Microsoft's Xbox U-turn is good news: Peter Nowak

Despite those who would say otherwise.

Media crowd around the new Xbox One (Photo: Ron Wurzer/Bloomberg/Getty Images)

Media crowd around the new Xbox One (Photo: Ron Wurzer/Bloomberg/Getty Images)

As a sometimes-contrarian myself, I can appreciate the efforts professional opiners sometimes take with the news of the day. But there are occasions when contrariness for contrariness’s sake is just plain silly.

Gizmodo’s take on last week’s U-turn by Microsoft on the Xbox One – now known colloquially as the Xbox 180 – is a good example. The company beat a hasty retreat on its previously announced policies on used and traded games, which would have greatly limited if not eliminated the popular consumer options, in light of major opposition to them. Microsoft capitulated to the status quo and said the Xbox One will instead continue to support second-hand games without restrictions when it launches in November.

In his article, Gizmodo writer Kyle Wagner suggests “the Xbox One just got way worse and it’s our fault,” mainly because Microsoft’s vision for games was a purely digital one, without all the downsides of discs. Digitally downloaded games don’t get scratched and you don’t have to get up off your couch to change them. Moreover, the company’s plan would have let players share their downloaded purchases with up to 10 people and resell them, at which point it’d be the game publishers and not retailers such as GameStop that would make the money.

This is the key point, Wagner wrote, because it would allow games to come down in price. Rather than charging consumers $70 a pop as they do now, publishers would have more flexibility if they were getting a cut of resold games, which they don’t now. Perhaps games could be $50 or less under this scheme? As he suggests:

Publishers [currently] KNOW that they will not make money on resold games, so they charge more to you, the first buyer. You are paying for others’ rights to use your game in the future. If the initially proposed system had gone into place, you would likely have seen game prices drop.

That’s a nice fantastical possibility, but it’s just not rooted in reality. If that were indeed the plan by publishers and Microsoft, why didn’t a single one of them say so during the whole Xbox One fiasco? Used game discs – and GameStop’s entire business model – would be on the fast track to extinction had one publisher, any publisher (even Microsoft itself), come out and said, “Hey, we know you’re not going to like this whole DRM thing, but guess what? We’re now going to sell all our new games for no more than $50.”

No one said that because no one would do it. History has shown that publishers are only interested in extracting more and more dollars out of consumers, whether it’s through additional online passes on used games, day-one downloadable content that could easily have been included on the game disc, or micro-transactions up the wazoo. Consumers are understandably wary of giving up their purchase rights when there’s no guarantee they’ll get anything in exchange.

The other issue with Gizmodo’s article – with Microsoft’s reversal, actually – is the lament about how the company has taken away the ability to share digitally downloaded games with family or friends. A fellow journalist remarked to me how this was really too bad, because he could have bought a game, then shared it with his brother who lives on the other side of the country.

In the first instance, Microsoft was pretty sketchy about exactly how this was going to work. The cynically minded could be excused for saying it sounded a little too good to be true. But in the second instance, is there any real reason why the company couldn’t still do this, or did executives simply cancel the plan out of begrudging spite on the disc issue? It sure looks that way.

Contrary to the contrarians, the Xbox One has not gotten worse because of the reversal – it has simply returned to reality. While other media – music and movies in particular – is now largely digital and cloud-based, ownership of actual physical games discs is still going to persist for some time for several reasons. Believing it won’t is at this point fantastical thinking.

The main reason is cost. As long as publishers are charging $70 for games, the first-sale doctrine – where buyers can recoup some of their hefty initial outlay through resale – will continue. If they want buyers to give up their ownership rights, they’re going to have to give assurances in the form of lower price guarantees for doing so.

Publishers and console makers can also try to cut out pesky used-game retailers such as GameStop by going completely digital, but then those pesky retailers are likely to turn around and stop selling consoles. Such retailers make very small margins on the hardware and virtually all of their money on the games themselves – giving up consoles will hurt them a lot less than the manufacturers.

The entire business is pretty much entrenched, with every stakeholder – from console maker to publisher to retailer to consumer – needing each other. There’s no doubt the industry is ripe for disruption and that the future of games is cloud-based and all digital, but none of that is likely to come from an existing player. It’s going to take an outsider to achieve Microsoft’s vision.

Say, isn’t the Ouya launching this week?