Xbox 180: Microsoft pulls back from the brink

A week ago, I tried to reason out the thought process that had led Microsoft to undermine its public unveiling of the Xbox One with a breathtakingly unpopular DRM system. I started from a simple assumption - that Microsoft is a company full of very intelligent people who had, collectively, made a bad decision, which implied that the data backing that decision or the culture surrounding it was the problem. Microsoft often has trouble reading consumer market sentiment (witness the commercial failure of almost every consumer product it has launched other than the Xbox 360) but its employees are neither stupid nor stubborn - it was inevitable that after the torrent of data which the company received before and during E3, the firm's brightest minds were thinking carefully about how to proceed.

"Mattrick was handed a gun and told to take the much-derided DRM scheme out behind the woodshed, where he promptly put it out of our misery"

Now we know what they decided - far sooner than any of us had given them credit for. They listened. They pulled back. They assessed the reaction to their DRM policy - far more passionate and widespread than they had imagined it to be - and made a simple call. Reverse. A hair-brained DRM scheme cooked up in a boardroom and already showing cracks before E3 arrived (if any of you honestly believe that the 10-person "family" sharing notion was a fully considered policy and not a desperate measure flung out half-baked in an attempt to calm consumer sentiment, I've got a bridge I'd like to sell you) was judged to be far less important than the overall goal of making a console that sells strongly and retains or builds the Xbox market share. Don Mattrick was handed a gun and told to take the much-derided DRM scheme out behind the woodshed, where he promptly put it out of our misery.

This is the right call. More than that - it's a swift and decisive call, at the end of several weeks where Microsoft has seemed incapable of doing anything but dithering and equivocating. The company's E3 wasn't just disastrous because of Sony's relentless gut-punching - it was disastrous because Microsoft still seemed incapable of giving straight answers. New questions popped up time and again which nobody at the firm seemed to be able to tackle with direct answers - at least, not direct answers that didn't promptly change within a few hours. Xbox One was going to be locked regionally using IP ranges, so you wouldn't be able to use your own console and games abroad! Or was it? We weren't sure. Anyone banned from Xbox Live was going to lose access to all the games they'd bought! Or perhaps they weren't. Opinions differed within Microsoft itself on that one, seemingly. As for the big, looming question of what happens to your games in ten years when Microsoft gets bored of running authentication servers and decides to switch off the Xbox One iteration of Xbox Live, absolutely nobody had any kind of answer to that - which tended to suggest, horrifyingly, that nobody had even thought of it.

By comparison, Don Mattrick's statement this week was outright refreshing in its clarity and directness. As much as I'm impressed that the firm has acted so rapidly and decisively to put a lid on this situation and start repairing the damage (which will take time and a lot more effort), I also hope that it has learned some really important lessons about communication and messaging. The problem with Xbox One DRM was not primarily a communication problem - the problem was that the DRM was a shambolic piece of monstrous corporate thinking that contemptuously treated every consumer as a potential criminal, and good PR for that would be like putting a sprig of parsley on a fresh turd - but bad communications definitely exacerbated things. Awful DRM might have ignited tech and gaming specialist media for weeks on end; awful DRM and awful communications, however, got this story right up in front of the world's media, turning Xbox into a butt of jokes on chat shows and a topic of derisive conversation among even the most casual of gamers and consumers.

"There's nothing dishonest or untoward about any of this - it's a good, successful company reacting in a sensible and mature manner"

Let's be clear - that is not a situation Microsoft could tolerate and it absolutely made the decision to drop DRM inevitable, even if the haste with which it has happened is surprising. This is not, as the dwindling but vocal band of DRM apologists would have it, a victory for loud-mouthed internet troublemakers, nor is it some kind of dishonest manipulation of consumer power by media busybodies. This is the market at work. Microsoft wanted to do one thing; Sony said it would do a different thing. Consumers - real, honest to god consumers, the people who actually go out and buy this stuff with their money and who, consequently if indirectly, end up paying the wages of everyone involved in this industry - made a clear decision that they preferred Sony's approach. Microsoft looked at what was happening, did the maths and decided to drop DRM like a hot potato. There's nothing dishonest or untoward about any of this - it's a good, successful company reacting in a sensible and mature manner to a consumer rejection of its policies.

In terms of those apologists, there seem to be two distinct if overlapping groups, both of whom have been making their point forcibly ever since Mattrick's announcement. The first is the likeably optimistic bunch who genuinely thought that Microsoft's DRM was a swell idea. They assumed, based on no evidence other than a deep belief in the innate goodness of media corporations, that the strict DRM of the Xbox One would enable publishers to drop the price of games and would put a stop to in-app purchasing, DLC and all the other bugbears of core gamers which, apparently, only exist because people keep on trading in their games at Gamestop. With sales soaring (an evidence-free assertion in itself) and income being raised for publishers from second-hand sales, prices would fall and the need for after-sale business models to boost profits would evaporate. Plus, the 10-person "family" sharing scheme was going to let us all share all of our games with ten friends, presumably meaning we'd only have to buy one game in ten, a system which would, er, in no way cause problems for the former assertions regarding soaring game sales.

The problems with this worldview are numerous and fairly obvious, but the most prominent is the notion that publishers would treat their income from second-hand sales as being a replacement for DLC, IAP and eye-wateringly high game prices. The reality is that publishers would slurp up that new income, add it to their bottom lines and wouldn't even say "thank you" before seeking a new way to expand their profit base. That's not because they're evil - it's because they're corporations, and if they didn't do that, they wouldn't be doing their jobs properly and their shareholders would find a way to fire them. Incidentally, for precisely the same reason, you can be absolutely certain that Microsoft's last-minute Hail Mary play of announcing 10-person sharing groups was never going to see the light of day without crippling restrictions. Still - I can understand and even respect the optimism of people who genuinely saw Xbox One DRM as heralding a brave new dawn for gaming, even if I think they're utterly wrong. And hey, about that bridge... Seriously, it's a lovely bridge. You'll love it.

"We'll all listen sympathetically to your complaints about puncture wounds in your neck when you stop sleeping with god-damned vampires"

The second group, most vocally represented by developer Cliff Bleszinski, is essentially made up of people who saw the Xbox One's policies as a chance to rescue AAA development from the rising-costs-versus-stagnating-sales ditch it has dug for itself. I don't like the attitude of this group, which essentially comes down to blaming consumers for the business problems facing the industry ("we're in trouble, and it's all your fault for not buying enough expensive stuff!"), but their frustration and hostility is absolutely understandable. After all, people genuinely feel that their jobs are at risk in some cases, and even if it's a huge exaggeration to extrapolate that out to the entire industry - AAA console development is a rapidly shrinking slice of the pie - it's still a real concern both for those people and for fans of those games. Moreover, I think the vast majority of people on both sides of this debate agree that there is a genuine problem with the parasitic and intrinsically immoral way in which retail chains like Gamestop and GAME have approached pre-owned software. I fume internally when I see retail stores putting pre-owned games on shelves next to brand new games but a few dollars cheaper, only a week after launch, and I'm not even a developer - if you actually work on those games directly, it must feel like a punch in the gut every time.

Where I differ from this group is in my assessment of what the problem actually is, and how it can be solved. I don't believe that you can fix the Gamestop problem, which is essentially the fault of publishers who frog-marched the rest of the industry into this awful, abusive relationship in the first place, by attempting to take away consumers' basic, long-standing rights to share and sell physical items they've purchased. We are gradually transitioning to a digital market where those rights are tenuous anyway - but that transition has to happen by choice, not by force, and it has to be subject to competitive market forces along the way. People accept the restrictions of Steam because Steam competes directly with other channels (piracy included) and emerges as the best, but not the only, option. Similarly, I spend a lot of money on iTunes, Kindle and Comixology in the full understanding of the rights I'm giving up, but equally understanding that an alternative exists if those rights are important to me (notably, I re-buy many books and comics that I particularly love as physical editions precisely because of the desire to share them).

Xbox One DRM didn't go down this route. It wasn't open to the competition that might have made it into a natural consumer preference (it may well still be the case that a majority of Xbox One game purchases will be digital titles with even stricter DRM than was planned for physical games, if publishers can bring themselves to sort out their blind spot over digital pricing - oh wait, sorry, we're not allowed to annoy Gamestop, are we? That's the same Gamestop that's supposedly putting everyone out of business by being horrible leeches on the industry? Look, we'll all listen sympathetically to your complaints about puncture wounds in your neck when you stop sleeping with god-damned vampires), nor was it respectful of consumer choice and preference. It decided that the future wasn't coming fast enough, and that we should all accept it as a fait accompli regardless of our individual preferences, desires or interests. In an entertainment industry, an industry which intrinsically sells its products based on nothing but individual preferences, desires or interests, that's a pretty horrible thing to ignore.

"Sooner or later we're going to have to confront a big question, legally, morally and commercially, about the ownership of media"

In the wider scheme of things, none of this is going to go away. Sooner or later we're going to have to confront a big question, legally, morally and commercially, about the ownership of media. We're going to have to stop dismissing the question of what legacy of media we're going to be able to pass on to the next generation; of how much we're going to lose, as a culture and as a medium, through blinkered corporate short-termism and the largely passive acceptance of consumers who value convenience over permanence. But this week, here and now, Microsoft made the right call - not because they wanted to address any of those issues, but because they want their console to make money, and that means not handing Sony a big stick and saying "another please, sir" over and over again.

Xbox One still faces big challenges. It's got a $100 disadvantage to begin with, a question mark over its graphical performance compared to its rival and a certain degree of negativity around Kinect being an essential bundled component (although personally I'm keen to see what developers do with that, even if I'm dubious that Kinect is actually going to work in my living room). What it doesn't have any more is a terrible DRM policy that was actually so bad that regular, everyday consumers were starting to notice it; what it has also lost is the painful image of a company utterly deaf to the desires and demands of its customers. Microsoft just executed a brave, if embarrassing, U-turn. Now, perhaps, the next-generation console race can finally start being a real competition.