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.