XBOX ONE Sharing the fun!
With respect to the XBOX ONE controversy over the issue of reselling and borrowing games, as much fun as it is to pile on Microsoft when they are down, I confess to feeling some sympathy for them. This is the thanks the market gives you for trying to preserve some vestiges of a dying business for the old timers who don’t want to let go of a gaming era that is fading rapidly. Before I continue I would like to get this in early in the article;
“I told you so…”
Okay, it’s out of my system. Now by way of contrast, have you ever heard of a controversy over World Of Warcraft’s inability to share access to the game with friends? The inability to resell boxed WOW copies? Their need for an always-on-Internet connection? Anybody heard this controversy over Apples App market or iTunes? How about creepy privacy concerns about a network accessible camera on nearly every mobile device in creation? No? So why would anybody have a problem with the XBOX ONE being THE SAME WAY? Isn’t always on, constant connectivity and personalization of all media sales the norm on the Internet everywhere but on the console?
The problem is that Microsoft tried to bridge a market transition that can’t be bridged. Instead of giving up on the dying boxed retail centric world, they thought they could “extend” it for one more generation with a “clever” blending of online connectivity and retail distribution resulting in confusion and anger from all quarters. The age of monolithic narrative $60 games is over, fighting it just makes the transition messier. Hence my earlier advice that they should have simply made a mobile console with a pure online business model and stretched the lifespan of the existing XBOX with more RAM a faster clock and some software updates. If they had done that they wouldn’t have pissed off their established gamers by launching a TV media box with restricted gaming capabilities, last years PC graphics capabilities and CALLING it a next generation console. Microsoft’s huge mistake was trying to trick the market into supporting their NEW initiative to dominate the living room with a media center by disguising it as a next generation game console.
The subject of the consumer rage over sharing and reselling games is a fascinating one from an economic point of view because it is illustrative of the problems with the retail business model for boxed games and WHY it is dying. What angry gamers are saying (in economic terms) is that when they buy a boxed console game for $60 they are paying maybe $40 for their own enjoyment of the game, $5 for the social status of having it to share with their friends and plan to get a $15 discount on the game by reselling it when they are done playing it. To them the game itself is worth $40. Note that they DO NOT get angry with GameStop for taking a 30%-100% cut of their games resale value because GameStop is viewed as the market maker that enables them to resell their game in the first place.
It’s so bad that EVEN the Japanese are looking cool making fun of Microsoft
Traditional boxed game publishers foolishly think that the discount dollars and social status dollars consumers associate with their games should belong to them and imagine they will make MORE money if they can block the resale of their games. Economically speaking all they will discover is that their games are worth LESS money than they thought and by trying to forcibly capture those dollars they will push their gaming audiences to other platforms. They will also discover the hard way that the sharing of games had marketing value for them that will be destroyed if they prevent it, thereby INCREASING the cost of marketing new games because they killed an important viral word-of-mouth marketing vehicle for their content that has some monetary BENEFIT to them. In a pure online world game publishers can actually measure and PRICE the value of social sharing and include that value in their games business models in the form of free trial play. In other words what you are witnessing is a cascade of economic mistakes that will lead to the end of the boxed retail game business leaving only the pure online business which has elegant and established mechanisms for correctly pricing the value of games and social virality. There is no re-sale market for online games because they have no physical manufacturing and distribution costs to recoup so the re-sale value of an online game is zero, it costs nothing to copy and distribute. The Internet is a beautiful thing for gaming.
Now If Microsoft were SMART they would sacrifice the retail channels interests in favor of the consumers and the game publishers because it is the retail channel that is dying. How much consumer rage would there be if Microsoft enabled an online market for XBOX ONE gamers to auction their used games to one another and took a cut of all transactions which they shared with the publishers? Not much… What if Microsoft had allowed people to share games freely and for the “Shared” players to be offered an online discount to buy the game online and have it mailed to them? The discount would come out of the retail channels pocket not the publishers. Now the publisher benefits from game sharing and can directly correlate game sharing with viral sales via… THE INTERNET! Isn’t everybody happier in the world where the retail channel gets screwed instead of the consumer and the game publisher?
But that has been my point all along… Consoles are dead because gaming business models have evolved beyond the need for a retail channel and the classic console business model always relied on the retail channels participation in game sales to achieve distribution for the console itself. Microsoft didn’t get that memo and tried to make a console that compromised the interests of the consumer to prop up the dying retail channels interest in distributing consoles for them and appease the remaining misguided publishers who are still in the console game business mostly because they could not make the transition to online gaming and online business models. The same economic ignorance that prevents a console game company like EA from becoming successful online after decades of effort is what motivates them to mis-understand how their retail business should evolve and benefit positively from game sharing.
The consumer rage you are seeing over the XBOX ONE launch is really the market beginning to recognize that the era of console gaming has passed and that purely electronic distribution of games supported my microcurrency based economics is the only game business model that makes sense in this era. Apple got there first and Sony and Microsoft are regrettably deeply invested in an obsolete vision of the console that doesn’t work for a generation of gamers that grew up on free (self-marketing), cross-platform, mobile games with mixed advertising and microcurrency based economies. Microsoft should have named the XBOX ONE the XBOX RETRO.
Watching Sony and Microsoft fighting over who will have the best hardcore console is like watching two people fight over who gets to lie on the train tracks farthest from the oncoming train. The price really is the problem here…price artificially propped up by the retail game market and large publishers. Valve doesn’t have this problem….but they don’t have the AAA content to support their story quite yet unless they are going to produce or fund it themselves.
Nintendo is already road kill at this point…selling $40 games to the casual users who are already playing $1 games (if not FREE) on their iPads is simply not going to turn out well. Nintendo’s price point is their saving grace right now…about the same as a low end iPad….but once you start talking about how much games cost woah does the math look bad.
The games will have to get cheaper at some point…and that is going to be the thing that ends this whole party.
This is actually an incredible opportunity for Apple to step in and attempt to patch some of the damage to the margins of hardcore game publishers. There must be something they could do to make this mobile transition easier and more expedient for large game publishers the way they made it easier for music publishers to transition to digital…
Will anyone save the industry?
I don’t think the industry is quite as dead as you argue. There is a market for games that you just play on your big screen television without worrying about what version of Direct X you have, if you have enough RAM, or if your video card has enough juice to run it. These games are more active and prettier than anything you can get on the iPad. There should be some premium paid for that difference. Sony is going to win this round of the console wars because of the backwards compatibility and used game market.
Well to be precise my argument is that the traditional console market peaked with the PS/3 and XBOX 360. My second argument is that IF there is another generation of console like device it won’t resemble consoles as we knew them. My more recent claim is that having seen the IPAD and AppleStore, I believe I’ve seen the future of gaming in mobile consoles with entirely digital app markets. Having seen the success of the Apple Model, I assert that launching a console that is not a superset of Apple’s approach in this day and age is retro. That doesn’t necessarily mean failure just LESS success. …and I agree that it would appear that Microsoft is giving Sony the gift of the remaining console market.
The PC is an open platform. People do not want to deal with that on consoles since the disc it’s self and it’s copy protection and the fact it only plays on the console is the DRM. like VCRs that the console looks like anyway.
I don’t care what the PC does it is another platform. the console is another device that should be simple and you throw disc in it and they play or you have downloads stored on it and they play. the account acts like a digital virtual disc on consoles or steam.
What Microsoft is doing is dumb for consoles and MMO are a service. you are more than welcome to hack the game and setup your own MMO servers as people have done.
In other words people do not want that on the video game machines or bluray players they want to buy disc put it in and play it. Some people do not even download the games even though they are there in the store I see some accounts on xbox live or psn with 0 downloaded games from xbox live arcade all disc nothing else and they are playing online anyway. you can check out every game they played on the machine and what they did. some have both downloads and disc.
They don’t know or don’t care or don’t like the idea of not having a game disc they can transfer to any machine at any time just by opening the disc tray and closing it and I hear people complain all the time about having to log in and jump though hoops just to play digital content from the internet and they hate it.