Why Microsoft’s new strategy for Xbox One is killing the games industry

Forza Motorsport 5 (Turn 10/Microsoft Studios)

Despite the overwhelming whines and cries from the denizens of the darkest corners of the internet, I’ve been a very strong supporter of Microsoft’s plans for Xbox One. ‘Finally’, I thought, ‘the console is finally catching up with the PC’. The prospect of a new generation of games powered and delivered by the cloud was nothing short of wondrous. It was the rejuvenation that the console industry sorely needed in the wake of the indie games boom and the inherent consumer shift to consuming digital content digitally. Yet, the ear-splitting mouthpiece of the ‘core gamer’, or more accurately, the short-sighted minority, blissfully stuffed in the pocket of companies like GameStop and GAME, employing their despicable anti-developer business operations, has decided it’s probably for the best that we, as a society, suffer a stagnant console generation unreservedly drained of innovation for ten more years.

"If I had asked people what they wanted, they would have asked for a faster horse."

Whilst the quote isn’t attributed to Ford, contrary to popular belief, it certainly serves as a powerful mantra for society’s resistance to positive change. Most customers don’t know what they want until they have it. Without a substantial change or evolution in a product, a customer’s propensity to consume generally remains unchanged, due to the lack of differentiation between preceding or competing offerings. This is exactly what’s happening in the console industry today.

Take Sony as an example. Just like Microsoft, Sony wants to move to a digital distribution model. They don’t care about supporting a used games market. Why? Because the very presence of a used games market is financially damaging to them. A customer who purchases a pre-owned copy of one of their games, say Naughty Dog’s latest hit, The Last of Us, is consuming all sorts of additional content. Customer support, server maintenance, community management — all costs associated with maintaining the ongoing service of the game. Costs that are borne solely by the publisher, with zero contribution from the second-hand consumer. It’s in Sony’s best interest (and the consumer’s too) to address the used games issue. It’s why they own a patent on it.

The Last of Us (Naughty Dog/Sony Computer Entertainment)

The Last of Us (Naughty Dog/Sony Computer Entertainment)

After Microsoft’s reveal of the Xbox One, certain buzzwords started to emerge through gaming forums, Twitter, and news outlets. Words like ‘always-on’, and ‘anti-consumer’ rose to the surface quickly, as gamers began to complain that a system employing such an ecosystem would compromise their best interests, whilst remaining blissfully oblivious to the fact that Sony’s beloved strategy was the very thing killing the industry they so sorely admired.

But Microsoft’s vision was unique. They designed a truly next-generation platform that’s powered by the internet. A platform that went beyond 'more of the same'. By exploiting the assumption that its core user group would be connected to the internet, Xbox One games would be greatly improved and deeply immersive like never before. For example, Turn 10’s Forza Motorsport 5 aims to rid the racing genre of AI opponents. Instead, your opponents’ intelligence is built on real drivers’ reactions. The new ‘drivatar’ system records your racing style and skill, developing an artificial intelligence closely related to your own personal driving ability. When you finish playing, your drivatar takes over, partaking in players’ races around the world, through Xbox LIVE, earning you points when it wins.

Other developers, like Bungie, Ubisoft, and Respawn Entertainment, have all been working on games inherently fused with the internet, allowing for new, innovative experiences, never-before-seen in the console industry. Without an internet connection, however, the lowest common denominator for the platform is lowered. Similar to Xbox 360’s Kinect, developers have to cater for the entire platform. By ensuring Kinect ships with every console, and an always-online architecture is available on every single system, game developers‘ visions would be relatively unbounded. Without this, games like Forza Motorsport 5 are essentially relegated to just being better looking versions of their predecessors, with a limited feature set and an experience offering compelling to few. Ultimately, it’s down to what players want in a next-generation game. Just better graphics? …or something truly innovative and meaningful?

Titanfall (Respawn Entertainment/Electronic Arts)

Titanfall (Respawn Entertainment/Electronic Arts)

Microsoft wasn’t the first company to suffer at the hands of the short-sighted consumer. In 2004, a new digital retailer opened its doors promising a new method of distributing games — a digital games library tied to the user, without the need for discs. People reacted exactly the same way. They complained about its DRM and its online requirements to register titles. Some even vowed to boycott the service and its games. But the owners stuck to their guns and focused their efforts to create the world’s biggest gaming delivery service — Steam.

Of course, we all know how successful Steam is today. It’s a behemoth, responsible for over 70% of the digitally-distributed games market, as of 2011. It’s the reason behind the surge in popularity in PC gaming in the last decade. Digital distribution has not only rid the PC platform of used game sales, but it’s also created a breeding ground for independent games development and fostered relationships between large development studios and their customers.

The promise of building a home console, digital-based ecosystem through Xbox LIVE for content distribution was a revolution. Microsoft proposed some radical ideas, in the way games would be distributed on Xbox One. The core idea was that your content wasn’t tied to a disc — it was tied to you. I go online, buy the games I want, and start playing them instantly. If I then come over to your house, your Kinect signs me in, and all my games are right there for us to play. No more discs. The content stays with the user. This is what every major digital retailer does (barring some notable exceptions).

However, Microsoft went even further with their plans. They understood the importance of a used games market. Out of respect to their customers, they came up with a plan to create the first digitally-distributed ecosystem to support digital used games, with lending and sharing options planned for the future, in order to foster a healthy and thriving sharing community amongst gamers.

This foundation for creating a personal, portable library of content brought the promise of some incredible supporting features, such as instant game switching, for example, using Kinect to instantly switch between a game of Halo and Battlefield, and Smart Match, allowing players to leave their Call of Duty game in the background searching for online matches, whilst they were watching a Blu-ray disc. Whilst, thankfully, the bulk of these features will seemingly still be possible for digitally purchased games, without platform consistency for every user, the experience will be inevitably diluted for everyone in the long run.

Halo (343 Industries/Microsoft Studios)

Halo (343 Industries/Microsoft Studios)

Opening up the possibilities for innovation, sharing revenue fairly, and raising the lowest common denominator for developers to exploit, are the keys to strengthening the industry. The only problem the Xbox One had was that it was too far ahead of itself. Clearly, the world thought it wasn’t ready for it yet. Gamers don’t care about the content or the ecosystem, instead prioritising price, value, and familiarity over everything else, at the expense of creativity and innovation.

The result of this is a generation of more of the same. More micro-transactions, more instances of incentivised downloadable content, and more complementary goods to ‘enhance’ the game. Without the due financial return owed to developers, these revenue generators will increase exponentially to discount financial losses.

Beyond 2013, you’ll also see developers investing in fewer original intellectual properties (IP) in favour of existing IP, more likely to attain a higher return of revenue at day one sales. It’s no question that gamers are more likely to impulse-buy franchise titles like Call of Duty in comparison with lesser-known new IP, such as Remedy’s Alan Wake. As Remedy’s Creative Director Sam Lake, the brains behind some of gaming's most beloved characters, such as Alan Wake and Max Payne, reiterates, "When Alan Wake came out, it was not a huge hit on day one. It’s been doing really well since then. It's become a cult classic." When a new IP’s ‘success’ is relegated to second-hand purchases down the line, and the odd purchase of downloadable content here and there, not only does it limit the creative, innovative potential for the industry — it also fills the retailer's pocket with the entirety of the revenue, with nothing going to the creators.

The Xbox One absolutely had the upper-hand until last night. It had a killer vision for the future and a plan to get us there. Whilst this vision is alive right now on your computer, on your smartphone, and on your tablet — it’s on hold in the living room for another decade. Now the Xbox One is just a souped up version of its predecessor, just like the PlayStation 4.

I just hope it was worth the eight year wait.