I’ve been an Xbox Live Gold member for the last few years now, and other than the first time I bought a Gold Membership (through the Xbox), I have always bought my memberships via cards that were on sale (usually through Amazon or eBay’s daily deal). As a result, my subscription had well over 20 months left on it.
Why do I mention 20 months? Well, that’s the most that Microsoft will look at when you convert your existing Gold membership into a Family Pack. You see, the Family Pack costs $99.99 per year (and at time of writing, the only way to get it is to go through Microsoft’s website), and for every month remaining on your membership, you get a $5 discount. Having more than 20 months doesn’t do anything for you, in fact they are just lost.
Now, the whole point of having a Family Pack is having more than one person on your membership (up to 4 in fact). Whenever you bring someone else on board, for every 2 months that they have remaining on their membership, the Family gains an extra month. The only limitation to this is that the maximum length of the Family membership is 36 months. So if your (up to 3) family members have a combined total of more than 72 months, the excess will be lost. If you are adding these members right after you bought your initial membership, then you anything over 48 for the family members will be for not (since the Family membership comes with 12 months).
If you are in a situation where you have one (or more) member with a long period of membership left, and one (or more) member with 20 or less, you can have someone with 20 or less instantiate the Family Pack, and then have the member(s) with the longer period join up, thereby increasing the duration of the initial membership. The only downside to this, is it makes them the Head of Household. This means that they have the ability to dole out allowances of MS Points to the various other members, and can set rating limitations. Additionally, they are in charge of billing.
I ultimately ended up not doing this. I wanted to be the one in charge of all the billing, additionally, I had a decent balance of MS Points already in my account, and would be more likely to be the one doling them out, rather than the recipient. As a result, I lost out on 13 months of excess time.
In the end though, it is ultimately worth it. $100 a year for up to 4 people is still cheaper than buying multiple gold memberships, even when they are on sale.
If you have any questions about the family pack, or just want to learn more, I encourage you to check out the Family Pack FAQ
UPDATE 22 Feb 2012 — After you go Family Pack, you can no longer take advantage of sales of 12 Month Gold Cards as you are not allowed to add them to your account. This means you are locked into the $100 a year price for your family.