Exactly, if MS had been thinking this all along, they could have proved it with a low price game option announced with the DRM. That would have been really appealing to a lot of people.
The point is to let the price fall faster after launch. Xbox can't exactly promise "Our games' prices will fall faster than the other guys" because the market will determine that -- in aggregate they will, but there's a reason Skyrim is still $30 on Steam.
Microsoft wants a world where you have account-locked games tied to disks, because it gives them the benefits of Steam-like DRM but also the game conveniently on a disk to take to a friend's so he doesn't have to download it, and to let the poor schmuck in rural Nebraska with 25 kb/s to play the game some time in the next week.
Honestly, Sony can take the same pricing strategies as Microsoft on their digital downloads -- Microsoft just wants to have more convenient digital downloads, while Sony just wants more convenient disks.
My guess is that long-term Microsoft will prove to be on the right side of history (the success of Steam is evidence). Sony can probably do just fine for now, they can always transition in later generations when the downsides are no longer breaking news stories.
Wow. There's this whole rest of the world that would kill to get that speeds. I'm confused as to why MS would try to alienate basically everyone not in NA, EU with that kind of a minimum requirement. People in Asia and Africa can pay up that kind of money for the console, but there aren't infrastructure to get you that kind of internet speeds in a budget.
Like Soldiers, 35% of America... and even then, the larger part of Europe won't have servers for the XBox One launch. So even if you do have a good connection in say... Poland or Japan... you can't play XBox One at all.
Valve does sell discs for their games, and they're just ways of delivering bits for Steam. The DRM is 100% identical in every way.
80% of the US population is urbanized. Most of the ones that aren't still have access to DSL, cable modems, or fixed wireless of at least a few megabits.
Of the remaining population, a lot of them don't want to play video games or can't afford them anyway. Some (probably large) portion of those that are viable gaming customers will simply make do with satellite connections.
The "poor schmuck in rural Nebraska with 25kb/s" market segment is just too small to economically justify catering to.
But more generally, why are you only talking about the United States? What you are saying might be true of the US, but plenty of places across the wider world are home to people who play video games but don't have an internet connection. Or have a spotty internet connection. Or have a connection with restrictive data caps (meaning digital download only would be impossible).
So yeah, MS screwed the pooch on this one and that will now all be Sony territory.
Are you unwittingly basing your comment on the standards of the still-privileged White minority, comprising less than 9% of a country of just 53 million?
Am I the only one who actually read the comment I originally replied to?
By the way, even the top 10% of South African households have an average income of just US$15,000, so the actual potential customer base is still smaller than you think.
I say this as a former customer... Hughesnet is an absolute joke. Looking past their incompetent installers (who provided me with a major leak in the roof over my kitchen) and their horrible uptime (clouds in the sky = service outage), at it's best the internet service could only be described as painfully slow. Super high latency, constant dropped connections, poor throughput and to top it all off customer service that I'd rate as equivalent to cell phone providers.
Please, do yourself a favor, and stay far away.
As for the incompetent installers, they're probably the exact same local contractors working for Dish Network or DirecTV. Results will vary by area.
So, to him, a game is NOT worth 60 bucks. The 60 dollar price point has nothing to do with him. He pays between 30 and 40 max, usually only playing B rated single player games years after the fact.
Adding DRM isn't going to magically increase the value of a game to the customer. That's not how a market works. The market currently has decided that a video game is worth something per person, on average. Let's call that $40 per game (just an example). So, with the DRM, you sell two $60 games for every three $40 games. Still the same $120 except it all goes to you instead of the first sale to you and the next two to Gamestop.
If MS can assume (or predict, or hope, or whatever) that more of their sales will go directly to them, then they have an incentive to drop the price of their copies of the game because they know that a gamer probably has a fixed budget for gaming and they want to maximize their value.
I don't have numbers but I would be interested in seeing what the average price per console game actually paid by a customer is. My hunch is that the DRM isn't expected to increase the overall sales, in fact they might decrease BY DESIGN. But MS doesn't care about overall game sales. They care about 1st sales. So they might get a bigger piece of a smaller pie and still make out in the end.
Sidenote, Steam's success came from no legit competition, better prices (allowable, in part, by their DRM) and great marketing but I agree that Microsoft's strategy is more likely long term.
....all in all, though, it just feels shitty to have something physical in my hand that I can't really sell to someone if I want.
Anyways, long story short, it's really hard to price discriminate in typical markets, because it's both really hard to figure out which of your customers will pay full price, and it's really hard to stop the people who get discounts from reselling to the full price folks.
But, if your market is digital, flash-in-the-pan pop culture items, then you have a market that's pretty much tailor-made for price discrimination. Who will pay $60 for a game? Well, the ones who buy it on launch, or pre-order for nominal bonuses. How do you stop the the people who buy at a discount from selling to those who pay full price? Two ways -- you attach the game via DRM to an account that is inconvenient to transfer, and you only sell the discounted copies 2 years later. Sales are also a good way to do this -- many people who buy games in sales either were waiting for a sale because the price was too expensive, or heard about the game because of the sale and wouldn't have bought the game otherwise.
The current status quo is that all the profit from the $30 customers is going to GameStop. Microsoft would rather it go to themselves and their developers, so they would rather have digital downloads. Not so they can stop games from being sold at $30, just so that they can sell games themselves at that price without killing their market.