When clarifying its Xbox One used-game policy, Microsoft seemed to send a troubling message to the very customers who made it the current-gen console sales leader. If customers can only resell games “at participating retailers,” can no longer rent games (link) and may be banned from loaning games to more than one friend, will we ever truly own a next-gen game? If gamers are paying full MSRP, why put such restrictions on the games they’re buying? The questions have been legit, but amid all the outcry, one interesting facet remains unexplored that could put the questions to rest and make all the sense in the world. It could also explain Microsoft’s coyness and guarantee Microsoft wins the console war once and for all with the Xbox One.
Microsoft may be planning to reduce the MSRP for the next generation.
The logic in such a decision would be sound for multiple reasons. When the current console generation was unveiled, gamers were upset that software would cost $60 rather than $50. We’ve gradually become accustomed to that price, but the increase has still helped boost the business of companies like GameFly. Now on the verge of a new generation, publishers have said the Xbox One and PS4 require additional investment, which often translates to “you’re going to pay more.” Common sense says they can’t pull that stunt, especially in a society increasingly focused on micro transactions. If a higher price tag is off the table, revenue has to be made up in sales, but short of a few key franchises, it’s hard to imagine games selling more units than they do today. Yet what if publishers could make up the difference by getting their hands on the resale market and broadening their base of potential customers? That could very well be possible, and it could help explain Microsoft’s new used-game policy.
If a new Xbox One game cost $30 — half the price of a current-gen game — how many more working parents and individual gamers would take a chance on a new game? With a lower up-front cost, the risk/reward ratio wouldn’t be so off-putting, so the game’s potential marketplace would expand. Likewise, if the Xbox One offered full titles at a reduced MSRP compared to the PS4 (presuming Sony retained the $60 MSRP from this generation), more consumers would purchase an Xbox One from the get-go, thus giving Microsoft a larger install base and providing more potential customers for third-party publishers. Hello, leverage to get platform exclusives…. The holy grail, though, and the center of Microsoft’s used-game policy, is the resale issue, which could also be solved by this strategy.
If a new Xbox One game cost $30, for example, the lower front-end price would make it seem far less “unjust” to have such a strict used-game policy. In addition, the lower price would entice more consumers to purchase games at full retail, which would generate revenue for publishers who don’t see a dime on the secondary market. The secondary market, meanwhile, would lose steam simply because the price of a primary-market game would be equal to or less than what people pay today on the second-hand market or eBay. Microsoft could get its install base of Xbox One customers due to the appeal of lower-priced games, publishers could see a doubling (or more) of retail sales and fill the revenue gap, and next-gen console owners could play more games and feel like they’re getting a deal by paying less up front. All the while, the console business model would be falling more in line with the mobile market, which is clearly on the industry’s radar.
Rental companies like GameFly and Redbox would still be left out in the cold (link), but the entities that really control the industry — the hardware and software companies — would at least be at a break-even point with the current generation. And they may even improve their lot and be positioned for further growth in the future.
Microsoft may very well follow the traditional MSRP model with its Xbox One games, and its used-game policy may actually be as draconian as it seems. Or the company may have something up its sleeve so groundbreaking that it could — in one fell swoop — change the business model of console games, help solve publishers’ non-DLC long-tail revenue issues, and help quiet the critics of its used-game policy. Along the way, an announcement like this could basically help Microsoft win the next-gen console war before it even starts. I can’t wait to see what the company announces today at its E3 press conference.
– Jonas Allen