Sony (NYSE:SNE) and Microsoft (NASDAQ:MSFT) have both been on the receiving end of controversial rumors in recent months about how the companies are planning to curb used game sales and piracy for their next generation consoles, the rumored PS4 and Xbox 720, respectively. Sony filed a patent last month that would prevent the use of secondhand video games on new hardware by linking physical game discs to an individual console once the software is installed. Microsoft is rumored to be developing a similar type of “activation code” for its new Xbox console, widely referred to as the Xbox 720.
Like game publishers' efforts to enforce digital rights management, or DRM, practices, the campaign against used games by game industry executives creates harsh battle lines between the companies that make the biggest video game consoles and their most dedicated fans.
Companies maintain that DRM is the only way to combat piracy and ensure that enough people are actually paying for game content to support its production, while digital rights activists and annoyed gamers say that it does nothing to combat piracy and only ends up disadvantaging those who are actually willing to pay premium prices for the games and consoles they like.
After warning console developers about the potential harm of banning used games, video game retail giant GameStop (NYSE:GME) officially entered the fray this week with a much clearer condemnation of Sony and Microsoft’s rumored plans. Speaking at the Goldman Sachs Technology and Internet Conference this month, GameStop CFO said that as many as three out of every five customers said in an internal study that they would not buy a system that blocked the use of pre-owned games.
“I think it was 60 percent of customers who said they wouldn't buy a new console [that blocks used games]" Lloyd said, according to game industry website VG247.
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DRM risks alienating this majority of customers by running against what Lloyd and GameStop see as their primary interest in owning any new consoles.
"Consumers want the ability to play preowned games, they want portability in their games; they want to play physical games,” Lloyd continued. “And to not have those things would be a substantial reason for them not to purchase a new console."
Lloyd didn’t reveal exactly how GameStop conducted its survey or how many people participated in it, though it did recently post an online survey on its website that enticed visitors with a chance to win some prizes. It’s also hard to deny GameStop’s vested interest as one of the last surviving brick-and-mortar retailers for the game industry in maintaining a vibrant ecosystem for sharing, renting and reselling used games.
Lloyd also noted that just 4 percent of his company’s used games sales are for new games within 60 days of their initial release, meaning that used games might not affect the commercial performance of any next-generation launch titles no matter what position Microsoft and Sony decide to take. And gamers as a customer base have a notorious habit of complaining incessantly about their favorite game titles and consoles and still obsessively buying them anyway, making it less clear how much of that 60 percent of disaffected customers would actually follow through on their threats.
But GameStop is hardly the first figure to oppose the game industry’s corporatist condemnation of used games, and the risk of driving away more than half of your business -- particularly the early adopters who are no doubt overrepresented in a self-selecting online survey by a game-centric company -- is hard to ignore. Sony and Microsoft have remained tight-lipped about any future plans they have this year for any next-generation hardware besides releasing the most teasing of possible teasers. But if consumer interest in this issue is as strong as GameStop suggests it is, console developers may finally have their day of reckoning with DRM later this year.