What Microsoft Could Learn From the Worst Company in America

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Golf clap for Electronic Arts (NASDAQ: EA  ) . The video game developer just won the unfortunate distinction of "Worst Company in America" this year in an online poll of readers at 

Microsoft (NASDAQ: MSFT  ) did much better in the survey. It never made it out of round one of the March-Madness-style contest that pits companies against one another over which one has offended the most consumers lately.

Still, Mr. Softy should be paying close attention. EA's dominating win highlights the risks around video gaming that Microsoft would be smart to avoid. As it puts the final touches on its latest Xbox console, Microsoft needs to get these issues right -- or else it could find itself a real contender for next year's title.

Make it work
EA boosted its chances for a win this year by severely botching the rollout of its latest SimCity title. The company's servers just weren't up to the challenge at the launch. And it admitted as much recently, saying, "We owe gamers better performance than this."

But EA could have avoided the problem if it gave its users the ability to play SimCity without an Internet connection. Instead, it forced every player onto a system that wasn't ready for the influx.

Microsoft hasn't confirmed any details about its new gaming console, but one of the biggest rumors floating around has it that the next Xbox will require an Internet connection to function. That could be an exaggeration. However, if Mr. Softy is going to tie any functionality at all to its own platform, it'd better be ready to handle all the users that need it. And it'd better have a backup plan in case something goes wrong. You only get one chance at a product launch.

Make it flexible
What angered EA customers even more about the online connection requirement for SimCity, though, was that many saw it as an intrusive digital rights management scheme, or DRM. Users thought EA was trying to strictly limit play so that it could sell more copies of the title. EA denies that charge:

Many continue to claim the Always-On function in SimCity is a DRM scheme. It's not. People still want to argue about it. We can't be any clearer -- it's not. Period.

EA users apparently weren't accepting that explanation. And the controversy over just the potential of tighter DRM schemes shows how little consumers like the idea. Microsoft and Sony are rumored to be considering locking their new systems from the ability to play used games. Obviously, it's a tempting idea to cut out middlemen like GameStop and centralize gaming purchases through your own platform. But the firestorm of complaints aimed at EA is more evidence that the move would turn many of the console makers' customers against them.

Bottom line
Consumers value flexibility and reliability in their game systems. Mess up even a bit in either of those areas and you'll hear about it from your users. Hopefully, Microsoft won't have to learn that lesson the hard way.

What you can learn about Microsoft
It's been a frustrating path for Microsoft investors, who've watched the company fail to capitalize on the incredible growth in mobile over the past decade. However, with the release of its own tablet, along with the widely anticipated Windows 8 operating system, the company is looking to make a splash in this booming market. In this special premium report on Microsoft, our analyst explains that while the opportunity is huge, the challenges are many. He's also providing regular updates as key events occur, so make sure to claim a copy of this report and stay up-to-date on the latest news by clicking here.

Read/Post Comments (4) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 12, 2013, at 8:38 PM, kaelif wrote:

    "Microsoft and Sony are rumored to be considering locking their new systems from the ability to play used games."

    Not really sure why Sony is lumped in here, as they have already come out and confirmed that the PS4 will not only not require an internet connection, but will also play used games.

  • Report this Comment On April 13, 2013, at 2:04 AM, esxokm wrote:

    Admittedly, I don't know much about the EA/Sim-City issue, but I do think that companies should be exploring ways to increase sales. Trying to combat piracy and used-game sales is an obligatory act for public companies responsible to shareholders.

    However, always needing an Internet connection to play a game is perhaps not the ideal solution. What the solution is, I don't know. In days past, entering codes from manuals would be utilized (remember the Lucasfilm adventure games?).

    Perhaps the answer might be to print less copies of a title, raise the prices on software (or keep discounts at a minum), and then always have new copies available via a print-on-demand system to thwart after-market buyers. The only other thing that could be done is to make cheaper games; with so many people enjoying classic platforms such as the NES/SNES/GENESIS/etc. these days, companies should model current titles off older game engines. Only make a few expensive games per year since the public doesn't want to pay the prices required.

  • Report this Comment On April 13, 2013, at 2:05 AM, esxokm wrote:

    Meant to say in the above "thwart after-market sellers."

  • Report this Comment On April 13, 2013, at 12:02 PM, TMFSigma wrote:

    @kaelif - I don't think we know exactly how the DRM will work yet, whether sony would leave it up to some publishers for example, on requiring user registration, etc. It would be crazy for either sony or microsoft to lock down their systems completely, but there are a lot of things they could do in between that strict DRM and a totally free system. So we'll have to wait until we get our hands on the systems to know for sure.

    @esxokm - you raise a lot of good points. I think part of the answer will be to drive the cost down for game development so you don't have to charge $60 for a game and then $30 on top of that for downloadable content just to make a decent profit. Activision is trying out some smaller scale games along that vein. Definitely a challenge for the industry though.


Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2360264, ~/Articles/ArticleHandler.aspx, 9/25/2016 8:14:55 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,261.45 -131.01 -0.71%
S&P 500 2,164.69 -12.49 -0.57%
NASD 5,305.75 -33.78 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/23/2016 4:00 PM
EA $84.26 Up +1.09 +1.31%
Electronic Arts CAPS Rating: ***
MSFT $57.43 Down -0.39 -0.67%
Microsoft CAPS Rating: ****