You know what really grinds my gears of war? When a company hopes you aren’t paying attention to the details in order to circumvent the natural free market process. Microsoft is betting that the average consumer has no idea what is changing with its new Xbox One console.
If you care about games, then you probably already know that ever since Microsoft announced their new Xbox One video game console there has been a worldwide backlash from a large portion of the gaming community on the internet. From the minute Microsoft announced their intentions for used games, connectivity, Kinect functionality, online digital rights management and price; the social media world has been ablaze with angry gamers. Every statement Microsoft officials made from that point on only seemed to further enrage the hardcore gaming audience. The whole thing has been quite chaotic.
Microsoft has taken on the task to move gamers into their ideal version of the future, whether they like it or not. This has turned into a grand battle of consumers versus a mega corporation for the future of gaming. Microsoft is betting that, in the long run, consumers will see the benefits of their vision of the future of video gaming.
In an interview with ArsTechnica, Microsoft Xbox Chief Marketing and Strategy Officer Yusuf Mehdi stated, “We’re trying to do something pretty big in terms of moving the industry forward for console gaming into the digital world. We believe the digital world is the future, and we believe digital is better… This is a big change, consumers don’t always love change, and there’s a lot of education we have to provide to make sure that people understand”.
Mehdi went on to compare the world of home movie viewing, where physical trips to a brick and mortar video store have been replaced with streaming services like Netflix and Hulu that allow consumers to watch on a multitude of devices instantly. The problem with this analogy is that consumers weren’t forced into this future, it happened naturally. Streaming services proved over time that their method of delivering content was superior to renting DVDs at physical stores. This was an organic process.
The process started with Netflix sending DVDs directly to consumer’s homes. This allowed consumers to see the benefit of not having to make a trip to a store. Netflix spread by word of mouth advertising. Consumers told their friends how convenient it was to have DVDs delivered. Netflix then began providing consumers with content that could be streamed directly to them on mobile devices and computers no matter where they were. Consumers themselves made a choice that this content was more convenient than even having DVDs delivered right to their mail boxes. Netflix changed its business model based on consumer acceptance of streamed content, but it didn’t force it on them. Well, it kind of tried once, but it failed miserably and Netflix was smart enough to back off and let consumers step into the future at their own pace.
It is obvious that Microsoft is modeling their distribution strategy off of Valve Corporation’s Steam digital distribution platform. Once again, the difference is that model of distributing content to gamers was an organic one. It took Valve three years to sell third party gaming publishers on the idea. Once they had some of the more popular third party games, more patrons were willing to try it out. Eventually, the convenience of not having to go buy games at a physical store, not having to keep up with discs and having all of your content in one place began to win gamers over. However, the most important reason gamers accepted Steam was the prices. They were willing to accept tougher digital rights management restrictions and not being able to resale used games because Steam offered tremendous value. During this period, consumers had a choice to buy games at full price from a brick and mortar store or buy them through Steam (often at discounted rates). The success of Steam was an organic process where by Valve won over gamers by offering them convenience and better price. Valve didn’t force consumers to accept their business model.
There are benefits to what Microsoft wants to do. Eventually the console gaming market will move to completely digital distribution of content, but trying to force consumers into it before they are obviously ready to make that kind of plunge is a mistake. Computer gamers were conditioned over a decade to accept more stringent digital rights management measures and restrictions on used content. Valve proved their model to consumers and won them over by providing enough benefits that they could overlook the restrictions.
Microsoft has chosen to forgo the organic process of leading the consumer into change and proving the benefits in favor of pushing them into the deep end without any swimming lessons. This is the fundamental flaw in Microsoft’s plan. It is summed up in Mehdi’s statement, “we believe digital is better”. Microsoft has decided what is best for the market rather than giving the market a choice and letting consumers choose what is better.
Microsoft is asking consumers to make a leap into digital distribution without most of the inherent benefits that computer gamers received. The Microsoft talking heads have hinted at the benefits, but it has all been corporate double talk and no real action to back it up. Mehdi himself vaguely teased more consumer friendly pricing models.
“As you go into a digital world, what’s happening is publishers are choosing to have different business models, and consumers are saying ‘Hey, if I can’t resell the title, provide me a different way to get value to get into your game.’ And we think the market will be efficient in finding good models that work for consumers…In the future, you can imagine the capability to have different licensing models, different ways that people have to access games. This all gets unlocked because of digital.”
Mehdi is asking consumers to buy into the business model in hopes that in the future games will be cheaper. That is a big leap of faith for gamers to take with a company that hasn’t shown a propensity to discount their products in the past. Microsoft has the process backwards and they are hoping that casual consumers who aren’t as attentive as the hardcore gaming community won’t notice.
What Microsoft could have done was offer the physical discs with current generation console digital rights management protocols and resale rights for the full price of a game and offer digital copies of the same games at a discounted rate. That would have allowed consumers to choose to pay less and accept more restrictions or have the freedom they currently enjoy at full price. This model would have allowed consumers over time to see the benefits of digital content. Eventually, if everything Microsoft believes is true, consumers would migrate exclusively to digital content and physical discs would be phased out. The market would have driven the change. It would not have been forced on consumers. All indications are that digital copies of the game will be the same price as buying what amounts to an insallation disc in stores. Both versions are going to retail for $59.99.
Microsoft wants you to believe that they are doing something revolutionary by offereing a digital distribution model. They aren’t. Sony is making every game available for digital download on the day it releases in stores on disc. That is right, they are offering both a physical disc that consumers can buy and use just like they have in the past or you can download the game digitally right from the console. You can choose the conveineince of not leaving your house and downloading the game in exchange for not being able to resale that game or you can go to the store and buy it on disc and be able to do just about anything you like with it. Sony is allowing you to make the choice to move into the age of digital distribution when you want to. They aren’t deciding what is best for you.
I do not often make recommendations. As a journalist I try to be objectionable. I have owned both the original Xbox and the Xbox 360 and thought both of them were excellent consoles. I preferred the Xbox over the Play Station 2 and the 360 over the Play Station 3. I am one of the few gamers I know who actually likes the Kinect. I am by no means an apologist for Sony or someone who has a vendetta against Microsoft. However, I feel like as a gamers and consumers we are at an important cross road.
The future of video gaming will be determined in the next six months. If you support Microsoft then you will be sending the message that the market is decided by the supplier rather than driven by the consumer. If the Xbox One is a success, Microsoft and companies like them will believe that they can do whatever is best for them and consumers will support them even when it is not in the best interest of the consumer.
Mehdi went on to say, “”I think it’s fair to say there’s a segment of consumers at this show (E3) in particular who really pay attention, who are very passionate about all aspects of gaming, and that we listen to closely. In a broader set of community, people don’t pay attention to a lot of the details. We’ve seen it in the research, we’ve seen it in a lot of the data points.”
This is crucial for gamers to understand. Microsoft knows you don’t want their model of digital content with all the restrictions and fewer rights as a consumer. They know you know it is a bad model for consumers until they offer more value to the consumer in return for fewer rights to content. They aren’t worried about you, the hardcore gamer. They believe they can sneak this past the soccer moms and softball dads who believe they are buying the next Xbox with all the same rights and access as the previous content. They are betting those people aren’t paying attention to the fine print. They are counting on those people to not know what they are buying and not bother on returning it when their kids complain they can’t rent a game from Gamefly or borrow a game from their friend because he isn’t on their friends list or the game has already been loaned once. Microsoft is betting that the hardcore gamers don’t have enough influence in their community to actually influence the market. This is the time to prove them wrong.
Gamers who disagree with the way Microsoft is going about trying to push the market into a business model that benefits them at the expense of consumer rights need to talk to all their casual gaming friends. Gamers need to be explaining what is going on to the people they talk to on Facebook and Twitter who may not be aware. Don’t assume people know. If you have younger relatives who game, tell their parents.
Gamers need to get the word out to the very people Microsoft is counting on to not “pay attention to a lot of the details”. If people are aware of what they are giving up and make a choice having all the facts to support Microsoft, then so be it. That is the free market economy in action. However, Microsoft knows that the free market isn’t going to support their vision for the future of gaming without them providing added value. They are trying to sneak their business model into the back doors of uninformed moms and dads during the holiday season. If we allow this to go unchecked, then we deserve what ever corporate America decides is best for us.