Microsoft's Xbox PR team has quite job ahead of itself. Not only do you have to recover from one of the biggest policy reversals in console history, but you have to deal with wonderful gaffes like this from executives who should know better.
The Xbox PR job is many things, but boring isn't one of them.
The question I have isn't about how this will play out and if I have to put a disc in the console every time I play a game. I want to know why a company would go down this path in the first place. What was the light at the end of the tunnel? I believe Microsoft expected backlash from the Xbox One DRM policy and believe that is why they stuck to their guns at E3. I'll speculate a combination of pre-order numbers and a deadly game of chicken with Sony caused Microsoft to flinch.
So why risk the backlash? Microsoft wanted to control digital publishing, not embrace it. Microsoft's actions mirror those of book, music, and movie publishers who refused to accept change. I don't think there ever was a "right way" to spin this message, and I think it's too late to control digital publishing in games.
A Digital Publishing History
The start of the web was the beginning of an assault on print publishing. It wasn't about piracy, but access. Sure there were pirated books but it would be a decade before readers like Kindle made ebooks convenient. No, the real danger was everyone had access to publish whatever they wanted. In the early 90's I spent over $200 buying the Windows API documentation. Can you imagine doing that today? If I had a problem such as adding printer support to my app, I would buy a book with a chapter or two dedicated to using printing APIs. Now I just read a blog or ask in a forum.
As the web grew, people found ways to make a living outside of the established print publishers. Authors figured out self-publishing, reporters started their own news sites. Craig's List, Ebay, and Monster killed newspaper classified ads and indirectly newspapers. Wikipedia replaced shelves of encyclopedias. New business models were created and old ones destroyed. As painful as some of the change was, I can only argue it was for the best. You're reading this post now because of it.
Then digital publishing came after the music industry. Piracy played a much bigger role initially than access, probably because a recording studio was still a required investment. I believe in the statement "piracy is almost always a service problem and not a pricing problem". We moved from tapes to CDs because CDs were better, and I don't just mean sound quality. You didn't need to rewind the damn thing, and you could instantly play your favorite song and even put the track on loop. With digital came the features of a CD but across my entire music collection. No need to burn a mix disc, just make a play list and sync it to my Nomad!
Music publishers at first refused to offer digital options. They were pushing full $20 CDs when we wanted an MP3 single. They stuck to a format that had been replaced by better technology. They tried to litigate it away, but the victories did little. Digital publishing didn't just change the model, but burst a bubble in the industry. The music industry was used to making money from full length album sales and crumbled when we could get $0.99 singles. Now I just pay $10 a month to Rdio. That's the rough side of digital publishing, it let's the free market adjust the value of your product. CDs were never worth $20, we never wanted the whole thing, but you gave us no choice.
(Side note - I said we never wanted full albums and as a market that is true - check that link above to see. Personally I listen to full albums, almost exclusively. If a band cannot make a full album worth playing I'm not interested. I am however, of a small minority in this.)
Digital publishing hasn't hit the movie industry as hard as the music industry. The movie theatre experience is preferable and the highest pirated movies are also the top grossing. Blu-ray quality, special features, and director commentary tracks still give physical the edge for many. Nor do I have a need for instant access my movie collection like I do with music - it's not normal to put on headphones and listen to a movie while at work.
Television has had it a bit worse, but television has a service problem. We want to watch shows on our schedule, and a whole season in a weekend. Sure I can mess with a DVR and I did TiVo for a long while, but a single download from the pirate bay is easier. Netflix and Hulu are great starts, but not fully embraced by the publishers. Buying the episodes individually through iTunes or Amazon costs more than buying them on Blu-Ray and are often delayed.
Movie and television publishing is still in the transition stage, but it's happening. The content producers have less to fear than the delivery networks. I haven't had a cable subscription now for two years, and cannot recall the last time I watched a show on network television live.
Games: The Digital Publisher Cometh
If you look closely at the order in which digital publishing has changed industries you'll see it is a factor of file size and bandwidth. When the majority of consumers can download your content within the impulse purchase window digital publishing has arrived. It makes sense then that games - from small indie titles to major AAA studio franchises - are next.
So what can we learn from the past that applies to digital publishing of games? Will games follow the path of books, music, or movies and television? The answer is a little bit of each plus some unique issues.
Like books, digital publishing for games increases access. You only need a computer to create a game and all the software require is free. No special mics or cameras, just a computer and time and anyone can make a game. This not changes game pricing but also retaining talented game developers and designers as leaving to start a studio is a viable option.
Like music, games are in a bubble. This could be a post by itself, but the cost of AAA game development has exploded. $20 - $50 million is the "average" AAA game, with the headliners costing $100M or more. These numbers are often just development costs that don't include the marketing costs. Now, it's not as dire as the publishers would have you believe - Skyrim cost a reported $85 million in development and marketing and made $450 million in it's first week of sales. The more interesting trend is how quickly games fall from the $60 release price. AAA games are not priced by market value, but by publisher's desired value.
Like movies and television, games have a service problem. Store specific pre-order bonuses make getting the "complete" game impossible. Region locking means paying more for a game in your country than others or not getting access to the game at all. Online passes, special required accounts, and other invasive DRM schemes create a level of frustration and hassle to the gamer who just wants to sit down and play the game.
Games have their own unique problem: preservation. Games do not age well, and I'm not talking about graphics. Special hardware may be needed, and that hardware has a limited lifespan. Emulation only goes so far and takes far more power to get it right than is commonly understood. This is not just true of console games, but PC suffers the same problem. DOSBox doesn't work in all cases. Unlike books, music, and movies going digital does little to solve the preservation problem and can even make it worse when tied to an online DRM scheme.
The Microsoft Solution
Much like the book and music publishers, Microsoft's approach to digital publishing is to control it. Requiring login accounts and active connections lets Microsoft controls who can play the game. Reducing physical media to a distribution method (once installed there is no difference between a digital and physical purchase) they control when the game is traded or sold. Limiting access to publish on the platform lets them control when and which games get released.
All of these control methods support the final goal: price control. No unapproved price pressure from used games sales, no enterprising developers releasing games priced below the established standard. On paper, this must have looked very good. The digital monster is put on a leash and business can continue as normal.
This might have worked, or at least delayed things, had Microsoft rolled this system out years sooner. Before gamers could experience the benefits of the digital future. Before Steam happened. Before Minecraft happened. Before Kickstarter happened. Now, it's too late. Digital publishing is here.
It Was Never Xbox Steam
A common narrative has been all Mircosoft did was put Steam on the Xbox, and "Microsoft hate" by the press and/or vocal internet destroyed a great idea. On the surface this may seem like a valid comparison, but it doesn't take much digging to rip it apart.
- Steam allows developers full control - Developers with games on Steam do not need a publisher, and are free to price their game however they wish including sales and discounts.
- Steam isn't exclusive - Games on Steam are sold on other sites, such as Good Old Games where all games are DRM free and Amazon where games often sell for less than on on Steam yet give you a Steam activation code at checkout.
- Steam works offline - True, the last time I tried this for a road trip it didn't work, but this was a few years ago and at least Steam is making the effort to relax the online connection requirement as much as possible
- Steam has a longer half-life (bam!) - Xbox360 games will not run on the Xbox One, including digital purchases. At some point support for the Xbox360 and later the Xbox One will end, and with it any games that required a connection to online services. If your unsupported console hardware dies, it takes your digital games with it. Compare this to the PC where you can always replace the hardware with new supported hardware, and patching out an online check is fairly easy in the event of a service shutdown. Yes, PC games eventually will not run on new hardware, but this expiration date is shorter for console games.
There is more. Steam is constantly improving with features like Workshop, Big Picture, Early Access, and Greenlight. Steam has support for Mac and Linux platforms. Steam has added support for applications. And let's not forget to mention the famous Steam sales!
Microsoft's largest blunder is thinking it could generate the goodwill Value built in a decade with a single press conference.
The recent Xbox360 updates have offered few improvements yet increased advertisement and load times. High profile developers such as Team Meat, Jonathan Blow, and Phil Fish all have spoken publically about the negative treatment they received trying to work with Microsoft. The Indie Game channel never saw any real improvement or attention and the community dropped along with the XNA game framework. Hell, the Service Formerly Known as Games for Windows Live is still selling the 2009 version of Batman: Arkham Asylum for $49.99!
Building goodwill doesn't start with the new console generation, its ongoing and Microsoft has some ground to make up from these last few years.
Its Not Too Late
Microsoft can still benefit from digital publishing, but it will have to be with less control and better service. A good start would be to allow self publishing and open access. I would prefer to see an Xbox 360 Indie Channel level of openness (and is the required feature for me to consider buying at launch), but it doesn't have to go that far to make an impact. Sony and Nintendo are moving this direction especially with their handheld devices and it's a matter of time before the "numbers make sense" to open up their consoles. Announcing Unity support wouldn't hurt either.
It was a mistake to take family sharing and other digital features away completely. There is no reason these features can't exist for digital while not being available for physical. "Considering options for the future" statements are interpreted as "no" because there is little trust. There are already signs that Steam is adding these features, don't get left further behind.
Deliver details on the new features of the console. How does streaming work exactly? How do I edit my gameplay footage? Can I upload it to Youtube? The assumption is silence is bad news. It's not a bad assumption - at no time during the first unveil did you say "oh, the fantasy football stats currently work only with NFL.com" which reports from E3 confirm that is the case. Bad news does not get better by waiting.
The Kinect. You've got to let this go. It's not worth the price increase.
I have very little hope these things will happen, Microsoft just seems too out of touch. This is not just true of Xbox, but on Surface, Phone, and Windows 8 as well. New technology has come hand in hand with new restrictions, and the give is not as good as the get. Blame is assigned to the consumer or press instead of accepting responsibility. The cycle repeats.
Well, I do like what's happening with Azure, even if I can't figure out what it costs.