Xbox One, or Damned if You Do…

24 06 2013

When the PlayStation 4 was announced, rumors were buzzing that it (and the as-yet-unofficial Xbox vNext) would incorporate some sort of protection against the use of used games. Immediately after the official announcement, Sony representatives said that used games would be playable and that they’d have more information on the full policy later. This seemed to indicate that the basic statement that used games would be playable wasn’t the whole story. This was met with some minor grumbling, but attention quickly shifted to the impending reveal of the next Xbox.

In the weeks leading up to Microsoft’s announcement event, rumors about their offering came fast and frequent. The system would be called “Xbox Infinity.” It would require a constant internet connection. It wouldn’t allow used or loaned games. These rumors seemed to draw confirmation from sources purporting to be (and perhaps genuinely) within Microsoft, with at least one vehement defender of the supposed always-on feature seeming to lose a Microsoft Studios job due to some poorly thought out tweets. The event finally came and went, and rather than slowing the flow of rumors and supposition, it provided just enough information to kick the rumor mill into overdrive – a process yet again aided by a serious lack of message discipline (and possibly a genuine lack of internal certainty and/or understanding) from Microsoft personnel. Some inside sources were saying it had to be online at all times. Others were saying it would need to connect once a day. Some were indicating that used games would work fine, while other reports had some sort of restrictive licensing system in place. Microsoft was saying almost exactly what Sony had said, but they didn’t seem content to leave it at “we’ll tell you more later,” and so we heard bits and pieces from a variety of well-placed internal sources, all combining to make the system’s requirements and capabilities maddeningly unclear. The specter of constant internet connectivity and restrictive “phone-home” provisions coupled with the mandatory Kinect sensor waiting eagerly for the magic words “Xbox on” fueled howls about invasive surveillance and onerous removal of genuine ownership. All the while, there was some sense that the more in-depth reveal of the system at E3 would clear the air.

At this point, E3 has come and gone, and the air has certainly cleared – just not in any way that Microsoft intended. The once-a-day phone home was confirmed, angering plenty of gamers, especially military personnel overseas without access to reliable internet connections. Games could be resold… at “participating” retailers and only if the publishers allowed it. The Kinect was only listening for the very specific phrase “Xbox On” when powered off, and all of its powered on functionality was subject to robust privacy controls, but it had already been described as a “twisted nightmare” by Germany’s commissioner of Federal Data Privacy. A bill to require an indication when a set-top box is watching viewers seemed timed to coincide with the Xbox One news (though the technology mentioned in the linked press release about the bill only mentions a patent filed by Verizon). Microsoft tried to play up the enhanced functionality that would be made possible through more rigid digital rights management – primarily the ability to share games with family and loan them to friends without any physical media – but fans weren’t having it. After scrambling to contain the tide of bad press, they finally capitulated, announcing a complete reversal of their plans. No longer would the system call home once day. Games would work exactly as they have done on the Xbox 360. The disc can be loaned and resold, and it must be in the system to play the game it contains.

In the wake of this major about-face, there has been quite a bit of sniping at Microsoft. My favorite headline was something along the lines of “Microsoft changed their mind. Do they expect us to smile?” Anyone who knows me is well aware that I’m a fan of Microsoft, and that I’d tried to put a happy face on the parts of the Xbox One that others found objectionable. Even as I did, I acknowledged that there were valid points of concern, and that Microsoft had done a terrible job of making their case clearly and effectively. Still, I have to ask the author of that headline the following – could they have done anything at all to make you smile? They scrapped a system that had to have cost massive amounts of planning, talent, and money to implement because people were unhappy with it. They bowed to popular sentiment. They walked away from an attempt to redefine console content toward the inevitable purely digital distribution model, and when you complained, they gave you exactly what you seemed to want – the status quo. What’s not to smile about?

What really gets me is that a lot of complaints people had leveled at the Xbox One could be aimed at the PlayStation 4. It has a camera and microphone array. It has an internet connection. Other than the Kinect listening for “Xbox on,” that’s basically the same as the XB1/Kinect setup. In terms of its used games/DRM policy, Sony had remained studiously silent, seeming to watch the public reaction to Microsoft’s announcement and tailor their own plans to suit the winds of opinion. At E3, a major part of their presentation seemed to revolve around “We’re not doing what Microsoft is doing,” and they seemed to be lauded for it. That’s fine – they definitely handled things a lot better than Microsoft did, but why does the rage remain after Microsoft broke down and agreed?

A further complication is the fact that Microsoft had some good ideas rolled in with their horrible mess. How many gamers can truthfully say that they’ve never thought “I want to play a different game, but I don’t want to go swap out the disc?” A profoundly lazy thought, yes, but I guarantee many (if not most) gamers have had it. Guess what? That’s exactly what the XB1 would have allowed. Under the original scheme, the disc was install media, nothing more. Once it had been read once, your ownership of the game it contained lived in the cloud, available wherever you signed in, regardless of where the disc might live. You could virtually loan it to a friend without needing to hand over the physical media. It was untethered. Of course, this would require more stringent licensing controls in order to prevent piracy, which is why a daily call to the mothership was built in. That may not have been the most elegant solution, but the reasoning behind it did at least stem from a decent idea.

What’s more, the restrictions on used game sales, while confusing and very likely to be haphazardly applied, were the expression of an existential crisis in game sales. Microsoft is caught between two very powerful and almost diametrically opposed forces – the people who make games and the people who sell them. To the people who make games, digital distribution is a dream come true. It eliminates all of the physical costs involved with game publishing. No discs, no instruction booklets, no keep cases. It also makes piracy more difficult, eliminating another drain on profits. Perhaps most importantly, reselling purely digital content, even if it had been upheld in Vernor v. Autodesk, is difficult at best. Of course, that’s where the whole “diametrically opposed” thing comes in. Reselling used games has been an enormous profit engine for game retailers. For those unfamiliar with the practice, game retailers like GameStop buy games back from players for paltry sums and then resell them for big profits. It’s fairly rare that a player will see more that $10 or $15 for a game that will likely be resold for $30 or more. For new and popular titles, the resale price is usually $5-$10 less than the price of a new copy. Preserving this revenue in the face of increasing digital sales is critical to keeping brick-and-mortar stores around a while longer. At the same time, game publishers hate it, because they only make money from the initial sale of a game. If a person buys a brand new game, the publisher gets the cost the retailer paid for the game (in simple terms, at least – the distributors and others take a cut, too). If that new copy is resold, they get nothing. So the person who bought the game new finishes it and sells it. When someone else buys it, the publisher gets nothing. Potentially, that same copy could be sold several times, so where the publisher could have sold five copies, they’ve only really sold one. Understandably, they’re not big fans of that model.

So on the one hand, Microsoft has to make their platform enticing to developers, ensuring them as much revenue as possible. At the same time, they have to keep retailers happy, since they need the shelf space and in-store promotion to move units, especially during the hard-fought holiday launch season. The Microsoft solution was a convoluted not-one, not-the-other dance down the middle that was destined to leave very few happy, with consumers likely the least happy of all. This was a bad move, yes, but it was likely a fairly necessary one that Sony was almost certainly considering as well. Sony played it close to the vest and used Microsoft as a trial balloon, but their cagey “You can play used games, but we’ll have to explain more later” answer makes it seem pretty likely that they had some very similar ideas waiting in the wings. They retained the ability to backpedal in secret, while Microsoft drove directly into a wall and made certain that the process of backing up would be as public as possible.

Again, I admit that I’m a fan of Microsoft, and it’s been unpleasant to see them flail about. Still, now that they’ve gotten the message and chosen what seems to be the preferred track, why is there still such vehemence? Their reasons for picking the unpopular route to start make sense. I suppose some unreasonable ire is just par for the course as people use their preferred consumer brands as badges of belonging, but it does seem to miss an important lesson – these ideas emerged from business realities, and they’re not going anywhere. As the march toward 100% digital distribution of any content – be it games, movies, music, books, or anything else – continues, sticky and difficult gymnastics to stay in the good graces of content providers will continue to irritate the consumer. We should consider ourselves lucky if future battles for consumer rights are as easily won as this round.

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