Xbox One – Thin ice.

Microsoft is on thin ice with Xbox One but Sony is no better off

• Details have emerged regarding how the Xbox One will deal with the second hand games market, offline play and game sharing.
• The advent of digital copies and storing games in the cloud complicates the management of user rights to play purchased games significantly.
• When a user buys a disc with a game on it, he has actually purchased a perpetual right to play that game as often and for as long as he pleases.
• This right should be freely transferable much in the same way that patent rights are.
• The advent of softcopies complicates this issue significantly as the right is no longer effectively physically attached to a physical object.
• Microsoft has neatly sidestepped this issue by dealing with this change in the following way:
  • The Xbox One enables the trading of used games but it has cleverly pushed the decision on whether to allow it onto the game developers.
  • Users can give a game to a friend as long as they have been on the user’s friend list for 30 days.
  • A user can play his own Xbox One for 24 hours without logging in or 1 hour if he is logged in on someone else’s Xbox.
  • 10 family members can log-in and play the purchaser’s shared games.
• The biggest issue here by far is used games.
• The used games market is around $2bn and the game developer’s hate this market because they see no revenue on a used game sale.
• They seem to think that it is depriving them of a sale of a new game.
• This is the wrong way to look at it.
• It is not the game that is being sold, it is the right to play the game and this right they have already sold into perpetuity.
• Hence, they have no fair claim to make extra revenues on the used games market.
• Microsoft’s move to leave this up to the developers is a stroke of genius.
• One the one hand it removes Microsoft from the firing line of angry users and it will probably force Sony to do the same thing.
• However, I suspect that this is a storm in a teacup.
• Developers are not stupid and they know that if they prevent the sale of used games the hackers will find a way around it.
• In fact, it is in their interest to allow the sale of used games.
• Someone who plays and enjoys an older game is far more likely to buy the new version when it is made available.
• The future of gaming is all about social activity and online gaming.
• Throw in TV over the internet, video calling and so on and its easy to see how almost all XBox Ones will be connected to the internet almost all of the time.
• Hence, the requirement to be connected is almost irrelevant.
• It is in Microsoft’s interest to make sure that users love the Xbox One as there is far more at stake than just leadership in the console games market.
• Xbox is Microsoft’s stronghold in the living room and with it has the opportunity to push its Digital Life offering onto the 4^th screen.
• This opportunity is far bigger than the gaming market and hence, I hope that Microsoft’s is focused on keeping users happy.
• Sony is very weak at the moment but it does have a portfolio of hardware and media assets that could be assembled into coherent offering.
• It will be praying for a chance to capitalise on any slip ups that Microsoft makes in this delicate transition.