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Microsoft Backtracks on Xbox One DRM: Will It Matter?

In a stunning reversal, Microsoft's  (NASDAQ: MSFT  ) Interactive Entertainment president Don Mattrick yesterday announced two key changes to Mr. Softy's plans for the next-generation Xbox One gaming console.

Go ahead, unplug
First, after a one-time setup process is complete, an Internet connection will no longer be required to play Xbox One games offline. Now, Mattrick says, "you can take your Xbox One anywhere you want and play your games, just like on Xbox 360."

When Microsoft initially unveiled its new console, frustrated gamers were told their flexibility would be hampered as the device would need to be connected to the Internet at least once every 24 hours for validation purposes.

In fact, in an interview filmed just before Microsoft's E3 2013 press briefing last week, Mattrick responded to gamers' criticisms by bluntly stating, "Fortunately, we have a product for people who aren't able to get some form of connectivity; it's called the Xbox 360. If you have zero access to the Internet, that is an offline device."

Share to your heart's content
Second, Mattrick also stated, "There will be no limitations to using and sharing games. It will work just as it does today on Xbox 360." In other words, you'll still be able to "trade-in, lend, resell, gift, and rent disc-based games just like you do today."

That's a big change from Microsoft's previous assertion dictating gamers would be only able to share their games with up to 10 people through a "family" sharing plan, enabling any of those 10 people to access the shared games digitally through their own Xbox live consoles. What's more, while Microsoft was planning to allow people to gift games to friends, they said each game could only be gifted once, and could only be done for people on your friends list for more than 30 days.

That was a smidge too complicated for many gamers' tastes. On the flip side, however, this also means Xbox One will now require disc-based games to remain in the tray during gameplay, and gamers won't be allowed an avenue for sharing downloaded titles as Microsoft had originally planned.

Who wins?
So who gains the most from these decisions?

First, it should come as no surprise that shares of used-game specialist GameStop (NYSE: GME  ) climbed more than 6% during Thursday trading. After all, GameStop has struggled the past few years, thanks largely to the rise of mobile and cloud-based gaming devices. As a result, GameStop investors have eagerly awaited a fresh revenue stream from next-gen gaming consoles.

Needless to say, then, Microsoft's original plans had the retailer worried. While Microsoft's change of heart certainly doesn't assure physical media will stick around indefinitely, the move definitely grants GameStop a temporary reprieve.

Of course, Microsoft is also hoping it will be able to win back gamers' affections. And, to be sure, Microsoft's attempt to please gamers is understandable -- if gamers were already annoyed at what they perceived as unpalatable restrictions on content, they were appalled when they learned the console would cost a whopping $499.

Those frustrations boiled over after Sony  (NYSE: SNE  )  stepped out last week with its Playstation 4 and undercut the Xbox One's price by a full $100. Even worse, Sony confirmed during the conference its new console would not only fully support used games, but also would not require online check-ins. In Microsoft's defense, however,  the Xbox One will come with an integrated new Kinect motion sensor, which typically costs more than $100 itself in addition to the current Xbox 360 platform. The $399 Playstation 4, for its part, will not include Sony's respective "Playstation Eye" accessory. 

Even so, when decided to run a seven-day Facebook poll during last week's conference to see which console consumers were more interested in, they ended up closing it after only three days when voters overwhelmingly favored Sony's Playstation 4 by a startling 18 to 1 margin.

But the question remains: Is Microsoft's concession too little, too late? After all, just a few days ago Sony told The Wall Street Journal it was increasing its internal sales projections for the PS4 based on strong pre-order activity, at the same time admitting "demand may well outstrip supply."

But what do you think? With both consoles presumably set to go on sale in time for this year's holiday season, do you think there's still time for Microsoft convince consumers the Xbox One is worth their dollars?

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Read/Post Comments (8) | 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 1:35 PM, zhukov1943 wrote:

    Too little, too late.

  • Report this Comment On June 20, 2013, at 2:09 PM, fwe43 wrote:

    Too little too late, the product is months from launching and it's too late? LMAO The hyperbole is a bit much zhuko.

  • Report this Comment On June 20, 2013, at 2:10 PM, incognito67 wrote:

    not that im defending what MS did, and im getting the PS4, but i just dont get the "too little, too late" comments. after all, its not coming out for another 6 months. at least they didnt wait till 6 months after it was released.

  • Report this Comment On June 20, 2013, at 2:27 PM, Goawaykid wrote:

    I love my 360, I loved the original Xbox, and I've never owned any generation of the playstation. But that ends here. I'm insulted that Microsoft corp even thought that would fly. I don't care if they've changed their decisions on how to handle dmr. The damage is done. We as consumers have a responsibility. We have a voice and the ability to keep these kind of ideas from becoming the standard practice (or at least postponing it). That ability is found in our wallets. What we decide to do with the contents of our wallets can go a long way. I'm going to be missing out on halo 5, but so be it. I'm done with you Microsoft.

  • Report this Comment On June 20, 2013, at 2:41 PM, XvGreymanvX wrote:

    One of two things will swing my vote back. Lower game prices. Or backwards compatibility.

  • Report this Comment On June 20, 2013, at 8:20 PM, RTB99 wrote:

    I have to stick with PS4 for four main reasons right now:

    1) It is clear MS only changed their policy because of consumer reaction, even Mattrick flippantly dismissed consumer concerns in the very article above here

    2) there is no guarantee MS won't simply reinsert these exact same restrictions down the road once enough sales have occurred and they have solidified their customer base

    3) Sony actually didn't implement this from the start so they have earned my initial trust for the next generation (I have never owned any PS, only Xbox consoles so this is a big change for me)

    and lastly, 4) with the Windows 8 release and this Xbox One issue, it is becoming apparent that this is not the same company Bill Gates once ran, and I am losing faith overall in this company especially when it comes to consumer response/wants versus what they think is best for us and the disconnect between these two realities

  • Report this Comment On June 21, 2013, at 10:55 AM, pooyow118 wrote:

    I love Sony. That is all.

  • Report this Comment On June 21, 2013, at 11:00 AM, pooyow118 wrote:

    Just joking...

    All these crazy Sony fan boys are getting old. I'm getting the Xbox One for several reasons.

    1. Microsoft has completely out innovated Sony and the only reason they are catching hell is because gamers are horrified with change.

    2. Price wise the Xbox One is a way better deal. The original PS3 was 600 and offered way less than the Xbox One. The kinect can play up to 6 people and is included in the 500 dollar price. For the PS4 + Eye + 4 Controllers to operate the Eye would be way over 500 dollars.

    3. Microsoft has deep pockets. They have enough money to not only completely change their policy to make customers happy, but they would buy just about every Sony exclusive game before they would allow themselves to go under. Microsoft has put probably just as much money into their online services as they have their system. No one can disagree that as for as social, Microsoft is hands down the victor.

    and finally...

    4. Integrity. Sony is known for being "all about the players" until its financially suitable for them to be against the players. At least Microsoft came out of the gate letting players know what they wanted to do. Sony's PS3 was raved over for being backwards compatible until they had their fan base and then the backwards compatibility was phased out.

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