Microsoft to GameStop: Drop Dead

As a guy who enjoys his Xbox sometimes, I’m hoping this report is wrong:

Microsoft’s next console will require an Internet connection in order to function, ruling out a second-hand game market for the platform. A new iteration of Xbox Live will be an integral part of Microsoft’s next console, while improved Kinect hardware will also ship alongside the unit.

Sources with first-hand experience of Microsoft’s next generation console have told us that although the next Xbox will be absolutely committed to online functionality, games will still be made available to purchase in physical form. Next Xbox games will be manufactured on 50GB-capacity Blu-ray discs, Microsoft having conceded defeat to Sony following its ill-fated backing of the HD-DVD format. It is believed that games purchased on disc will ship with activation codes, and will have no value beyond the initial user.

A lot of games are purchased by kids and young adults without a lot of money to spend. They finance new game purchases in part by selling their used games. If MS really does intend to kill off the secondary market, they seriously screwing some of their most devoted customers.

We accept that games we download digitally have no resale value for a couple simple reasons. First, they cost less. A lot less. Many are free, the majority are just a few dollars, and most of the top-end games top out at about $10. New Xbox games go for $50 or $60. But you can make up some of the difference by taking your used disc down to GameStop for cash or store credit.

Digital downloads are also easily ported between your devices. Buy a game on your iPad, and it can be automatically downloaded to your iPhone. Or vice versa. And it’s long been assumed that Apple will be bringing App Store functionality to Apple TV. One purchase, one manual download, up to three different kinds of devices. What’s not to love?

And on your Mac or Windows PC, digital downloads aren’t your only choice. You can guy something from the Apple’s or Microsoft’s app store, and accept the limitations imposed. Or you can buy it on disc and maintain more control. Will you give up some features for a lower price and the convenience of a digital download? Your dollars, your choice.

But if Microsoft takes away that choice — if they impose digital purchase constraints on expensive, physical media — then they might just alienate enough customers to lose money in the bargain. And that’s why I doubt this report is correct.

Then again, Steve Ballmer seems like the kind of guy who would cut open the golden goose with a rusty spoon, just to get one last egg that much faster.

We’ll see.