The Contract-Bound Xbox: $129 More Than Buying a Console & LIVE Separately

By , dealnews Features Director

Microsoft confirmed Internet rumors yesterday by officially announcing its new contract-based Xbox promotion, which entails giving consumers the Xbox 360 4GB Console with Kinect Sensor for just $99 — if they sign up for a 2-year Xbox LIVE Gold membership in the process. (Currently the offer is only available on location at Microsoft Stores.)

If this promo sounds like your cell phone service plan that made your handset more affordable, that's because it's exactly like that, replete with early termination fees. Except, unlike contract-based phone service, Xbox LIVE subscriptions (up until this point) have been more akin to prepaid calling cards. That is to say, they are sold in small, finite increments and we more frequently see deals on them. You can purchase a fixed number of months at a discount, or even use various rewards points to score a month here and there.

And as such, the prospect of being locked into a static LIVE membership plan, with the unchanging rate of $14.99 per month, raises the question: Is this intriguing promotion actually a deal at all? According to our archives, the answer is a resounding "no."

Breaking Down the Costs of the Xbox 360 Contract "Deal"

A 4GB console with Kinect for just $99 seems pretty choice at first, when you consider the $300 retail price tag. But we, of course, see the bundle for less than retail fairly consistently. In fact, we've seen the Xbox with Kinect bundle for as low as $200, on Black Friday. (We saw it with a $100 credit for $300 in December as well.) More recently however, we saw the bundle reach prices between $250 to $256 (from Amazon, Toys "R" Us via eBay, Fry's Electronics, and Microsoft Store) four times over the past two months. (Currently, the lowest total price we could find, with reasonable stock left, is $284.99 at Amazon, a low by $5.) Based on these numbers, let's say then that a shopper with a customized deal alert could, in the next two months, snag the console bundle for $250.

What then would you pay for an Xbox LIVE Gold membership if you go it alone? The lowest price we've seen for a 12-month membership is $30, but we routinely see deals between $35 and $40. These memberships don't activate upon purchase either, so you could theoretically buy two at once, or even wait all year for another stellar deal (perhaps around Black Friday) to purchase before your current year is up.

So our careful deal-hunting Xboxer could get the same package — the console, Kinect sensor, and 24 months of Xbox LIVE Gold service — for approximately $330. If you went with Microsoft's new contract-based plan, you will pay $458.76 after two years. That's a full $128.76 more than our cobbled deal bundle.

Microsoft's Misguided Attempts to Shift Focus to Other Media

Microsoft has been open about its attempts to promote the notion that its console and LIVE services can appeal to more than just diehard gamers. In fact, just last month Microsoft announced that its LIVE subscribers were spending more time streaming media than gaming. Fittingly then, this promotion discounts Xbox hardware in order to lock consumers into a service contract, thus pushing them toward Xbox LIVE acclimation.

If Microsoft truly wanted to entice consumers with this promotion, it might have been more successful by offering enhanced LIVE services, as was rumored last week. But by offering just a standard Gold membership, this isn't much of a deal for a shopper who knows better; a few customized alerts for an Xbox 360 deal and LIVE membership will yield far better savings with just a little bit of patience.

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DealNews may be compensated by companies mentioned in this article. Please note that, although prices sometimes fluctuate or expire unexpectedly, all products and deals mentioned in this feature were available at the lowest total price we could find at the time of publication (unless otherwise specified).


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Of course it'll cost more to go under contract - rarely would anything under a term contract cost less that paying up front. Buying a car in cash is cheaper too, but not everyone can do that. Perhaps is MS is trying to broaden its user base beyond those who can easily shell out $330+ and target the market that is happy with paying $30/mo.
Lindsay Sakraida (DealNews)
Yeah we also end up buying a lot of stuff too. At least they're deals!
Nice! Very nice investigation. I check your website everyday and i often use the savings codes you guys add. I hope in some way this is helping you guys because you guys sure help me every day. Because of you guys, i don't miss out on so many great deals! But i also buy a lot more stuff! 
 LOL. No problem!
Lindsay Sakraida (DealNews)
Ah, thank you. It looks like we inverted the 2 and 7. Big big thank you for catching it. 
Good article. Microsoft is going crazy with this whole LIVE membership thing. They're also banking on people not canceling after the first 2 years. Should just offer the xbox for free if they're going to do this. People still pay more, but no upfront costs.

By the way, I don't think 458.76 - 330 = 178.26?