Zune Marketplace’s Absurd Pricing Scheme

by James R. Stoup Nov 13, 2006

Lately I have been trying to avoid talking about Microsoft. I figured the whole Zune thing had been covered to death and so my input wasn’t really needed. I continued to think this until I read about Microsoft’s “Zune Marketplace”. This iTMS competitor was so badly designed I just had to write something about it. Even though by now I expect Microsoft to be incompetent, this was taking ineptitude and elevating it to an art form. But let me lay out the facts for you lest we get ahead of ourselves.

As we all know, purchasing songs, videos or games from the iTMS only requires a customer to create an account and have a valid credit card. Thus, like most other business transactions, you purchase a good and the price of that good is billed to your credit card. It works the same way at the grocery store, at the gas station or in a restaurant. And for the most part it seems like a pretty good system. Plenty of people have credit cards and they understand the concept of purchasing items with them. So, how, you ask, could Microsoft screw this up? No, first you might ask, what is there to screw up? I mean, the system already works. All you need your customer to do is show up with a credit card? Right?


I suppose Microsoft saw this as a chance to “innovate”. And we all know what happens when they innovate (in the 25 Worst Tech Products of All Time MS has many entries) This was one of those times when Microsoft should have just stolen the iTMS concept lock, stock and barrel. It would have been unimaginative, but at least it would work. Instead, they decided to go with the following scheme:

The 5 Step Plan To Fill Your Zune With Legal Music
1. Create a free Zune account
2. Register a valid credit card
3. Buy “points” from MS
4. Scratch your head as you try to figure out why you need to buy “points” to buy songs. Why can’t you just use standard American currency? Doesn’t Microsoft accept the Dollar anymore?
5. Say “screw it” and go buy an iPod

Adding a completely unnecessary layer of confusion is, in and of itself, a bad thing. But it wouldn’t be Microsoft if they didn’t go that extra mile to rape their customers. You see, when you buy these “points” you can’t buy them as you need them, you have to purchase them in Microsoft defined denominations. In other words, Microsoft just invented a currency and they require you to invest in this currency before they can sell you any music. And just if you were wondering, here are the denominations:

$5 = 400 points
$15 = 1200 points
$25 = 2000 points
$50 = 4000 points

But wait, it gets BETTER! There isn’t a 1 to 1 correspondence between the value of a “point” and the value of a penny. Let me break out some math for you:

$5 = 400 points
$1 = 80 points
100 cents = 80 points
1 cent = .8 points
1 point = 1.25 cents

So, let me explain why this is important. If Microsoft prices a song at 79 “Zune Points” is it cheaper than a 99 cent song from Apple? I don’t know, lets do the math.

79 points * (1.25 cents/1 point) = 98.75 cents (or approximately 99 cents)

So the answer is “no, the MS song isn’t cheaper, it is the same price as Apple’s”. So, that means, to find the actual price of anything on the Zune store you have to multiply it in your head by a ZP (Zune Point) factor of 1.25, and since the general populace isn’t to keen on doing math in their head I can only conclude that this will cause no small bit of confusion. But wait, it gets better.

If you recall $5 is the lowest denomination you can purchase. So if you want to buy one song from the Zune Marketplace you have pay Microsoft $5 up front and let them keep your remaining 321 points (or $4.01, this is beginning to get confusing).  Now, the expectation is that you will be back purchasing more songs (and more points) and so you won’t care about your balance. But, what you are in fact doing is giving an interest free loan to Microsoft (because they, of all companies, need the money).

Of course, you could just spend all of your points each time you buy music, but would require you to purchase songs in multiples of 31,600 points (that being the LCM of 79 & 400). That works out to 400 songs for $395. A better plan would be to buy 5 songs for 395 points (or $4.94) and just save your 5 remaining points for some future purchase. In effect, Microsoft has created a store that only accepts gift cards as the valid method of payments. And if you don’t think thats insane then you obviously already have pre-ordered your Zune.

I know what you’re thinking. Why would Microsoft do this? Perhaps to screw customers out of their money by creating a complex, uselessly confusing layer designed to hide the real price of their products? No, of course not. Why, according to Zune.net the reason is:

The Points that you purchase can be easily managed in a special account that you can use on Zune Marketplace and Xbox Live Marketplace.

Well there you go. It isn’t targeted at average consumers it is targeted at these special Marketplace users. So how many of theses users are there? To figure that out we need to know how many Xbox Live users are there. Well, there have been 24 million Xboxes sold and almost 6 million Xbox 360s sold (as of Sept. of this year). So, if every Xbox owner also buys a Zune, and they also decide to use both Marketplace services (or else what’s the point?) then this service will be useful to, at most, 30 million people. That assumes that all of those people who bought Xboxes outside the USA fly over here and buy a Zune (because the Zune is US only baby!) and then use that Zune in America to load up on their music. (presumably they can then fly home and enjoy their music, assuming of course, that they can both read English and enjoy American music, but whatever)

A more realistic figure is Microsoft sells around 2 million Zunes and maybe half of those users also use the Xbox Live Marketplace. So, this horrible system has been put in place (according to Microsoft’s logic) to make life easier for less than 1 million people.

“Welcome to the Social”, b***h!


  • Maybe ‘butt-head’ was a big harsh. I should have left it at ‘short-sighted.’

    Jedder had this to say on Nov 14, 2006 Posts: 2
  • Anybody gone to business school? Run a company or two? Take Business Phsych?

    The need for the $249, not $250 is actually perceived invention of the human mind from years of seeing this. There’s an entire chapter on it in some book I’ve tossed out years ago but basically American’s and most of the world are accustomed to seeing prices this way for legit products from legit business.

    Maybe you should make a movie on it.

    The points system is good for MS. That’s a net $3.2 million dollars in interest per year for every 2mil units sold with a $5 point purchase. I realize the Xbox thing uses the same system, but games and points go together. Music and points? It will sell, there’s a sucker born every minute. But in stores next to the iPod it might be tough which is why some stores were told to move the pods to another location and spiffs are as high as $50 microsoft credit (however no points here).

    xwiredtva had this to say on Nov 14, 2006 Posts: 172
  • That is a major ripp-ff and sucks!

    I will never open an account with Microsoft!!

    Greetings from Germany!


    Toby Heitmann had this to say on Nov 14, 2006 Posts: 1
    Yeah. I, I, I…Listen, that virus you’re always talking about. The one that, that could rip off the company for a bunch of money…

    Yeah? What about it?

    Well, how does it work?

    It’s pretty brilliant. What it does is where there’s a bank transaction, and the interests are computed in the thousands a day in fractions of a cent, which it usually rounds off. What this does is it takes those remainders and puts it into your account.

    This sounds familiar.

    Yeah. They did this in Superman III.

    Hywel had this to say on Nov 14, 2006 Posts: 51
  • “They do it because psychologically $249 seems much cheaper than $250.  MS is doing the same thing, just implementing it in a different way.”

    No it is not, because MS is keeping the change from your $250 bill.
    They will always have a float in the millions, and get to keep the interest.

    bob_dobbalina had this to say on Nov 14, 2006 Posts: 1
  • Seems like the “Profit Paradox” at work ... something that Microsoft is expert at. 

    (In short, the “Profit Paradox” could be defined as how a company “kills itself” in it’s efforts to “miximize immediate profits.”  Sometimes, the marginal “Lifetime Rate of Return” of the “next penny” added to this quarter’s bottom line is significantly less than that “same penny” remaining in the consumer’s pocket ... and having that consumer maintain a positive image of one’s company is his or her mind.  For example, if I were to say choose one of the following to describe Microsoft, which answer do you think most people would respond with - per Star Wars (A) the Good Side of the Force or (B) the Evil Empire?)

    Microsoft could just as easily have set it’s conversion rate for it’s marketplace at 100 points per 1 dollar instead of the asinine 80 points per 1 dollar.  But no, it was all “calculated / desinged” to maximize their “bottom line” at the “consumer’s expense.” 

    Genius?  Sure ... if your an MBA and only concerned with this quarter’s profits.  Stupid?  Absolutely ... if your interested in building something that is going to last smile

    DavidEzra had this to say on Nov 14, 2006 Posts: 1
  • —Off Topic—

    Mac Pro get’s 8 Proccesors next week :>)


    xwiredtva had this to say on Nov 14, 2006 Posts: 172
  • No it is not, because MS is keeping the change from your $250 bill.

    In what way?  You buy your points and you keep your points.  There are going to be remainders left over, but MS doesn’t keep them. 

    If I buy a $15 iTunes gift card (or win one, as I did at Spinmatters.com, the best site on the web for fair and balanced political discussion!), I can buy 15 songs.  But I have 15 cents left over that I can’t get back and can’t buy anything with.  Does that mean that Apple keeps it?  No, it’s mine.  It just goes toward that next gift card or purchase, should I choose to do so.

    Beeblebrox had this to say on Nov 14, 2006 Posts: 2220
  • TRUE! But your billed .84 cents, not another $5. It takes $100 to almost break even point/cent ratio.

    xwiredtva had this to say on Nov 14, 2006 Posts: 172
  • That’s true, xwiredtva.  And I agree that forcing bulk points buying is not a good idea, but the point is that MS doesn’t just “keep the change” as asserted. 

    And people are pointing out these techniques, like pricing manipulation and interest on floating revenue like MS invented them as part of their evil schemes - when Apple and just about every other corporation uses these techniques all the time.

    Beeblebrox had this to say on Nov 14, 2006 Posts: 2220
  • Agreed. But look at in the grand scheme. Apple isn’t FORCING you into buying bulk.

    ALSO because your trading money/money they cannot legally use your change to invest. BUT the second you PURCHASE points, they can take that money as income, you cannot use overages in a customer account to INVEST.

    You buy the points, transaction is complete. When you purchase music/movies/games on iTunes with a $15 gift card, you have a balance (overage) that is NOT commited thus apple cannot legally count towards there bottom line, thus invest.

    Hope that makes sense.

    xwiredtva had this to say on Nov 14, 2006 Posts: 172
  • One other note on the overage… You can request that the .15 cents be sent to you somehow. And by LAW Apple must comply within 30days. Microsoft can tell you to lb sand, you purchased the points, transaction complete.

    xwiredtva had this to say on Nov 14, 2006 Posts: 172
  • >when Apple and just about every other corporation uses these techniques all the time. <

    I can’t find one with Apple.

    xwiredtva had this to say on Nov 14, 2006 Posts: 172
  • Hope that makes sense.

    You are trying to draw a distinction where there isn’t one.  You PURCHASE a gift card.  You PURCHASE points.  You have a balance in iTunes just as you have a balance in the Zune Marketplace.

    To say that a company cannot invest non-income is fantasy.  Banks invest your savings account money all the time.  And you can bet that Target and Wal-mart aren’t sitting on the money they’re raking in from those holiday gift cards, balance or not.

    The ONLY difference here is that MS forces you to buy bulk while Apple doesn’t.  That’s a legit criticism.

    Beeblebrox had this to say on Nov 14, 2006 Posts: 2220
  • I can’t find one with Apple.

    $249 instead of $250 is psychological manipulation of pricing.  Unless you can explain some OTHER reason why everything they sell just happens to be priced this way.

    Beeblebrox had this to say on Nov 14, 2006 Posts: 2220
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