 1600 MP card may cost you $20, but it cost the retailer $15.00.  That margin, gives the retailer the ability to take a profit, incur some expenses, and even put the cards on sale. 

Anyway, when you go onto Xbox LIVE and purchase that content you're purchasing that content from an American company.  Microsoft, in order to accept that purchase in local funds (GBP), has to perform a currency exchange.  Or more correctly the bank who is performing the transaction does.  With Microsoft Points, the same issue existed if you purchased your points from Microsoft, but if you went retail (which was actually the more popular method of obtaining points) there was, as stated above , margin for the retailer to absorb any fees.  Which for them the currency exchange would not be one of, since they're a UK business doing business in the UK.

With Microsoft Points, VAT was included in the price of the Microsoft Point cards.  Now with real-world currency, prices need to reflect VAT as well.  This means that any content has to reflect a 20% VAT if the price of the goods wasn't previously aligned (because I'm sure there's margin in XBL goods too).  In the US, this means each and every State will be different.  Where as previously, I didn't pay taxes on goods because in my state MP cards are exempt from taxes, I will be charged sales tax for the Xbox LIVE purchase because Microsoft does business in my State and by law because they do they have to charge sales tax for online purchases.  For some states, this won't have an impact, they either already pay or they have laws against online sales taxes.  But for the vast majority of people across the US this is gonna bite.  You won't see it in the XBL price, an item will be price the same regardless of where you live, but when you go to check out, the price will reflect any sales tax.

Microsoft Points were, in every way, better.  Only stupid people thought they were worse or a scam.

And when you bought a card with points, it also reflected tax. This doesn't make any sense. There's no difference whatsoever.

Also, points cards had added VAT tax, hence why the prices were higher. You'll still be paying the same thing.

That margin will still exist! Just because it has a dollar value doesn't mean there's no margin.

 

You know nothing, TheProf.  I'm getting really fucking tired of correcting your stupidty.

A Microsoft Point card costs me $0 in tax.  NONE!  Microsoft doesn't pay a cent in tax to my state.  I don't pay a cent in tax to my state.  NONE.

With real currency, that isn't the cast.  I may or may not pay tax on the card, but when I pay for the purchase of the item in US Currency by LAW Microsoft has to charge sales tax.

While the cost was slightly higher per Microsoft Point, it was only marginally higher, not 20%.  Trust me, I've cracked the numbers throughly in the past.  I've looked at the actual costs, I know what I'm talking about.  If you bought Microsoft Points cards via Amazon.co.uk, you paid nearly the same amount as in the US.  I think it was $1.08 vs $1.00 per Microsoft Point.  You saved money. 

The ONLY way Microsoft Points weren't a good value is if you bought them directly from Microsoft off of Xbox LIVE or Xbox.com.  If you bought them from retail, it represented a value for consumers.  

Sony cards, which are real currency cards, have no margin.  There is no likely reason why Microsoft would maintain margin on a real currency card. 

~

Edit: User was moderated by TruckOSaurus for this post



theprof00 on 10 July 2013
Adinnieken said:
theprof00 said:

And when you bought a card with points, it also reflected tax. This doesn't make any sense. There's no difference whatsoever.

Also, points cards had added VAT tax, hence why the prices were higher. You'll still be paying the same thing.

That margin will still exist! Just because it has a dollar value doesn't mean there's no margin.

 

You know nothing, TheProf.  I'm getting really fucking tired of correcting your stupidty.

1 A Microsoft Point card costs me $0 in tax.  NONE!  Microsoft doesn't pay a cent in tax to my state.  I don't pay a cent in tax to my state.  NONE.

With real currency, that isn't the cast.  I may or may not pay tax on the card, but when I pay for the purchase of the item in  US Currency by LAW Microsoft has to charge sales tax.

2 While the cost was slightly higher per Microsoft Point, it was only marginally higher, not 20%.  Trust me, I've cracked the numbers throughly in the past.  I've looked at the actual costs, I know what I'm talking about.  If you bought Microsoft Points cards via Amazon.co.uk, you paid nearly the same amount as in the US.  I think it was $1.08 vs $1.00 per Microsoft Point.  You saved money. 

The ONLY way Microsoft Points weren't a good value is if you bought them directly from Microsoft off of Xbox LIVE or Xbox.com.  If you bought them from retail, it represented a value for consumers.  

Sony cards, which are real currency cards, have no margin.  There is no likely reason why Microsoft would maintain margin on a real currency card. 

You started off arguing that prices have increased because MS is now taking more costs, but all you've ended up arguing is how now the consumer is eating all the extra costs, while MS is making more profit from cutting out retailer margins.

You haven't proven that the VAT tax is now a cost, because VAT was ALWAYS a cost.
You haven't proven that CC charges now apply, because CC charges have ALWAYS applied.

All you've proven is:
a) you will now be paying the taxes
b) MS is cutting retailers out of their margin
c) You will not be able to save on cards online

d) You'll still buy the xb1.

PS: I'm not reporting you. Why? Because I don't want to add insult to injury. You were wrong about MS taking more costs (which you've now argued the point of to the point of insult, assuring me that YOU are now bearing the extra costs). I can't promise you won't be moderated though.



thranx on 10 July 2013
theprof00 said:

1 Yeah, so nothing has changed. You do know that users still had to pay with their cc to buy points through LIVE
2 Yeah, and there won't be a difference here, either. The cards will say 20$, the retailers will pay 18$, the distributors 17$.
3 Right, so nothing has changed.
4 *shakes head* You do know that the whole reasoning behind it was that MS would rather have you pay 20$ one time, than 5$ four times.
It saves them roughly 50 cents or so...and yet, they'll still be selling the dollar value cards, and will likely have you purchase in quantities on LIVE.

They still pay the same percentage, it's just now they'll be skipping the smaller charge, which is usually about 10-15 cents for a big retailer.
So even if you spent that 20$ buying 20 1$ items, the most they'll lose out on is about 5%, meanwhile, your cost went up 35%.
And trust me, there are still ways to push sales around, like not expensing until the end of the month, and other tactics like simply holding your cc info, so they can collect all at one time.

It's not rocket science.


Usually for credit card transactions there is a per swipe fee(or a fee everytime you have to verify a credit card and make a purchase with it), and an overall fee on the amount. By reducing the per swipes (the number of times a CC had to be processed) they would save money. With MS points you could buy multiple games with one CC swipe buy buying points in bulk. Now every single purchase will be a different swipe. So there will be an additional fees for every purchase. They add up. That is why some bars and restaurants make you do a tab with a Credit card instead of using it a bunch of times.

 

Here is some info on it http://www.retailmeansjobs.com/swipefees

its a massive drains on business to have 3-7 % of your revenue taken right from you



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theprof00 on 10 July 2013
thranx said:
theprof00 said:

1 Yeah, so nothing has changed. You do know that users still had to pay with their cc to buy points through LIVE
2 Yeah, and there won't be a difference here, either. The cards will say 20$, the retailers will pay 18$, the distributors 17$.
3 Right, so nothing has changed.
4 *shakes head* You do know that the whole reasoning behind it was that MS would rather have you pay 20$ one time, than 5$ four times.
It saves them roughly 50 cents or so...and yet, they'll still be selling the dollar value cards, and will likely have you purchase in quantities on LIVE.

They still pay the same percentage, it's just now they'll be skipping the smaller charge, which is usually about 10-15 cents for a big retailer.
So even if you spent that 20$ buying 20 1$ items, the most they'll lose out on is about 5%, meanwhile, your cost went up 35%.
And trust me, there are still ways to push sales around, like not expensing until the end of the month, and other tactics like simply holding your cc info, so they can collect all at one time.

It's not rocket science.


Usually for credit card transactions there is a per swipe fee(or a fee everytime you have to verify a credit card and make a purchase with it), and an overall fee on the amount. By reducing the per swipes (the number of times a CC had to be processed) they would save money. With MS points you could buy multiple games with one CC swipe buy buying points in bulk. Now every single purchase will be a different swipe. So there will be an additional fees for every purchase. They add up. That is why some bars and restaurants make you do a tab with a Credit card instead of using it a bunch of times.

 

Here is some info on it http://www.retailmeansjobs.com/swipefees

its a massive drains on business to have 3-7 % of your revenue taken right from you

Actually, I was the one that explained that to him.

However, I also countered, and he agreed, that the majority way to buy points currently is to buy cards. In the future, this won't change much. It's the same reason why when you buy a game on PSN, it offers you to just purchase in 20$, 50$, etc, along with the direct game cost. While it is 3-7%, it's 3-7% on less than half the revenue stream, as retail based cards are greater than 50% of where points come from, and according to adinnieken, they are now cutting retailers margins out.

So, on 50% (conservatively) they will lose 3-7% (probably closer to 3% as high volume corporations tend to get much much lower rates per swipe), and on the other 50%, they will be making an extra 25% on the new found margin.

EDIT: Oh, also it's not 3-7%. It's between 10 and 70 cents, depending on volume, and pricing. So, on a dollar purchase, they will actually lose 10%, but on a 5$ purchase, it's 2%. Being MS, they probably also stay at the 10 cents area.



thranx on 10 July 2013
theprof00 said:

Actually, I was the one that explained that to him.

However, I also countered, and he agreed, that the majority way to buy points currently is to buy cards. In the future, this won't change much. It's the same reason why when you buy a game on PSN, it offers you to just purchase in 20$, 50$, etc, along with the direct game cost. While it is 3-7%, it's 3-7% on less than half the revenue stream, as retail based cards are greater than 50% of where points come from, and according to adinnieken, they are now cutting retailers margins out.

So, on 50% (conservatively) they will lose 3-7% (probably closer to 3% as high volume corporations tend to get much much lower rates per swipe), and on the other 50%, they will be making an extra 25% on the new found margin.


Sorry didnt read the whole thread. CC fees just piss me off. As far as I know there is no way around the per swipe fee, even if the charge is held, they still have to verify the card at the time of purchase. As far as I know. If you have info otherwise I am open to reading it. I didn't really bother with the rest of the stuff in the post sorry. I was only interested in the credit card processing part of it.



theprof00 on 10 July 2013
thranx said:
theprof00 said:

Actually, I was the one that explained that to him.

However, I also countered, and he agreed, that the majority way to buy points currently is to buy cards. In the future, this won't change much. It's the same reason why when you buy a game on PSN, it offers you to just purchase in 20$, 50$, etc, along with the direct game cost. While it is 3-7%, it's 3-7% on less than half the revenue stream, as retail based cards are greater than 50% of where points come from, and according to adinnieken, they are now cutting retailers margins out.

So, on 50% (conservatively) they will lose 3-7% (probably closer to 3% as high volume corporations tend to get much much lower rates per swipe), and on the other 50%, they will be making an extra 25% on the new found margin.


Sorry didnt read the whole thread. CC fees just piss me off. As far as I know there is no way around the per swipe fee, even if the charge is held, they still have to verify the card at the time of purchase. As far as I know. If you have info otherwise I am open to reading it. I didn't really bother with the rest of the stuff in the post sorry. I was only interested in the credit card processing part of it.

For instance, at my work, we do the same kind of processing. We hold a card, authorize it, and can simply keep adding later on. In the span of a couple days, this is no big deal. You can put off the authorizing until all charges have been incurred. So instead of it being treated as multiple swipes, it gets charged as one group charge. Like for instance, I bought journey and some dlc, and ps+ in one day, but on three separate authorizations, and it got grouped into one charge.

It is indeed very similar to a restaurant tab.

And yeah, CC fees are fucking unbelievable. The only other way around it is to be a big enough corporation that the CC company wants your business....kinda like walmart. Walmart probably has hefty discounts on swipes.



endimion on 10 July 2013

well one reason they used points was convenience for them.... one currency to price everything in the store was far better for them....

and yeah this a prime example of peeps bitching .... getting what they want and then realizing it might have been better before.... even if the price would have went up.... we loose the possibility to get discounted point cards and free points with the reward plan.... which is a direct loss for customers.... but hey they got what they wanted now live with it



theprof00 on 10 July 2013
endimion said:
well one reason they used points was convenience for them.... one currency to price everything in the store was far better for them....

and yeah this a prime example of peeps bitching .... getting what they want and then realizing it might have been better before.... even if the price would have went up.... we loose the possibility to get discounted point cards and free points with the reward plan.... which is a direct loss for customers.... but hey they got what they wanted now live with it

Yeah but who has confirmed that? Like, Sony gave me 10$ a little while ago. Why wouldn't MS continue to give just currency values? Sony could do it easy as pie. And you can get cheaper psn cards on ebay.

And really, all MS had to do was change the way points worked. They didn't NEED to go into currency, and I'm not sure at all that they did this because of consumers either. It could have more to do with the windows 8/ windows phone integration where points might become a nuissance. Rather than doing this to address complaints about points, it might have much more to do with streamlining the platforms.

I mean, if they wanted to address user complaints, all they had to do was change the points values to match local currency pennies, and charge rates accordingly. That would have solved both the supposed issue with CC swipes, taxes, and all the user complaints. But yaknow, I'm no genius. If they didn't simply use that answer, then that's because my answer is for a different question. Again, this is likely not related at all to user complaints about points. 

EDIT: This is simply the result of merging the xbox marketplace into one central area.