Wednesday, June 12, 2013

E3 2013 (Day 0): Can XBOne survive DRM?

The thunderous applause that greeted Sony when they announced that they will support used games marked just how disastrously wrong Microsoft’s consumer research and public relations have been.

Yes, Sony STUNNED the crowed.  This is this console generations MEGATON and GAME CHANGER.

Perhaps it may be safe to say that Microsoft has lost the next generation console war even before its system actually gets out of the door.  I’m not saying that no one will buy the XBOne (A crude but it’s a rather catchier name compared to XBOX One) anymore.  What ‘will’ happen is that Microsoft will no longer be the market leader nor will it reach the same installed base as the Sony PlayStation 4.

For potential consumers (who may be interested despite the DRM debacle) are this means:
  1. Wait for a massive price drop (which is bound to happen the moment sales projections in the first quarter of sales do not meet the expectations of Microsoft)
  2. Only buy the games that are worth something --- (I guess we won’t be seeing my little pony in the XBOne but its more worrying that ‘niche’ games like Japanese RPGs will not come unless its going to be one or two produced by Microsoft themselves à speaking of which where is my Lost Odyssey 2 Microsoft?)
  3. Just buy - for those who are rich enough to get all systems.  (I certainly don't fall in this option.)
But I suppose Microsoft should be used to that…  A part of me does not want to believe that Microsoft is ‘caught off guard’ by the reaction.  I’m sure there are smart people in their team who have seen the disaster that was Sim City and Diablo III.  But Microsoft’s attempt at Digital Rights Management(DRM) won’t be the first and it won’t be the last.

DRM is the HOLY GRAIL of any company that produces software, video or audio.  MAKE NO MISTAKE, DRM is also lingering in the minds of Sony --- they are masters at marketing and have won the hearts and minds of the console gaming market but they will never forget the ‘PROJECTED’ sales that they know they will lose from used game sales, game re-use and piracy.   Those losses are just estimated losses but the prospect of gaining those sales is tempting enough to keep the thoughts of DRM always around.

Microsoft as of late have been wrought with ‘wrong’ moves --- from Windows 8 now to the XBOne.   But what can be perceived as wrong moves by the consumer market can also be seen as a long term strategy for Microsoft.  It’s a costly mistake / decision but if viewed in the long term context might be worth it.  The question now for MS is if they are committed to actually seeing the XBOX brand in a long term light.  
Microsoft may seem fickle, axing things left and right, but who knows maybe there is more to this than meets the eye. (I know I sound like an MS apologist but who cares?)

The problem Microsoft had with the XBOne DRM is how they handled it.  

Every time DRM is introduced there will always be resistance amongst consumers.  Take a look at the early days of STEAM where the PC gamers were up in arms with the thought of losing their game discs.  Take a look at Adobe and their implementation of the cloud subscription of the Adobe Creative Studio. 


It will only work depending on how well you market it.  And that is the real failure of the XBOne.  It’s not the games, not the console but it was all in the marketing.

Throughout the past few weeks, I keep on asking what’s in it for me?  A question that Microsoft continues to dodge which again is a point against their marketing and PR team.

The ONLY advantage I seem with a potential DRM is lowering the game prices (WHICH THEY HAVE NOT ANNOUNCED).  The percentage is unknown but since DRM is in place the projected losses from game trades and game sharing should have been lessened right?  If the SRP (of $60 USD) for physical disks includes projected losses…logic dictates that prices should go down should a fraction of the projected losses be addressed with DRM.  Microsoft’s lack of response on this issue just makes you wonder if they plan to continue selling the games at USD60.  In that case, they lose again because if Sony offers the same price point and the possibility of selling the game at USD40 or less then in avertedly the cost of the PS4 game to a consumer falls around USD20 --- unless you’re the gamer who wants to KEEP all his games.  (Unlike me who ends up getting annoyed at the clutter.  YES I do sell my games after we've played them for extra cash to buy new ones or simply because I'm running out of space.)

Another marketing blunder MS has is their failure to present or highlight an alternative to disk games.  If they are absolutely certain that they will not back down from DRM, they should have highlighted their online store for online downloads.  But an online store is once again a problem since the lack of physical media and third party liaison should lower the price of a digital download.  Instead, MS (and Sony AND Nintendo) intend to keep the price of digital download the same as physical game sales for the sake of not angering their retailers.  Again…MS is stuck between a rock and a hard place but nothing that an expert marketer should be able to remedy.

Nintendo actively markets their online store eSHOP.  Recently, I was sorely disappointed with the news that Ace Attorney 5 will be a digital download only.  Capcom sited several reasons which is at the heart of every publisher.  AA5 is a niche game.  The previous AA titles did not meet the enormous expectations or ROI that Capcom has set on it --- so they want to cut their losses by no longer creating a physical game (create cartridge, print materials) and the logistics of this distribution to retailers.   So there --- AA5 is now just a mere download but hey --- at least its coming I guess… 

Nintendo sure knows how to make their customers happy...

Nintendo includes the Club Nintendo points for every sale of a 3DS physical game, mostly the ones published by Nintendo.  (Forget the fact that this is just locked to North America at the moment.)  These points encourage gamers to buy the physical copy for the sake of getting free game downloads and actual physical collectibles from Nintendo.   GENIUS IDEA!!!  GENIUS!!! Unfortunately the Big N hasn’t capitalized on this that much yet.

Now can Microsoft do the same thing?  Can they actually TELL consumers what’s in it for them if DRM is here to stay.  Because if they can’t figure that out then can either pull the plug on the XBOX group (which is making money but NOT THAT MUCH money for MS anyway) or pull the plug on their DRM plans because clearly they were not ready to implement such a thing.

DRM is not to be taken lightly.  It is a big shift and in general people hate change.  Several companies have failed in their DRM initiatives (EA, Blizzard, etc etc) but the ones to actually get it right  will reap great rewards (Apple, Steam).   

Your move MS...  You may have lost the war but I'm waiting...

The question now is how resolute is Microsoft in seeing this through.