Why Microsoft Was Not Ready To Join The Digital Future

With all the talk about Microsoft, I had been thinking about the digital future of gaming and specifically Microsoft’s place in it. I made a quip back during E3 that I couldn’t figure out if Microsoft was taking a bold step into the digital future, or if they were just plain bonkers. However you may view their move, the truth is that they were moving into the inevitable future. Think about it. What has happened to music over the last 10 years? What about movies and books? Even games. They are all going digital. That is the future. That is the present.

But, you may ask, if digital is the future, why is what Microsoft did such a bad thing? I will explain that here in detail. 

DRM

The first boneheaded, and probably the biggest, move by Microsoft was the insistence on the use of Digital Rights Management (DRM) to control the games on its consoles. Everything you bought, everything you played, everything you did on the XBone had to be tied to you specifically and verified on their servers. This meant that in Microsoft’s eyes, at any moment, any day now, you would go from paying customer to filthy pirate. That is an incredibly stupid way to treat your customers.

Look at the history of DRM’ed media. For years, music had DRM attached that would only allow the music you bought digitally to work with the iPod. Sure, you had great access to a lot of music, but it was inconvenient for you and potentially a pain. Other services, such as Walmart’s music service, had DRM that required authorization checks on a regular basis. Eventually, those DRM servers were shut down and unless you took extreme measures, you lost all that music. Eventually, music publishers wised up on DRM and ditched it all together. You know what happened? Digital music sales skyrocketed. Sure they are lamenting the loss of CD sales, but they are raking in the cash for digital sales.

Let’s look at another industry, books. With the introduction of the Amazon Kindle, ebooks have slowly begun to erode the ground once held by physical books. But here again, the fear of piracy has led to book publishers to require incredibly insane DRM that has locked readers into a single distribution service. The DRM’ed books cannot transfer easily from one device to another. You cannot easily share your love of an author or a book series with a friend. This use of DRM may have held off the inevitable death of paper, but it hasn’t worked much at all. While the Big 6 publishing companies continue to insist on DRM, self published authors have moved away from it and they are becoming the core source of books for many ereader users.

Finally, we will look at the PC Games industry. While AAA game developers and publishers continue to use strict DRM on their PC game releases, the overall game community has moved on from such measures. The Humble Bundle, Good Old Games, Desura and more offer lots of games without the burden of DRM. These companies are seeing huge success after huge success because of this policy. All this while the AAA game industry has declared PC gaming to be dead. What is really dead is the AAA PC game business model. DRM, online verification, and many other policies put in place by the AAA industry are not a desired product by most PC gamers. They want ease of use and frustration free gaming. DRM gets in the way of that.

Steam could be seen as what Microsoft was attempting to become. Steam is essentially a big DRM service. However, they have something that Microsoft would not have any time soon. Something that keeps gamers coming back to Steam day after day. Something that Microsoft confirmed wouldn’t come with the XBone, low prices.

Pricing

This is the second major issue behind Microsoft’s failing and something that a digital future requires, a good and low pricing model. Microsoft confirmed that all of its major releases would retain the current price of $60. This is a very high price to pay for something that you cannot get rid of with ease. Something that you cannot earn back some of that money spent.

When it comes to the currency that gamers have to spend on games, money isn’t the only thing they think of. They also consider the games they currently own as part of what they have to spend on new games. Whether that is spent by trading with friends, or going to Game Stop, it is all the same. If I have $30 and $30 worth of games to trade, I can go to Game Stop and get a brand new $60 game. If you take that $30 worth of trades away, gamers can no longer afford that $60 game. In order for an all digital gaming ecosystem to work, prices must drop.

We can see this in action all over the digital landscape. CD albums used to cost $15-20. What did you get? 12 songs and only two you actually like. With the advent of digital music sales, you could now buy just the two songs you like for $1 each. That is a much better deal. With ebooks, the current average price for an ebook now runs at less than $10. That is paper back territory.

On the gaming landscape, we have learned that low prices are the best way to get the most sales and make the most money. Just look at the current Humble Bundle. With this one, you can get six amazing games for less than $5. Can we say the same thing about the XBone? No. What about Steam and GOG’s 75% off sales? Will we see something like that on the XBone? Not likely.

Then we have the Ouya. The Ouya is touted as the console that is going to bring in a new digital age of gaming to the console world. Every game on it is free to download and free to try out. You only pay for what games you actually like after trying. And guess what? The games are not all that expensive. The most expensive are the games by big name companies like Square Enix and those are only $16. That is a far cry from $60. But the Ouya and PC have something else that Microsoft failed to include. Indies.

Indie Developers

This is the final major flaw in Microsoft’s plans. Microsoft failed to alter its publishing landscape to be indie friendly. With the 360, indie developers had to find a publisher willing to give them one of their own limited number of digital slots in order to make it on the Arcade store. If they couldn’t find a publisher, they could beg Microsoft to be its publisher, but that was never a sure fire way to get there. Even if they did get a publisher, the publisher took on none of the costs or risks for releasing the game on the XBox and took a significant chunk of the profits.

Additionally, Microsoft had a really harsh policy of charging 10s of thousands of dollars to patch an Arcade game. If you couldn’t patch your game, you were forced to sit idly by while potential fans ranted about how buggy your game was. This policy of charging such large fees for patches kills the good will that indie developers could earn with potential fans.

The digital age has allowed for indies of all stripes to reach their audiences. It is now extremely cheap and easy for indie musicians, novelists, filmmakers and game developers to release their wares and sell them to fans. The PC has been a huge boon to the success of indie game developers. The flexibility of release, reach and pricing allows for indie developers to find that right balance and reach the success they want.

Even consoles are catching up. Both Sony and Nintendo allow for indie developers to self publish. Nintendo actually made huge strides with the WiiU and the 3DS in order to make it easier for indies to bring games to its consoles. And again, the Ouya has created a great system that allows for indies to not just self publish but also control their pricing and releases to their pleasure. Microsoft failed to grasp how important indie developers are to modern gamers and a healthy digital landscape.

In The End

I the end, Microsoft really only addressed the DRM portion of this battle when it made its retraction. Pricing and indie policies are largely unchanged and probably won’t see any change in the future. They will also not be able to move as close to the digital future as they wanted to. But with the bad policies they had in place to begin with, they would not have found very much success in a digital world that was completely incompatible with them. There is no altering the digital landscape to fit your business model. It is the business model that must change to fit the digital landscape. That is something that Microsoft needs to learn.

Originally Published at Random Tower.