No, Xbox One’s DRM Reversal Didn’t Doom the Industry

A Threat To The Industry, If By Threat You Mean “Not A Threat”

According to many observers, Xbox One’s DRM was a necessary response to severe problems plaguing the gaming industry. This argument is a bit trickier, because it’s true there is a crisis. We’ve already seen it play out again and again in recent years, with the closure of smaller companies as well as major publishers. And of course, there’s also the nearly constant news of widespread layoffs across the industry, often affecting thousands of workers at a time. It is, we admit, extremely rough out there.

Though Microsoft never said it outright, it is smart to assume that Xbox One’s DRM scheme was designed in large part to arrest what major publishers have long insisted is the culprit behind these problems: their inability to completely control what customers do with an individual copy of a game once they’ve purchased it.

Of course, it’s never stated like that. Instead, the industry points to revenues it claims are lost due to piracy and, increasingly, to the used games market. Cliff Bleszinski has been the most vocal proponent of the idea that the video game industry is in existential peril thanks to used games, but he’s hardly alone. Even Penny Arcade Report’s Ben Kuchera expressed such concerns a month ago when defending Xbox One’s DRM.

The specific claim is that small game studios will be saved if the market for used games is destroyed, because via Underpants Gnomes logic, somehow more money would go directly to those studios. Used games therefore are directly responsible for all of the crises I listed above, or to put it more simply, you the consumer are directly responsible.

But are you? Consider this: as we all know, the gaming industry is incredibly cagey about how its products actually sell. We typically only learn sales numbers when they’re spectacular, or when we learn that for some reason, the best-selling game in a series’ history was somehow still below expectations. But one thing we do know is that the gaming industry rakes in tremendous money.

(Image via Gamasutra.)

The industry as a whole made more than 20 billion alone in 2012. To put that in perspective, that’s almost double the film industry’s take during the same period. That is spectacular money, and yet, so strident defenders of Microsoft’s tremendous PR blunder insist, the industry’s woes must surely be lost revenues and not, oh I don’t know, a top heavy corporate world in which top execs are making multi-millions, while rank and file developers are worked like dogs (for far lower pay), receive no royalties, and are often unceremoniously punished for missing obscenely arbitrary goals.

But I’m not here to rake an industry over the coals over its business practices. My point is that we know what industry figures tell us about the industry’s woes, and we know how much of our money is already going to it. That money didn’t come from the tooth fairy, it came from, yes, those dastardly consumers who part, every day, with such significant amounts of their hard-earned money that Bobby Kotick is worth an estimated $1 billion. Naturally, the industry sees 20 billion and imagines that it could be 40 billion or more if it weren’t for used games. Pardon my french, but bullshit.

First, we can’t assume that every pirated game is a missed purchase, because people who pirate video games are demonstrably unwilling to spend money on games honestly in any case. (They’re also really good at getting around whatever meager blockades are put up to combat piracy, which makes most anti piracy measures a stopgap at best.) And as for the impact used games sales have, ask yourself this: if the option of trading with friends or buying used games was taken away and thus every single game you purchased new was priced at the current MSRP of $59.99, would you personally buy the same number of games you currently do, or would you end up buying less games overall?

Most of us would have to buy fewer overall games: after all, your budget wouldn’t have changed, only the amount of product you’re able to afford with it. It’s probable that the average gamer might buy one additional new title instead of 3 or 4 used titles, but the nudge in profits for the industry overall would be slight. And it certainly isn’t the case that people would simply buy one new game for every used game they can no longer purchase.

Sure, Xbox One might have ultimately resulted in fewer costs for the industry thanks to digital sales. Every copy – sorry, “license” – sold digitally means one less physical product to have to manufacture. But there is no evidence that the actual price of these games was going to drop as a result. In fact, every bit of available information about Xbox One indicates your games, digital or otherwise, would cost the same 60 bucks (or possibly more). If you think that money would be going to the developers, then look at this chart one more time.

As we’ve seen from the prices EA charges on Origin and the already-confirmed fact that digital downloads on Xbox One would be identical in cost to physical games, with consumer protections removed, the major publishers simply have no incentive to charge consumers less money for their products. Instead, they’ll simply collect more of it than they do currently.

If Xbox One’s DRM could have done anything for the industry, it would have been to simply funnel more money directly to the top. And that wouldn’t change calculations like EA’s insistance that a game isn’t a hit unless it sells five million copies (at the full AAA price). As the price per copy for a new game wouldn’t have dropped under Xbox One’s DRM scheme, it’s likely the total number of new games sold would have remained pretty close to where it is now. That’s not going to save the numerous small studios who continue to get hosed, no matter how much cash the parent company is piling up in the money bin.

Contra Cliffy B and those who agree with him, Xbox One’s DRM was not a silver bullet that would save an ailing industry, because whatever is ailing the industry has nothing to do with a lack of money. Removing the option of cheaper used games, ​exerting first party control over how games can be transferred between people, and ​leaving in place the apparatus that keeps new games at the current MSRP of $60.00 (and possibly higher) would simply hand the industry a captive market. ​Xbox One buyers’ only respite would have come in the form of occasional holiday discounts and the eventual price drop for older titles. ​In other words,​ Xbox One ​was an attempt to turn the video gaming industry into a de facto oligopoly.

It almost feels like parody to have to point out that cartel-structured economies are not, in fact, good for consumers. They exist not to benefit the consumer, but to ensure the continued survival of businesses regardless of the free market forces we are told​ repeatedly ​must be respected. ​Apparently that argument only applies to the hoi polloi. Still, to paraphrase Jim Sterling on the topic, an industry that needs Xbox One’s DRM to survive has already revealed that it is incapable of survival.

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13 Comments on No, Xbox One’s DRM Reversal Didn’t Doom the Industry

Ellis

On June 25, 2013 at 10:08 am

Why is it a surprise that games journalists have chosen to suck the d*cks of Microsoft? It’s no different from you and Ian kissing the asses of every ‘liberal,’ feminist, anti-corporate or reverse-racist spokesperson on the planet. In both cases you’re letting your deep-seated, naive and often uneducated beliefs cloud your judgement. The only distinction is that games journalists deepthroating games developers isn’t anything special. Games journalists using a games website as a platform to vent their spleens on socio-political issues they have limited-to-no understanding of is a bit more of a problem.

Patches

On June 25, 2013 at 10:30 am

You sell your Xbone “naked”, then those that are interested register for the 24h/DRM/10 members service (free or for a fee)… Problem solved…

BTW, if MS is interested, I’m available as a consultant for a million$ a year…

Ross Lincoln

On June 25, 2013 at 11:10 am

Patches, you’re a dangerous genius. Please use your powers only for good. :)

eddie

On June 25, 2013 at 11:19 am

I have been waiting for you guys to post a rebuttal to all these idiots for the last week. Thanks again for being awesome gamefront

Rick

On June 25, 2013 at 12:24 pm

Thank you Gamefront.

I originally found Gamefront during the Mass Effect 3 ending debacle. You guys were a beacon of hope and reason during that time (I still secretly hope and believe in the indoctrination theory), and I have been a constant lurker ever since.

Thank you for the articles, like this one, that you post, and the points-of-view you bring to the conversation.

R-man

On June 25, 2013 at 1:45 pm

Great job on the Used Games section. Honestly, I don’t really like buying used too often… however, I enjoy the option, and I definitely do not have the extra funds necessary to buy all the games I want, so I have to ration out my dollars and cents to buy only the games I desperately want… The ones that I think look to be worth the full price of $60. I think I’m a good example of what a consumer would be in a No Used Games world. And I also believe that if there were no used games option, there are some games I never would’ve gotten into to begin with… If I had never bought a used copy of Mass Effect, for example, I never would’ve gotten into the rest of the trilogy… Because I would have never known what I was missing. I wouldn’t have been anxiously waiting for the release of the next two and I never would have bought Mass Effect 2 or 3 brand spankin’ new. Yeah, I could’ve bought those used as well… but why would I? I loved the first so much that I wanted my own brand new copy of whatever they were selling. Actually, I feel that because of the used games market, it puts more pressure onto the developers and publishers to put out a much better game so that people WANT to buy it new. The majority of people will buy something brand new (maybe even pre-order it) if it’s something they KNOW they absolutely can’t go without, or that will give them the satisfaction they are looking for when required to pay $60. I feel like the used games market puts a good kind of (and much needed) pressure onto the people who make and sell the games. I feel that, without it, the quality of games in the overall market would probably begin to fall.

Chris

On June 25, 2013 at 8:43 pm

one new title which see the developer getting paid or 4 used titles which they see 0 dollars of. i wonder which one i support.

Of course im a PC gamer. ive seen how this world plays out. and i like it.

matthew s

On June 26, 2013 at 8:08 am

I like used games because it gives me a chance to try a game im not sure about and if I hate it then its not so bad because I didnt pay that much.

I bought a used copy of uncharted drakes fortune when I first bought my PS3. There wasn’t a lot of games to choose from and the demo was ok but I wasnt sure if it was worth paying full price for as it was a new ip. It vost me half the price used and I fell in love with the game. So when the second and third arrived I bought them day one brand new. And it means ill be buying the last of us brand new.

R.J.

On June 26, 2013 at 12:38 pm

I’m curious, if MS backing off on the used games is somehow going to bring about ruin for the industry, why were we not hearing these people calling for Nintendo and Sony to implement such features? Apparently, two out of the big three knew that getting in the way of people trying out new games is a bad idea, even if that is by sharing among friends or buying a used copy. I’m pretty sure that listening to what your customers want is a good thing for a business since it, you know, makes people want to buy your product.

Kakyo01

On June 26, 2013 at 11:42 pm

a friend of mine had my copy of inFamous 1 because he liked the sandbox-concept but did not know if he would buy a game like that (he isn’t into superheroes, etc)… he played it and before you know it he bought inFamous 2 full price.

giving a friend access to your games can result in increasing the publishers income… without playing with my game for a while he would never bought the game… he would have skipped it…

making it hard / impossible to give your games to your friends will hurt the publishers income in the long run even if they gain some money at the very beginning

Dratkin

On June 28, 2013 at 4:26 am

For the first time EVER, I am zero interest in the Xbox. I was a big fan of the original Xbox and the 360 but I am just not interested in the Xbone as some are calling it.

quicktooth

On June 28, 2013 at 6:21 am

Bless you mates :D . I’m delighted that Gamefront’s (highly *unusual* in this industry) integrity shine forth some more. You know who I don’t read the articles of? Dishonest people who have no opinions of their own but act as a sort of relay service for slightly reworded press releases. I don’t need to waste my time with them, and I don’t. Nor do I need to pretend they are “journalists” and “news articles”. If I want some company’s spiel, I’ll go to them directly. *Gamefront’s* journalists have actual opinions, insightful industry commentary, and is one of the few sites I enable ads in my browser on. Yep you heard me, I turned my adblocker off (on Gamefront). Why? This gives the people I want to support money (and I will buy the stuff advertised if it looks promising). Put that in your pipe and smoke it, numerous corrupt game journos- you daft b@astards. Try to get me to lose MY rights, will you *shakes fist*

Mike

On June 28, 2013 at 10:44 am

I don’t think I will be buying this one. Especially after releasing Fable 2 only on xbox, that ruined faith in them from me.