Saturday, June 15, 2013

DRM -- Prices and Values

So since I'd already done one post recently as a result of my former game development history, I figured I'd touch on one topic in gaming which is causing a lot of buzz right now, especially in the wake of E3.  This is regarding the respective DRM outlays that Microsoft and Sony are taking on their new consoles -- XboxOne and Playstation 4 respectively.

Looking at Microsoft's vs. Sony's respective press conferences at E3 earlier this week, I think anybody would say that Microsoft gave the better presentation out of the part.  Sony's was actually kind of dull but for a few moments, but then the DRM announcement came and all of a sudden, there was thunderous applause.  End result, people came out of the conference with 94% preferring Sony's console to Microsoft's, at least according to Amazon's survey.  This is far too strong of a bias to be explained away by fanboyism or sample bias, especially considering that prior to E3, Amazon was seeing pre-orders for the two consoles running a dead heat.  So clearly, DRM is one of those things that presents a serious issue for consumers.  But it also presents an issue for developers and publishers.

That said, there's a lot of information out there that demands culling and correction.
First of all, Sony's little play of "no DRM" is nothing more than a marketing play, and not really true.  What it really means is that the DRM and rights protection model will probably be nothing new on their part.  At least not on the packaged disc side of the picture.  There's still such a thing as protection against duplicated discs and legal right of ownership and so on, but we've had that all this time, and people generally consider it a fair thing.  Sony may claim that they have no DRM measures, but really, it's nothing more than a jab at Microsoft, whose popularity had dived when the public heard about XboxOne's overtly restrictive policies.  The reality is that Sony is not really regulating that, and certainly not on online PSN games, which could do anything they want, really.  Secondly, people seem to view Microsoft's new policy as somewhat of an intrusion, when it really isn't.  It's entirely about the nature of ownership of merchandise, and putting equally strict measures on that as many software vendors already do for their software for home PCs.

Bringing it to the console and games software is a bit new, but even more than that is the fact that it's not...  hidden.  It's not something happening under the hood beneath your notice.  It's something that is made explicitly necessary, and that's the thing that makes it painful.  Technically speaking, the protections placed on games you download off of PSN, Live, or Steam are all subjected to the same sorts of protections...  maybe not the must-check-in every 24 hours bit, but the rest of it, at least, is much the same.  I personally feel, at the very least, that a given download should be tied to a machine as well, not necessarily only to a particular account -- the latter is problematic for people who deliberately keep more than one user account on their console (such as myself).  Granted, the purpose of tying to an account is so that if you get a new console, you don't have to pay for the game a second time.

Let us remember that this is not really entirely new, though.  We don't legally have the rights to sell software that we've purchased for ourselves, most of the time...  it really depends on the specifics of the EULAs for certain packages.  It's also not uncommon (think Adobe CS) for software update managers to routinely scan your license keys and make sure you have a valid one regardless of whether or not you bought it legally.  Almost every particularly expensive piece of software, or anything meant for enterprise usage does this all the time.  Heck, if you take things like Apple's OSX, you never really own it per se.  Those who've bothered to read the license agreement pretty much realize you're effectively leasing the software.

All that said, there's the real limitations put on the end user, which relates to used games, rentals, and personal sale/borrowing/lending of games.  There are matters of the fact that it's not uncommon for people with broadband connections to experience long-term outages of several days (especially in regions with severe weather), but I actually expect Microsoft to be pretty lenient about that, just as they currently are with software activation on Windows or Office.  Rentals, I think, are a solvable problem, in that a lot of the protection measures can be locally removed in the short term, but in the long term, the whole cloud gaming idea may come to fruition in a better way than the earlier attempts with which we're all familiar, and that can pretty much eliminate the rental difficulties entirely without having to add special exceptions.  Microsoft has already talked about this in the more generic goal of future-proofing the platform since it would allow playing future games on hardware many times more powerful than the XboxOne.  Provided that such a system proves feasible in the long run, I think we can say that can also solve the "rental problem."  The weakness of this solution is that it's only in the long run that it's effective.  That helps no one today.  Rentals are not really something to discourage in my book because it really empowers the consumer to try before they buy.

Used games is where I have to say that game publishers are really the ones behind this.  Used game sales has always been a bit of phantom revenue.  Money that shows up in the net retail performance of a product, but never actually reaches the people who were involved in its creation.  The model that MS is proposing doesn't really end used games, but makes them a continuing income stream for the production teams while also making them potentially more expensive by putting an ownership transfer fee on top.  The retailers like Gamestop are not too happy about this because it means they only get a 10% cut (supposedly) on used game sales revenue (their former cut was 100%).  Although used game sales account for about 30% of their total sales revenues, it accounts for close to 60% of their profits.  When a game is sold new, the retailer is buying in lots of 1,000, and many many people are getting a cut of this including the developer, the publisher, the console platform owner (be it MS, Sony, or Nintendo), the people who printed the disc, the graphic design company that did the cover art, the company that prints the instruction booklet, etc.  Because of that, the cost to the retailer for that game is pretty high, and they sell it to you at $60.  But when they are buying back a used game, they define how much they pay and how much they'll sell it back for.  Gamestop makes about the same amount of profit on the sale of a used game at $25 as they do on a new game at $60.

But the publishers are surely happy with Microsoft's new model because they now get a cut of this used game sales revenue (how much hasn't been stated to my awareness, but anything is more than the 0% they'd been getting before).  As far as I'm concerned, this particular effect is indisputably a good thing.  This is all the more important because the more technology advances, the more expensive games get to make, and that means any revenue stream you can get is infinitely better than having phantom sales.  So in this sense, I can't completely go against Microsoft's move here, because it partly benefits the people who actually deserve the money you spent on it.  No matter what, something had to be done to address this missing money because the current model of only getting money on sell-in is simply no good.

What I particularly like about this is the fact that as a consumer, you and I don't really "owe" anything to the gaming industry, technically, just because we might like their games.  Our rational concern should be one of our own satisfaction as a consumer.  If we see that the used game gives us equal satisfaction for less money than new, it is only reasonable to want to get the used game.  The only times we tend to buy new is if that's all that's available, the used games are highly damaged, or we have some sort of personal commitment to support the makers of the game, at least so that the cycle of creation is still fed.  Somehow or other getting some chunk of that profit back to the developers is helpful, and if the consumer can do that without necessarily having to think beyond his own wallet and available cash, then both people benefit, though the retailer takes a hit, relatively speaking.

There is, however, more than one way to skin a cat.  While the end effect is a good thing, the cause is what people have a problem with.  It's one of the areas in which having an always-on broadband connection really pays off -- online digital distribution.  This cuts out so many middlemen that it is possible for the earnings model to be more efficient because there is no more instruction book or disc printing or cover art and so on.  It's also a model in which the end consumer, not the retailer, is the direct source of revenue for the publishers.  Indeed, the brick&mortar shops are not happy about this either, but I feel that if it really takes off, it will make the need for something like a transfer fee and ownership re-assignment completely moot, and that's why pushing this model harder is something that I think everybody would agree with.  Note that when I say "really takes off", I mean to the point that brick&mortar retailers selling used games becomes such a small issue that its ultimately irrelevant.  Currently, platforms like Steam and the like have reached the point of parity with used game retail revenues, which is a good thing, but we still have a ways to go there.  Moreover, it really helps to prevent piracy because it is doing a lot to make the content more easily accessible.  That does more to curb piracy than any draconian copy protection measures.

Again, I think Microsoft knows all this, but I feel like a lot of game publishers, especially large ones, really aren't going to trust the consumer that much.  I can't say I blame them entirely on that because I've seen just how aggravatingly stupid a lot of the people out there in the market can appear to be.  It's the same reason why Anita Sarkeesian found so much misogyny in the gaming community -- the filtering mechanism here is online forums, where the discussions usually get carried away by the loudest and the dumbest.  This is why I believe it was they who pushed Microsoft for a sort of indefatigable solution to the problem of lost revenues due to used games, and what you get is something that satisfied them.  Make no mistake, I do consider those lost revenues a problem...  Ultimately, you can make a lot of arguments about the need for big development and marketing budgets and the necessity of pushing more polygons, bigger, better graphics, etc...  But whatever you say about that, any retail revenue made off the sale of the game -- is it unfair for some part of that to go towards the developers & publishers so that more games can be made down the line?

At the same time, used game sales between individuals is a bit of a different ball of wax.  How many used games are sold through Gamestop where the person selling back the game might only get about $10 for their game (which will be sold to someone else for $35-50) vs. people selling over craigslist, ebay, or garage sales themselves?  This is one where you start to see the measures on top show their hands.  At least when you buy at a Gamestop (under the new approach), the license transfer fee is included in the price of the used game you are buying, but when you buy from some random guy, you are going to have to pay that fee afterwards, meaning you're essentially buying it twice.  That may, in effect, decrease the influence of private sales on the market.  But aside from that, I think this is one of those fundamental changes that is much more seriously not consumer-friendly.  Always-on check-ins and having to pay a little more for used games you buy at the store is small potatoes, when you really get down to it.  Not being able to sell the games you bought to someone else (again, not because it's impossible, but because it's unreasonably expensive to the buyer) is something that I don't think helps anybody.  Now you could argue that this is also phantom losses, but I don't think it's significant enough to merit more restrictions.  Most of the time, when people sell privately, they're selling for a fraction of the cost of retail or used titles at Gamestop, so trying to grab at some part of it is really not worth the effort.  Then again, I could be wrong.  I'm not aware of any statistics on private sales of games the way I am on retail used game sales.

Well, that still leaves lending and borrowing between friends.  That's something that Microsoft's measures completely block.  That's something that I think is necessarily harmful.  This sort of temporary exchange of hands doesn't hurt anyone, and doesn't really constitute a "problem" in the eyes of anybody in the industry.  But because of the approaches used to solve other problems, we don't really have a solution to this.  Perhaps Microsoft could have some sort of grace period on these license checks or perhaps there's the sort of "borrower rights" approved by the original owner, but that constitutes a hassle simply never existed prior to this point.  Nobody is going to lend their friends a game to try for a while if it actually involves some sort of red tape (unless of course, it was standard practice).  This is something we should actually be encouraging among gamers.  More often than not, someone borrowing a game from a friend is going to either like or dislike a game based on their experience and it is every bit as effective as rentals if not more so in the "try before you buy" effect.

In summary, I have to say that there is a slight degree to which things are being blown out of proportion, but it is slight nonetheless.  I do think that the approach that MS is taking is questionable, but I can also see why it's there.  I think some parts of it, like the periodic check-ins are completely unnecessary -- this could just as easily be a check-in that occurs once per play session, and be in every way innocuous to the user.  This is what a lot of enterprise software already does.  On the one side, this sort of strictness and addition of a new revenue model is a good end result (even if the methods are a bit questionable), but at what cost did it come?  You can find ways to make everybody happy and make things a little easier for everyone.  But the real mistake is how it came out more so than what they've done.  This is what also gave Sony a chance to stretch the truth a little bit and really take a major jab at MS, and that's what really hurts.  And what's that going to do for the developers?  Microsoft's purported DRM (about which the public details are still a little slim) actually seems to help them on a per SKU level, but if the market at large has suddenly painted that platform in a very revolting light, it could make it all for naught.  This has also clouded what was really the true difference between the two platforms in that they were playing different business models.  XboxOne was more of a convergence device that had at its base, a huge variety of media and entertainment options right out of the box in addition to gaming.  Compared to PS4 which is more of a pure gaming box with a few extras that you can buy on your own later.  If only that's what the next generation of console wars really comes out to be.