Why did Xbox One turn around on their Used Games policy?

Xbox One
It was the belated shot heard round the world. One month after their infamous XBox reveal conference, where Microsoft revealed their upcoming console, the Xbox One, and their plans for digital rights management, Microsoft takes it all back. As President of the Interactive Entertainment Business Don Mattrick says, they listened to the fans, and decided to roll back so that users could continue to play games from their discs, as well as lend, borrow, rent and resell them freely. It was a move that seemingly divides the gaming community now, whereas before it appeared that its announcement received unanimous condemnation. Why did Microsoft go back on its new used games policy and why did they even want to change things in the first place?

As explained in our prior article on how the Playstation 4 and Sony won E3, used games became a hot button issue on the lead up to this upcoming generation of game consoles. Statements from major third party developers like Ubisoft, Activision and EA indicated that they were adamantly against the sale of used games, and that they wanted to see real changes in the industry.

To get into more detail, the argument used against used games goes like this: When a new game goes to market, some consumers decide they don't want the game almost immediately and sell it back to retailers like Gamestop. Gamestop then resells these used games at a fraction of the price they were originally sold in. Seen this way, sales of used games cannibalize on the sales of brand new games, and hurt the industry.

There are other scenarios that can also be categorized under used game sales and are also seen to compromise sales of brand new games. For example, game rental companies like GameFly allow you to rent games at a fraction of the cost of buying them brand new. These companies do not have profit sharing arrangements with game companies, so the only profit game companies see comes from GameFly's initial purchase of those games. Selling your games via Amazon or Ebay are also transactions that allow consumers to buy used games.

The possibility for a solution to used game sales first came up with the success of Steam. In essence, Steam is digital rights management. You need to install Steam to be able to install and play games under it. Steam games can either be downloaded and installed to a PC, or retail discs that require you to sign into Steam. Steam has conditioned users to treat its game delivery as a service instead of a product, and they do reserve the right to kick out users who violate their Terms of Service.

Steam is considered a success because they have gotten consumers and game companies on their side. They liberalized rules so that consumers get frequent sales and discounts. They have also made arrangements for game companies to get a bigger share back from their game sales, in comparison to what they get from console companies.

For a time, there was speculation that these upcoming game consoles would themselves abandon physical retail for digital distribution, and particularly cloud gaming to stream games. However, it became clear that discs would be a necessity as internet as a whole still wasn't capable of meeting the high technical requirements needed to service the gaming community this way.

Instead, Microsoft's answer was to put controls on game discs themselves. Discs were to function as installers, and every purchased game would give you a copy both on your personal console and on the cloud. Like Steam, game ownership would be tracked down with user accounts, and would allow people to login to their accounts on other people's consoles, to play their games on the cloud.

Microsoft took it one step further with digital sharing. The Xbox One was to have a system where they would identify 10 users as family, allowing them to share one purchased game with several people. The system was also optimized in such a way that developers would be able to leverage the power of cloud computing in their games.

However, this system also came with many limitations. Cloud computing would necessitate being constantly online, and so certain games would not be playable offline. Microsoft extended that in such a way that even single player offline games would be unplayable if the Xbox One did not do an online check in once every 24 hours.

Another limitation came with the resale of purchased games. This time, Microsoft had a system in place which would invalidate a game license when a user wanted to sell their games. This would remove the install in their physical Xbox One as well as the copy in the cloud. After invalidation, the physical game would be free to sell again, for new purchasers to buy at a price the game's developers would get a cut from. Microsoft actually sought out a partnership with GameStop to put this system in place.

Without going through the invalidation process, discs would not run on other people's consoles, eliminating the possibility for users to sell their own games. In fact, people would no longer be able to lend or borrow discs from each other. Although Microsoft attempted to explain the tradeoffs with family sharing, this was seen as a huge drawback overall.

And, in fact, as many argued, the way the system was set up infringed on consumer rights. In particular, many gamers and activists pointed to the right of first sale doctrine, which provided exceptions to copyright for the express purpose of allowing borrowing, lending, and resale of copyrighted works. This right was last recently defended and asserted March 19, 2013, in the decision to the case Kirtsaeng v. John Wiley and Sons, Inc. As some legal experts explained, however, this being unexplored territory, the degree to which Microsoft was going to be allowed to do this depended on how much consumers were willing to take.

What was to follow was no less than a pitch battle by assigned gamers to shape the coming generation. Fan petitions and campaigns loudly demanded they take back the new policies. Many video game bloggers and journalists, in print and online, condemned these policies. An unsavory but necessary aspect to these fan campaigns were these personalities telling their followers they would not be buying Xbox Ones, and in fact advocating no one buy them.

It's important to acknowledge that there was dissent among gamers on this topic. There were also many video game journalists and fans willing to defend Xbox policies. Some were going so far as to parrot the arguments of game companies and call for the death of used games. The big argument from Xbox, repeated by its defenders, was that this was the future of gaming.

Defender or not, gamers seem to agree that Microsoft screwed up their communication of these new policies. As early as the Xbox Reveal event last May 21, Microsoft employees were saying different things, even conflicting statements, about their used games policies, and so it wasn't even until recently that we received clarification on aspects like family sharing. This failure in communication fanned the flames of fan outrage even further, as consumers were inclined to suspect Microsoft as not being on the level when it came to these policies. The perception that Microsoft was being disingenuous and not transparent grew online, to the level where it was literally memetic.

In the end, Sony's E3 announcement that they were not going to implement used games DRM on the Playstation 4 eventually made Microsoft take back their own implementation. However, we should not forget that this did not happen immediately after that announcement. Whether their intentions were good or not, Microsoft had the earnest belief they would eventually win everyone over when the console was actually out there, and consumers saw the new systems in action.

So, we go back to the initial question; what was the last straw that forced Microsoft's hand to take back their Xbox One used games policy? In the end, it came down to preorders, and Microsoft's own bottomline. Immediately after E3, Playstation 4 preorders rose to record breaking levels, and Xbox One preorders, which actually also saw huge numbers following the initial reveal, dipped. Not long after, retailers like GameStop announced that they were going to stop accepting Xbox One preorders. While it was later revealed they actually surpassed preorder caps, the news was immediately taken to indicate interest in the console had dropped.

Even if it was just a misunderstanding, this was simply the last straw in what rapidly became futile damage control. Xbox One's brand was now completely at peril, and if they insisted with their used games policy, the console would basically have no chance in the market, all before it even went up for sale.

It remains to be seen if these changes were enough. There's been enough damage made to Xbox's brand that many consumers are still reticent to buy their console. There are also remaining issues, particularly privacy concerns with the exceeding snooping powers of the next Kinect, which will be integrated into all Xbox One consoles. As many have pointed out, nothing is stopping Microsoft from bringing these policies back in the future, as is also the case with Sony. As we approach the next generation of consoles, it still remains a fuzzy and uncertain future.

Written by: Ryan P., Philippines

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Edited by: Rajesh Bihani ( Find me on Google+ )

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