Is Microsoft Going to Phase Out its Microsoft Points System?

An interesting rumor is circulating around the Internet: Microsoft may be phasing out its Microsoft Points system. The rumor is based on reports that Microsoft, in recent publishing agreements with mobile developers, is asking developers to plan for changes concerning their downloadable content and in-app purchases. Now if these rumors are really true and Microsoft Points are headed for the dustbin then I say good riddance! 

But first some background. Inside Mobile Apps reported that by the end of the year Microsoft plans to phase out its points system for its various services, including Xbox Live, Zune Marketplace and Windows Phone, and implement a straightforward cash-based system. When asked to elaborate on this, a Microsoft spokesperson responded with “we do not comment on rumors or speculation.”

Considering speculation, one of the main reasons Microsoft could be replacing their points system, besides the fact that many customers are very annoyed by it (which I’ll get to in a minute), is that they want to bring their pricing system more in line with their Windows Phone competitors, such as with Apple’s App Store and Google’s Android Market.

This transition shouldn’t be too big of a change either. Microsoft already uses real dollar prices with its Xbox 360 games and Windows Phone app purchases. Microsoft Points themselves are generally applied to Xbox Live Arcade games and add-ons, along with in-app purchases with Windows Phone apps. Customers with point balances will see their remaining points converted into real currency when the transition happens.

So if Microsoft Points really are going the way of the dinosaurs, will we miss them? Well, there might be a few gamers out there who will miss the little Microsoft Points icon (it looks like a little sharp and intense version of Pacman), but all in all, I think plenty more of us really won’t miss it. To many customers, this system is a nuisance.

First, the system adds a superfluous layer to the process. When a customer goes to purchase an item on the Xbox Live Arcade for instance, they have to bring up a separate menu to buy virtual points, which end up being paid for with actual dollars anyways (or whatever your local currency is), which then allows the customer to pay for the content with fake points that were bought with real money. Conducting this transaction only takes a few seconds; it’s not that big of a hassle. Nevertheless it’s unnecessary.

The other thing to consider is the infrastructure behind the points system. Who’s paying for all the plastic and packaging that goes into making the points cards? Who’s paying for the monitoring of the points transactions, making sure that everything adds up and goes smoothly? I confess I am ignorant when it comes to this process, but it nevertheless raises questions as to how materially necessary the points system is.

The points system also further abstracts and obfuscates the purchasing process. As you may have noticed, the point values aren’t proportionate to the dollar value attached to the purchase. But as consumers we are used to the relative value of our own currency in ascertaining pricing and budgeting. Clever customers could possibly memorize the more common point amounts as they relate to dollar amounts, or even calculate the relative exchanges when making their purchases, but in the end the points system functions as another layer of abstraction that makes gamers’ purchasing decisions more difficult.

And why the tiered purchase amounts? The minimum point package the customer can buy is the 400 point package for 5 dollars. The amounts differ from country to country, as the different currencies line up differently with the MS Points. But the end result for everybody is a rigid purchase structure that often forces the customer to pay more for the actual content since the content usually costs less than one of the points packages, leaving the customer with some extra currency in their account that they didn’t need at the moment. Of course if you browse the market regularly, you’ll be using up many of these extra sets of points. Overall, the addition of the extra layer of currency ends up forcing the customer into a game of arithmetic just to purchase what they want regularly (glass half-full types could argue that you get to play a game before you even buy the game).

Why did Microsoft do this? Many commenters note that Microsoft could have just used the simpler cash-based transactions from the start. Before we get too cynical and start suggesting customer manipulation, let’s consider the explanation on the Microsoft Points Wikipedia page. Apparently the points are misaligned from the currency because they have to be exchanged with multiple currencies around the world. Okay, fair enough...I think. But why implement the points in the first place? Well, it seems like Microsoft just wanted to implement the points to dodge those pesky credit card fees. I can’t blame Microsoft for that, those fees can be ridiculous. Though I personally use a card to purchase the points themselves, this question could probably be traced back to the costs I wondered about above. Most likely, Microsoft did some sort of cost-benefit analysis and decided to implement the points in the end. Too bad they didn’t consider customer frustration and mounds of plastic added to landfills in their equation.

In the end, if this rumor proves to be true, I commend Microsoft for choosing to do away with the point system. Microsoft Points add an unnecessary layer of abstraction to the purchasing process and I think it would be safe to say that many of us will be relieved when the system is no more.

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