News, Views, and Reviews
Before their big Xbox One reveal on May 21st, before their main stage presentation at E3 on June 10th, and all the days after E3, Microsoft has not been able to shake their “dark knight” image. For some years now, used games have been a growing, hot issue in the video game industry. Microsoft posed some innovative methods of dealing with the issue, ways that could have stood up for the publishers AND gamers. But, as of yesterday, Microsoft has announced that they are abandoning those methods in favor of, well, the way everything works right now. (It’s a policy reversal, they’ve turned over, flipped 180 degrees – it’s an Xbox One-Eighty, get it?) In that announcement, MS stated that they are doing this because of the gamers, because they are listening to the complaints and adjusting their policies accordingly. I wonder if they felt pressure from publishers and retailers as well? To help understand this complicated mess of policies and reverse decisions, I will discuss the Problems, Microsoft’s Solutions, and ponder what happens next in the Conclusion.
Game publishers lose money to piracy and used game sales. Period. Every copy of a game that is either illegally traded or purchased from a used game vendor is one less copy of that game that is sold by the publisher. If not enough legitimate copies of a game are sold, game development studios go out of business. Traditionally, a game studio makes a deal with a big publisher, like EA, Activision, or Ubisoft, to pay for the development costs of their game in exchange for a percentage of the eventual game sales. Game development budgets can range from a few thousand to several millions of dollars, and can take anywhere from one to five years of development. Depending on the development cycle and budget, a video game’s “break even” point averages around one million copies sold. Few games actually break even, and very few go on to make huge profits. It’s usually the few, very successful games that help compensate the publishers for the number of failures. Again, it’s up to those games to sell a certain number of copies – but that success is constantly threatened by the (legal or illegal) distribution of used copies.
Video games are a unique commodity. When discussing the issue of used games, many people like to make comparisons to other used goods. I don’t think these comparisons are helpful, at least not anymore. Traditionally, video games were manufactured on cartridges, a mechanical product with its own share of moving parts. These became more and more costly to make, could wear out or be broken, and couldn’t be copied. So, it’s easy to compare them to other “used” products like cars or furniture. Gamers could trade cartridges with their friends, sell them at garage sales, or take them to retailers like GameStop and trade in their value towards newer games. As that used game market grew, so did the number of outlets available for trading or selling used games. In recent years, traders have turned to online sites like Amazon.com or Craig’s List to get a little more cash than GameStop would give them. This created a tradition for gaming enthusiasts, and a sense of entitlement for them, that this is their property. They own the product and should be able to do whatever they want with it, right?
But, as technology advanced, that attitude created a number of problems for game developers and publishers. When big companies like Sega and Sony moved from manufacturing game cartridges to pressing game discs, the potential for illegal copying of those discs became a problem. Sega lost so much money due to piracy of their Sega Dreamcast games (1999-2001) that they nearly went out of business. Sega had to concede from the console market and became strictly a game publisher, leaving only Sony and Nintendo as console rivals. Microsoft filled that void in 2001 with the original Xbox. Since then, Nintendo, Sony, and Microsoft have combatted the illegal copying of game discs by introducing a number of different disc formats over the years. Producing these new technologies is undoubtedly expensive, but the people that own those game discs should be able to do whatever they want with them, right?
Meanwhile, PC game developer Valve, creator of hits like Half Life, released a digital distribution system called “Steam” that allowed PC gamers to buy games directly from Valve, download entire games, and install them directly onto their PC hard drives. This began with Valve’s release of Half Life 2 in 2004. Steam wasn’t very popular at first, but it went through it’s growing pains and is now the most popular source of buying games on the PC market. Unlike consoles, PCs read games from the hard drive, not the disc drive. The disc drive is just a delivery system, a means of copying the game from the disc to the hard drive. This is an alternative to downloading the game from the internet, especially for those that still don’t have speedy internet connections, so PC game discs are still available in stores. But this created a new variation of entitlement. If you don’t even use the disc anymore, what exactly do gamers “own”? The information on their hard drive? What would stop them from copying that disc to multiple systems, effectively sharing one game with hundreds if not thousands of people? The solutions, in the form of “DRM” or Digital Rights Management, like registration codes and online authentication, have helped, but aren’t very popular. New PC games come with a registration code that can be used only once, by that person that installs the game from the disc to their hard drive, that first time. They can try to trade or sell that plastic disc as much as they want, but without that code, the disc is useless. As a result, there hasn’t been a “used game” market for PCs for about ten years now. Steam took this to a new level, and registers the games purchased onto a user account, and that user account is viable on any PC. The convenience of signing in to your Steam account, on ANY PC, and being able to play your entire library of games you’ve purchased, far outweighs any inconvenience caused by DRM. Steam goes even further to maintain customer satisfaction and loyalty by offering occasional sales and HUGE discounts on games. Sure, you might not be able to take your PC game to GameStop and use it’s value to buy a new game, but why would you need to when games are consistently cheaper in the first place?
The current generation of consoles slowly began to mirror the PC market. The PS3’s Blu-ray player, for example, is great for movies and storing lots of data, but not so great for playing games that require much faster read times. So, many PS3 games require a hard drive install. The Xbox 360 also has an option to install games to its hard drive, but both machines require the disc to remain in the disc tray to function. Sony and Microsoft also offered digital distribution, primarily for smaller “arcade” type games, although full “retail” games are also available for download. In some ways, these digital purchases are similar to Steam’s model, in that they are tied to a user account. However, the number of different systems the same game can be installed on at the same time is limited, I would think, for obvious reasons. It also became more and more common for games to come packaged with an “online pass” (a one-use-only registration code) that was required for multi-player features to work. This was an interesting compromise, in that PC games’ registration codes locked the entire game from being sold or traded, not just the online features. This compromise kept the used game market open for console games, but unlike the previous methods, at least the publishers would get some compensation for used copies being sold, in the form of gamers having to buy the “online passes” directly from the publisher. I should reiterate that: new “registration” codes have never been an option for PC games, but they are available for console gamers.
The Xbox One is supposed to offer same-day sales of disc or digital copies of new games. All games will be installed onto the hard drives, and like PC games, the disc will just be a delivery system: an alternative to downloading the game from the Xbox Live Marketplace. Also like the PC market, this is where the comparison to other used-goods doesn’t work anymore. When you buy a car and then sell it to someone else, you don’t own that car anymore. But, if you could copy a disc to your hard drive and then sell that disc to someone else, you would still own a copy on your hard drive. Obviously, some limitations have to be put in place. Microsoft’s original plan – and the cause of many rumors and hard feelings being passed around before the Xbox One reveal – was to adapt the PC model to the Xbox One and stop used game trading and selling. . . but not completely. Microsoft said that used games could still be sold or traded at “participating retailers” and that they would not charge any fees for doing so. Any fees or restrictions would be up to the different publishers to impose if they so desired. It’s my guess that this was supposed to keep retailers and publishers happy, but it didn’t make gamers happy.
So, Microsoft came up with some interesting solutions that could have made gamers happy, too. Like Steam, games purchased would be recorded to individual profiles, and those game libraries could be accessed on ANY Xbox One system. Just like Steam, the user would just have to log in with their profile (or “Gamertag” on Xbox) and have access to all of their games. Further – and this is the crazy good part – gamers could put up to ten (TEN!) of their closest friends on a “family” list, and any one of those “family” profiles could ALSO access that entire library of games. On ANY Xbox One system. Even if the original owner is still logged into their profile. The only limit was that only two profiles can play the same game at the same time. I thought this was HUGE! I could imagine that this would make gamers AND publishers happy – but maybe not retailers. Imagine this scenario, played via Xbox Live:
Gamer 2: I don’t have it. Is it good?
Gamer 1: Click on my profile, then click on my game library. Then play COD with me. You’ll see!
Gamer 2 (after hours of playing together with Gamer 1): this is awesome! I think I’ll buy it! (clicks on “Buy Now” icon. game downloads and installs to hard drive. everyone is happy.)
Unfortunately, the negativity of the Xbox One’s DRM policies overshadowed this innovation. First, the rumors of “always online” were confirmed: the Xbox One has to “check in” with the internet at least once every 24 hours, to authenticate that the games being played are legitimate copies. If the gamer is using his Gamertag on a different Xbox One than his “home” system, that internet authentication has to happen every hour. Second: games can only be traded once. If you give or sell your copy of a game to someone else, they get to install it that second time, and then that’s it. Nobody else, even you, can use that game again. It’s unclear if this was an option that was “up to the publishers” to use and Microsoft wasn’t going to impose this restriction on their games, or if this was mandatory for any game. I also think this was suggested to keep retailers happy, in that you *could* trade a used Xbox One game to stores like GameStop, and they could sell it as a used game, if only once. I guess we’ll never know, though, because Microsoft reversed their policies, and stated that there will be no used game restrictions or mandatory online connections required.
The main problem, then, is you can’t make everyone happy. If games have fewer restrictions, that would make gamers and retailers happy, but game studios could potentially go out of business. If games are only digital copies, that makes publishers happy, some gamers happy, but some gamers would not be happy and retailers are definitely not happy. I have to admit, I’m a little disappointed in Microsoft’s decision. As a gamer, sure, I’m happy that I still have the “rights” to trade or sell my “property”. But how long will this last? It’s inevitable that digital copies will some day replace physical copies completely, making those plastic discs of “property” obsolete. Someone will have to introduce these limitations eventually. Microsoft had to be the “dark knight” and explain what their limitations would be, while Sony got to be the “white knight” and pretend they have no plans for used-game restrictions. At least Microsoft was trying to innovate some solutions that would give us options. Sharing games with “family” would have been really cool, and being able to play your entire game library from any system, would be very convenient. If MS – or anyone, for that matter – is willing to alienate the retailers, they could offer the tremendous deals that Steam offers. Perhaps Microsoft made the right call. The lower price and convenience of digital distribution could eventually win console gamers over, just not right now. Like Steam, there will probably be some growing pains as everyone, gamers, publishers, and retailers, adapt to the digital age. In the mean time, we have at least a few more years of doing things the “traditional” way.