Xbox 360 2-Year Subscription Contract Examined — Is It Worth It?

Last week, we reported that Microsoft had said that the new Xbox subscription model is pivotal to the company’s business. You had a few choice words in response, and while I’ll refrain from chiming in as a voice in the choir, I do tacitly agree with you.

But for the sake of fairness, let’s analyze Microsoft’s existing subscription packages for the 360, which come in three flavors — all equipped with an initial down payment followed by two years of monthly fees. We’ll do some back-of-the-envelope calculations to find out if these deals have any merit.


Every package requires you to sign up for a two year Xbox LIVE Gold Membership at a rate of $15 per month — a total of $360 after 24 months.

1. Xbox 360 250GB Console with Kinect
      Down payment: $150
      Total price: $510

2. Xbox 360 4GB Console with Kinect
      Down payment: $100
      Total price: $460

3. Xbox 360 250GB Console
      Down payment: $100
      Total price: $460

To put these figures in perspective, let’s compare them to what you would pay for the exact same products and services, but without the mandatory two-year contract.

An Xbox Live Gold Membership costs $5 per month. After 24 months, that amounts to $120.

1. Xbox 360 250GB Console with Kinect
      Console price: $400
      Total price: $520

2. Xbox 360 4GB Console with Kinect
      Console price: $300
      Total price: $420

3. Xbox 360 250GB Console
      Console price: $300
      Total price: $420


We can see that while the first package is actually $10 cheaper if you go with the two-year contract, the other two packages are $40 more expensive. Now, I understand that sometimes, you simply can’t afford to drop $300 upfront, so having two years to pay off that Xbox seems like an inviting option, even if you have to end up paying a little more. Hold on a second, buddy. I’ve done some more math for you.

If you were to grab a credit card with 12% APR, you could charge the $300 console and the $5 subscription fee to it every month, then go without paying a dime for a full 18 months before the total compounded interest has accumulated to $460, the total you would have paid with the two-year contract. But I can’t, in good conscience, recommend going a year and a half without paying a dime toward a credit card bill.

So let’s go by Microsoft’s terms: pay $100 upfront and $15 a month until you’ve completely paid off the debt. How long would that take? About 22 months — roughly on par with Microsoft’s deal, with one key exception that I’ve been holding as the ace up my sleeve…

You can cancel your Xbox Live subscription at any time.

You’re not locked into a 2-year contract. You can switch to a PS3 or a PC at any time without penalty. You can take a month off gaming without feeling like you’re wasting your $15 subscription.

Microsoft’s deal is aimed at creating long term customers by locking you in for two years. It provides no benefit to the consumer that cannot be obtained from a loan.

Bottom line? Pay upfront. If you really can’t pay upfront, and really can’t wait to save up enough money to pay upfront, then you’re probably better off borrowing the cash at a reasonable interest rate. At least you’ll have the option to cancel your LIVE subscription whenever you please.

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