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Microsoft Apologizes, but Is It Too Late?

Microsoft (NASDAQ: MSFT  ) isn't always bright, but it isn't stupid.

Realizing that consumer sentiment was turning against its Xbox One gaming console in favor of Sony's (NYSE: SNE  ) PlayStation 4, the software giant is scaling back on the publisher-friendly initiatives that are rubbing die-hard gamers the wrong way.

  • The requirement that an Xbox One connect with Microsoft's servers at least once every 24 hours is toast. After a one-time system setup that registers the console, online players can play any disc-based game without having to deal with Mr. Softy's authoritative ways.
  • Just as Sony received a rousing round of applause after announcing that gamers will be able to trade in, lend, resell, gift, and rent games on disc the way that they are currently able to on the PS3, Microsoft is backing away from the limitations that it was allowing publishers to take advantage of in order to curb profitless software exchanges.
  • Xbox One games will also be able to play on any Xbox One console no matter where that Xbox One may be. Regional restrictions have been zapped.

It's not as if Microsoft had much of a choice. Xbox 360 has been the best-selling console in this country for the past two years, but sentiment can turn quickly.

Just check out Nintendo (NASDAQOTH: NTDOY  ) . Nintendo's Wii was the early favorite with its low price point, family-friendly games, and bar-raising motion-based controller. Things haven't gone so well with the Wii U. Despite having a year's head start on the competition, Wii U has been a disappointment.

With Wii U's fate all but sealed, the attention will turn to Microsoft and Sony slugging it out this holiday shopping season.

Microsoft seemed to have the early momentum. Its Xbox 360 is the top dog in this country, and Microsoft has 46 million Xbox Live subscribers, and they are unlikely to abandon their online achievements and switch consoles between generations.

However, momentum turned during last week's E3 expo when Microsoft flew too close to the sun and Sony doused it with gasoline.

Microsoft's doing the right thing by backtracking, but the damage may already be done. Gamers may not feel that the retreat is genuine, fearing that Microsoft will reverse course once publishers get their say.

The hope for Microsoft and game developers at this point is that the early adopters buying consoles later this year flock to digital delivery. That solves the hand-me-down dilemma. However, by restoring the value of disc-based games with last night's moves, Microsoft is raising the perceived value of disc over digital. Microsoft may be offering new releases online the day they hit stores, but if a $60 game on disc can be flipped for $10 to $30 in a few months once the player has moved on, it will be hard to justify buying that as a bandwidth- and storage-slurping download at the same price.

The key here would be to make the same games available cheaper through direct distribution, something that developers wouldn't have a problem with if it means fewer secondhand sales and no inventory hassles or production costs.

For now, all that matters is that Microsoft realizes that it made a mistake and it's apologizing. It will have until the holidays to figure out how to make gamers care less about disc-based releases.

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Read/Post Comments (15) | Recommend This Article (2)

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 June 20, 2013, at 9:56 AM, colonelcool wrote:

    This changes nothing for me. Just the fact that they thought it was a good idea in the first place destroyed what little good faith I had in the company.

  • Report this Comment On June 20, 2013, at 9:57 AM, Wingeddamnation wrote:

    Too little, too late M$. You showed the world your true colors. This generation, don't expect me to drop one cent on your gaming system. Glad you saw your error, but me personally as a gamer you were not only arrogant, but tried force feeding a new idea that has clearly failed you. I will leave you with a quote:

    Supporting Xbox One would be like supporting someone that wanted to rape you, that only stopped because they got caught in the act.

  • Report this Comment On June 20, 2013, at 10:12 AM, starflyer59 wrote:

    We have become the whinest nation in the world. People get so bent out of shape over the smallest things. I wasn't going to get one because I only buy used games, but since they changed that then I will consider getting one after the first price drop. I never buy a console on release day.

  • Report this Comment On June 20, 2013, at 10:16 AM, Drusshutch wrote:

    I just think that if MS changed their used games policy so easily, what's to keep them from eventually changing it back?

  • Report this Comment On June 20, 2013, at 11:04 AM, Nomoremicrosoft wrote:

    Game developers seem to be continuing to struggle with making money. Too many gamers, not enough engineers working for them? How about coming up with a NEW game? Every title out there is a rehash of old titles that have been out for more than a decade. You'd probably sell more games, and no longer have the need to control the second hand market. If the games go digital, and they no longer need to print manuals, CDs , and cases are the prices dropping? Doubt it. Aren't we paying for the manual, case and disc when we shell out $60 for a game we've played before?

  • Report this Comment On June 20, 2013, at 11:07 AM, AlwaysAround wrote:

    Too late M$, already preordered my PS4.

  • Report this Comment On June 20, 2013, at 11:07 AM, VegasSmitty wrote:

    Its too late for the foot-in-mouth writers at the Motley Fool!

  • Report this Comment On June 20, 2013, at 11:09 AM, Petronilus wrote:

    Where does Microsoft apologize? I am not sure they do. Changing their policies is not the same as apologizing.

  • Report this Comment On June 20, 2013, at 11:11 AM, platinum7850 wrote:

    Take the kinect out of the box and add backwards compatibility to the system and then make the kinect an optional add on.

  • Report this Comment On June 20, 2013, at 11:20 AM, 7eregrine wrote:

    The "whiniest nation" in the world? Really?

    I thought we were the "nation that puts up with anything companies throw at us anymore".

    Companies can do anything, but we always forgive them. Always.

    Example: When the first Android phone hit the market, one big advantage was that memory card slot. People were rabid fans of that. Google comes out with a phone without one and we all say: Bleh... we didn't need that anyway. Look how fast this is!!!

    Same thing here. People will complain today, as is understandable, but completely forget this even happened come release day.

    THis won't effect sales even a little. Next article?

  • Report this Comment On June 20, 2013, at 11:21 AM, Bjimenez805 wrote:

    If they did a 180 so quickly they could just be making an attempt to get their sales up. Then after everyone buys one then they will drop the hammer again. Because you can't do nothing once you already bought the sucker.

  • Report this Comment On June 20, 2013, at 11:31 AM, frankiec1975 wrote:

    Oh please, any of you that calls themselves a true gamer and don't believe that the company that put together the game you enjoy should keep the licensing rights to a game, aren't real gamers. Instead of giving your money away to gamestop, the money should be going to the people that will reinvest it to make you another entertaining game instead of the people who are scavengers...true gamer here...

  • Report this Comment On June 20, 2013, at 11:34 AM, fwe43 wrote:

    Apple has been doing this ever since the opening of their itunes store and people just love love love can't spend enough money on Apple. Microsoft follows a similar path with registering content on devices, that never even launches, and every idiot is like oh my god I can't believe they even thought of such a thing. I'll never go back! LOL It's just ridiculous the amount of media (and personal) bias there is against MSFT.

  • Report this Comment On June 20, 2013, at 12:00 PM, pillar81 wrote:

    What is the basis of calling it the whiniest nation starflyer59? Did you take a poll?

    fwe43, I always get a chuckle out of people talking about the ridiculous amount of bias against Microsoft.

    What do you think about Sony?

    There were plenty of media outlets hating on Sony in the PS3 generation, while the Xbox 360 was more or less a darling of the xbot media.

  • Report this Comment On June 20, 2013, at 12:19 PM, lacerz wrote:

    Terms of Use can always be changed at a later date. As noted, Microsoft's strategy wasn't created overnight. They will steer the Xbox One back to what they deem the best path forward once people have become invested.

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