After months of hype Microsoft will finally release the Zune media player tomorrow. We assume that someone, somewhere will actually buy the damn thing. If you’re one of those soon-to-be Zune owners there’s one last thing you should know before you run off to stand in line at the local Best Buy. When the Zune Marketplace launches later this week you won’t be able to buy songs with your local currency. That’s right, your money is no good in the Zune music store. Instead, you’ll have to convert real money to Microsoft Points, and then use those points to purchase songs. Of all of the puzzling Zune “features”, this one has to be the strangest.
What’s all this talk about Microsoft Points? Microsoft Points, the coin for the Zune Marketplace realm, is a system that works across borders, including Xbox LiveÂ® Marketplace and other Microsoft properties. You can buy Points from the Marketplace by using a credit card or you can pick up Microsoft Points cards at a participating retail location.
Gamers and Microsoft Xbox enthusiasts are undoubtedly rolling their eyes right about now wondering what my problem is. The rest of you are likely scratching your heads wondering what the hell a Microsoft Point is and why you can’t just use your credit card to buy music from Microsoft the same way you can just about anywhere else in the free world.
Microsoft Points were introduced a while back as a way to facilitate transactions in Xbox 360 Marketplace. Microsoft claims that Microsoft points will finally enable affordable micro-transactions. Because all online transactions cost money to process, small transactions have traditionally not been practical or affordable. It doesn’t make sense to sell something for a few cents when most of the cost will be eaten up by processing fees. By translating dollars, pounds, euros, and yen into Microsoft points first, Microsoft can facilitate extremely small monetary transactions at almost no cost. Essentially, Microsoft pays the transaction fee on the initial conversion, then processes subsequent transactions directly without going through the traditional middlemen (banks, credit card gateways, etc.).
Microsoft recently told Gizmodo that the point system will be used in the Zune marketplace because it was so well received by the Xbox community. While that may be the case, you have to consider the demographic makeup of the Xbox community. If Zune and the Zune Marketplace are going to effectively compete against Apple and iTunes it might behoove Microsoft to consider accepting payments in the manner most adults are used to making them. The whole process of buying Microsoft Points is sort of like buying tokens at a video arcade. Something most of us haven’t done in decades.
There’s more to this story, of course (there’s always more when Microsoft is involved). Individual songs can be purchased from the Zune Marketplace for 79 Microsoft Points. That might sound like a deal when compared to iTunes 99 cent song pricing – until you realize that 79 Microsoft points is around 99 cents. It all just seems like a lame way to try to make Zune tunes appear to be cheaper than iTunes.
Here are a few of the more obvious problems I have with Micosoft Points:
- You have to buy a minimum of $5 US worth of points to fund your account. If you only want to buy a couple of songs, too bad. Of course, once you’ve got those extra points sitting around Microsoft is hoping you’ll buy a few more songs. It’s more likely that consumers will just be confused or offended by the whole concept and skip buying points altogether.
- The conversion rate for the Microsoft Point is not pegged to the US dollar, or any other currency for that matter. In fact, Microsoft seems to have gone out of their way to make it difficult to translate points to local currencies. A dollar buys 80 points, a Pound buys 120 points, a Euro buys 67 points. If you’ve traveled to foreign countries you know what a pain currency conversion can be. Thanks to Microsoft’s point system you can now experience the aggravation of currency conversion without even having to get a passport (although Microsoft would be happy to give you a passport).
- No interest is paid on the money you’ve deposited to your account. It’s conceivable that some users may deposit more than the minimum in their accounts in order to avoid the annoyance of constantly having to buy more points. Collectively Microsoft could be holding huge sums of money. On the off chance that the point system actually catches on, this could turn into a nice profit center for Microsoft.
While it’s great that Microsoft has found a way to make micro-transactions affordable, it’s hard to avoid the conclusion that they are essentially positioning themselves as a bank, while at the same time avoiding all of those pesky regulations that most banks have to comply with. Microsoft is trying to create its own currency and it’s only a matter of time before governments around the world begin asking questions about all of this.
In the meantime I sort of wonder if Microsoft might try to pay Universal their Zune royalty in Microsoft Points.