E3 Preview: Big Changes for the Gaming Industry
E3, the massive videogame industry trade fair, begins this week, and with it will come a slew of announcements promising gaming will forever change. This is absolutely correct. But the most important change for videogames on the horizon is not in graphical fidelity, innovative gameplay, or (god-forbid) story-telling and quality. No, the biggest change coming to videogames is not in how we play games, but how we buy them.
Earlier this year, Sony and Microsoft announced their additions to the newest console generation, the PlayStation 4 and XBox One, respectively. Coming this holiday season, E3 will certainly be a showcase for both consoles, providing another stage for both companies to win over consumers, as well as stockholders, game developers, and industry publishers. And it is those last two that seem most at odds in Sony and Microsoft’s plans. Based on their previous announcements, let’s take a look at what we can expect from this year’s E3.
Let’s start with Sony. The biggest takeaway from the PlayStation 4 announcement, and its subsequent marketing and press materials leading up to E3, is a focus on game developers. While in-house or 1st party development teams are still a large market force (just ask Nintendo, hurting for 3rd party developers), a recent industry survey shows 53% of game developers recognize themselves as independent. This shift in the 
way games are being made has Sony positioning themselves to take advantage. As Andrew Groen notes in an article in Wired, “There’s a war brewing for the hearts and minds of the videogame industry’s independent developers. The weird thing is, Xbox doesn’t seem interested in fighting it.” Groen quotes independent developers like Braid‘s Jonathan Blow and Retro City Rampage‘s Brian Provinciano who found working with Microsoft to be excruciating and unnecessarily difficult, with restrictive demands and guidelines, as well as errors while publishing that have cost these developers money. Sony will be taking this message of developer-friendliness with them to E3, where they will be giving out shirts with the tagline “No hurdles, just games,” followed by the PlayStation symbol, a pixelated heart, and the word “Devs.”
Turning to Microsoft, if I had to sum up the reaction to Microsoft’s May 21 reveal of the XBox One in just one word, it would be confusion. Industry reporters used words like disaster, desperate, and uncertain. Most of this stemmed from Microsoft’s lack of clarification on crucial issues like persistent online connection, used-game functionality, and privacy concerns over the ‘always-listening’ nature of the Kinect motion-sensing camera/microphone. Perhaps Microsoft realized the situation when this past Friday it made a post on its XBox Wire titled “How Game Licensing Works on XBox One.” In the document Microsoft attempts to clarify some of these points of confusion, emphasizing how games are always installed and registered directly to your unique XBox ID (whether purchased digitally or a physical disc), how game trade-ins and reselling will be up to the publisher to decide whether to enable this functionality, and that the XBox One must be connected to the internet once every 24 hours to allow games to be played. This time the reaction was a bit worse with one reporter claiming the XBox One “just had a very bad day.”
What Microsoft is trying to do with the XBox One is apply similar digital rights management (DRM) we see used on digital-commercial platforms like Steam and the App Store to a console that still supports physical, disc-based media. By tying game purchases to individual users and accounts, they are taking the physical out of the equation, much in the same way software is already registered to individual devices (Remember, this is still Microsoft). However, this ignores the several thousands of console users who do not have dedicated internet access or simply choose to use physical copies. Consider the entire video game rental business, which is completely unsupportable by the XBox One at launch. According to the post, “Loaning or renting games won’t be available at launch, but we are exploring the possibilities with our partners.”
To be clear, Sony has not been forthright with their system’s DRM and may well take on a policy similar to Microsoft’s. Hopefully Sony will reveal that at E3. But the question remains why Microsoft would risk alienating a large portion of their users? Just as Sony is looking to appeal to game developers, Microsoft is wooing game publishers. Used games have been a scapegoat for hurting sales and profit margins, and Microsoft may appeal to publishers by giving them that control, while avoiding being the ‘bad guys’ themselves by outright banning the second-hand market.
Both Sony and Microsoft have a lot of questions to address at E3. Their answers will change the course the video game industry follows, having nothing to do with the actual games and everything to do with the economics of the market.
