Real money could be more expensive than points on Xbox Live.

JULY 10, 2013 • Microsoft Corp.’s beta test in the United Kingdom of the new real money transaction system for Xbox Live is raising some consumer alarms. Users in the test are reporting that games converted from Microsoft Points to real money are costing more.  The point values are being converted into pounds in real time  however, the conversion ends up costing consumers more for the same points value than was charged previously. For example, a game that used to require 1,600 Microsoft Points now costs £14.99. Previously, purchasing 1,600 points cost the British user £13.20. Banked points already purchased before the beta appear not to be affected by conversion fluctuations, as Microsoft has previously said banked points will be given an amount in local currency that is equal to or greater than the marketplace value.

Impact: If it wasn’t for all the other problems the Xbox One is facing this would be of minor concern.  However, consumers are leery of Microsoft right now and the message is getting out that they are hiking prices even if that is not the case.  The move to real money from Microsoft Points was seen as a positive for consumers.  However it may show you need to be careful what you ask for. On balance, real money transactions seem like such a more transparent process than purchasing proprietary virtual tokens. Currency fluctuations, unfortunately, can create headaches for mainstream consumers and merchants alike. European gamers already feel shafted thanks to the pound and euro trading higher than the dollar. So a €299 or £299 console purchase translates to $386 and $448 respectively. In all fairness, this is a beta test, and Microsoft has not disclosed under what formula that its points are assigned a value that can be converted into local currencies.  What is clear is that this is one more public relations headache to be added on top of the Xbox One DRM and always-on connection issues that had to be stepped back from post E3. Consumers are a prickly bunch when it comes to perceived value. They like new features and convenience, but they are often averse to change – especially change that costs them money or adds friction to how they use a trusted product. So while many Xbox Live subscribers have called for a change to real money, doubtless few of them took into account the currency value ramifications. Taken by itself, Microsoft could easily massage subscriber discontent in any number of ways from offering free content, to free access to additional entertainment providers. But added to the growing list of perceived Xbox One missteps, Microsoft is courting a consumer-unfriendly status with mainstream consumers that will cost millions in marketing to correct. Worse, the perception of turmoil within the management ranks in Redmond only grows.