Monday, June 17, 2013

Xbox One vs. PlayStation 4

This article borrows from and elaborates on the following article (in French) by SebSauvage (1).

Microsoft and Sony have unveiled the secrets of their new video game consoles, which are due to be commercialized at end of this year. The only problem (for Microsoft) is: they've done it absolutely wrong. The 2 consoles will not be on the market for another 5 months and yet Microsoft already lost to Sony... big time! Let's see what they've announced and why Microsoft is shooting itself in the foot. Here are the facts about Xbox One:

  • More expensive than PS4 ($500 vs. $400)
  • If it does not connect to Microsoft's servers at least once every 24 hours, it blocks the gaming functions
  • You cannot lend nor give away your games (unless the recipient is part of your 10 registered "family members")
  • Even though you bought a game, you cannot resell it unless the editor allows it explicitly... and the editor may demand a fee when you resell your game... which will also force Microsoft to strike reselling deals with shops specialized in second-hand video games.
  • Zone restrictions: a Japanese game is blocked from running on American or European consoles. Therefore imports are a no-no.
  • Some 15-20 games have been announced (vs. 140 for PS4)
  • Independent developers are not allowed to self-publish their games. They'll have to surrender their fate in the hands of Microsoft.
  • Big Brother Kinect watches you. But it seems they allow now to deactivate it.
  • If you get banned by Microsoft, you lose ALL the games that you had purchased. I call it "flipping 2 birds with 1 stone".

So, it bids the question: what the hell went through Microsoft's mind? Were they on crack or something?

I'm only just speculating but my guess is that Microsoft thought in terms of "game theory" (GT). The concept of GT is that of a game player who doesn't know what other players have in mind but who must make strategic decisions in order to maximize the outcome of the game for himself. The most famous illustration for GT is the prisoner's dilemma... 2 prisoners are being interrogated separately. The authorities want them to incriminate each other and they have a choice of either remaining silent (to protect each other) or to spill the beans and betray each other. The possible outcomes are:
  • Both remain silent. Each serves 1 year in prison
  • Both betray each other and they each serve 2 years in prison
  • 1 remains silent, while the other betrays. Betrayer goes free and Silent serves 3 years in jail
In this configuration of the prisoner's dilemma, one might be tempted to betray and hope to go free. But if you betray, you have no control on the other prisoner's decision. If he makes the same bet as you, you'll both serve 2 years and you can kiss your freedom goodbye. The best decision for prisoners is actually to remain silent. Because statistically, it is the configuration that benefits most to both prisoners. But both prisoners must be as rational and must surmise that each of them will take this rational decision.

In real businesses, companies operate on the basis of GT, because they're not allowed (by law) to conspire together against consumers. It would "break" the almighty law of the market aka. "competition". My guess is that Microsoft thought in terms of GT about the market of video game consoles. Had Sony made similar choices of locking the consumer in a slave position, both companies could have taken advantage of the situation. Video Game players would be stuck between the option of playing on obsolete consoles of the past generation or accepting the abusive terms from the leading 2 actors of this market... And it would have changed the market with no going back.

But after both companies have presented their new respective babies at E3, polls show that 60% of video game players are interested in PS4 and only 10% are interested in XO. The numbers were respectively 40% and 20% before E3. So, Sony has won over the favors of the undecided and of half of the (now repented) early Microsoft enthusiasts.


(1) Sebsauvage's work published under a CC BY-NC license.

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