Risky business: the next Xbox versus PlayStation 4

You’ve got to admire Microsoft’s bravery. News that its next Xbox could shut out the second-hand games market has caused strong reactions across social media today, and it has impacted upon the real world too. GameStop’s share price took a dent following the publication of our story earlier this afternoon.

If our sources are correct (and we’re confident they are), Microsoft has made the move that publishers and developers have been asking for. Microsoft’s next Xbox will do what Steam and the App Store have been doing for years, and very successfully, too – a download-first, one profile, one purchase, one storefront system. Overnight, it’ll stop GameStop and GAME from selling on games without a penny heading back to its publisher, let alone its creator.

In recent years, online passes have allowed publishers to recoup some of the cost of maintaining servers for online play, but they have always been something of a half-measure. With the next Xbox, Microsoft could go all the way.

The key differences between Steam, the App Store and the next iteration of Xbox Live are in pricing and that ‘always-on’ detail. There’s good reason no-one really cares that you can’t trade in Steam and App Store games – often, they’re so cheap it barely seems worth the bother. One can easily call into question whether download-first next-gen games will actually be any cheaper because they skip costly manufacturing and distribution processes. One would expect they won’t be. On first impressions, Microsoft is taking a huge risk in cutting out a second-hand games ecosystem which keeps gaming affordable and its players interested in the box under their television.

But it is worth remembering that in adopting this download-first policy, Microsoft is free from existing pricing models. One can easily imagine premium prices for those titles deemed still worthy of a retail release. Service-based subscriptions for bigger, costlier games will play a part, too, and middle and lower tier games will sell further down the pricing scale. And let’s not forget free-to-play.

Microsoft has also, rather more sensibly, surmised that the kind of consumer happy to pay for a next-generation console is going to have a decent internet connection. It is not a portable device; there’s little harm in keeping the next Xbox connected, as long as the next iteration of Xbox Live is implemented in the right way. Past experiences with always-on services have been disappointing – just ask Ubisoft and Blizzard – but that’s current generation technology. Microsoft must take note of its contemporaries’ mistakes and make its always-on Xbox service as unobtrusive as it can.

What’s trickier for Microsoft is in explaining its decision when faced with Sony’s plans for the PlayStation 4. Walk into a game retailer (should you be able to find one by the time these consoles arrive) and the choice could be simple: PlayStation 4 is more powerful, and plays second-hand games. One can imagine how fruitful a call between Kaz Hirai and Don Mattrick might have been had they both agreed to take the same measures against second-hand sales.

Based on our sources’ information, we are building an ever clearer picture of what PlayStation 4 and the next Xbox will be. Right now, there seems to be a subtle role reversal happening; Microsoft’s stricter, more complex box aspires to be the complete entertainment superhub PS3 was once designed to be. Sony’s PlayStation 4 is more PC-like and developer-friendly, as Xbox once was.

What hasn’t changed is the logistical challenge of launching a home console. We understand that PS4 will reach the US and Japan by the end of this year, with European territories to follow after Christmas, just as PS3 did. What Microsoft might stand to lose in halting the second-hand market, it could gain if it manages to launch its new console globally before PS4.

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