Why Microsoft hasn't lost the console war

We’re less than half way through the world’s largest videogame conference, and the verdict is already in. Microsoft has lost this year’s Electronic Entertainment Expo (E3).

The expo isn’t simply a major industry event but has now become more or less a competition where the big three gaming giants - Nintendo, Sony and Microsoft - are ranked by the media and the gaming community on their future plans.

All three players want to do well at the conference and this year ‘winning’ the event is of particular significance for Sony and Microsoft, given that both are on the cusp of releasing new gaming consoles.

Final votes are usually counted at the end of E3 but no one is bothering to wait that long this year.  

Sony’s PS4 has claimed this year’s E3.

But don’t let the accolades fool you, Sony’s PS4 may have won this bout but this fight is only getting started.

Why Sony ‘won’ E3

Sony pretty much won this year’s conference by default due to a frustrating, albeit profitable, feature in Microsoft’s new console.

In what seems like a nod to the future of gaming, Microsoft’s new Xbox One console will upload all of the data from a game disc onto the device’s hard drive, but it also makes it impossible to trade-in or resell that game.

It’s easy to see why Microsoft opted for such a system. A similar practice is already in place with PC games and other Windows software. The sale of pre-owned games cuts Microsoft out of the profit equation. So, by turning the disc into a single-use product, the company assumes a greater control of its distribution channel and ensures that it earns coin from each and every software transaction.

Needless to say, the move is not going down well with the gaming community. To this point, the loudest cheers and applause during Sony’s PS4 conference came when the CEO of Sony Computer Entertainment America Jack Tretton said:

"When a gamer buys a PS4 disc, they have the rights to use that disc, resell it, lend it to a friend or keep it forever."

And this isn’t the only stab Sony has taken at its rival. It has also undercut its Microsoft’s console by $US100 ($50 in Australia) and released a video seemingly poking fun at Xbox One’s ‘no sharing policy’.

Short term risk for long term gain

It’s funny that Sony’s making fun of Microsoft’s strategy, given that it will more than likely be mirrored by a number of content-driven industries - including Sony - within the next couple of years. Technologies like cloud computing are going to give the companies greater control over how they distribute and charge for their content. And once they have that power, they aren’t going to stifle it. 

Microsoft’s ‘no sharing policy’ is simply ahead of its time and a precursor to what lies ahead for the industry. The early implementation may have left the window open for Sony to score a PR win with the gaming community but how long before ‘no sharing’ becomes the norm?

Of course, it’s a risky move by Microsoft, as gamers are often the early adopters of these kinds of products. But the company has a habit of enduring short term criticism for long term profits with its Xbox products.

When it released its first Xbox console, Microsoft introduced a system which forced gamers to pay for a\subscription in order to play each other online. This too was controversial, and Sony again opted to play the gamers’ advocate and not introduce a similar system with its PS3 console. Fast forward seven years, and now Sony’s changed its tune, saying that PS4 players will require an online subscription in order to enable online multiplayer.

Microsoft made the tactic viable, and Sony’s begrudgingly followed in its footsteps.

The same strategy may apply to the ‘no sharing’ tactic. There’s a not a lot separating the two consoles when it comes to what they deliver to gamers. The key differentiator is content and while gamers are currently livid with Microsoft’s announcements, they may put their angst aside if their favourite movies or gaming titles are only available on the Xbox One.

 Given this, Microsoft's no sharing strategy may actually work to its favour, given that the company isn’t alone in its desire to reap more revenue from each title. Video game publishers are also missing out on any profits generated by the second-hand gaming market, and this may give them the motivation to promote the Xbox One over the PS4. This could see publishers who are releasing content for both consoles, either release their games earlier on the Xbox One or release more exclusive content for that platform.

Microsoft may be copping a lot of heat at the moment and it’s taking a big gamble with its strategy. But it would be short-sighted to write off the Xbox One just yet.