Xbox one, take two - How consumers forced Microsoft's next-gen hand

I've been playing video games for almost 17 years now, ever since my uncle bought me the newest high-tech gadget of 1996, the Nintendo 64, and introduced me to the Japanese-dominated video game world of the 1990's. Things have obviously changed a lot since then, but one constant has been the Electronic Entertainment Expo, or E3, which is held on an annual basis in Los Angeles. E3 is the biggest video game trade show in the world, where developers show off their upcoming games, and console makers, such as Microsoft, preview their upcoming hardware. Following E3 is one of the nerdiest rituals I adhere to, and in a year where all of the "Big Three" (Microsoft, Nintendo, and Sony) are fully unveiling their next-gen console lineup, it's almost like Christmas has come early. But while E3 can be a huge boon to the companies which make up the multi-billion dollar gaming industry, things can also go terribly wrong, as demonstrated by Microsoft.

Microsoft actually announced their newest console, the Xbox One, before E3. It was unveiled in late May, in an Apple-esque standalone presentation. The Xbox One has a lot of new features, including an upgraded Kinect sensor, cable TV integration, and heavily upgraded hardware. But the thing that really grabbed both the media and the gaming community's attention was the addition of upgraded DRM. The Xbox One would have to be connected to the Internet constantly for games to function, and would lock gamers out of their game library if Internet connectivity was lost for over 24 hours. Used game trade-in would be severely hampered, and discs could only be shared with friends if they were an Xbox Live member and on your friends list for at least 30 days. Industry and consumer reaction to these plans were overwhelmingly negative, including countless jokes at Microsoft's expense, outrage on video game forums and social media, and even criticism from the mainstream tech press. In all my years following the video game industry, I don't think I had ever seen such anger over a new product.

Of course, Microsoft didn't do anything to help the situation. Their response included this incredibly awkward E3 interview with Don Mattrick, the head exec of Microsoft's Interactive Entertainment Business. The video may actually make you feel sorry for a corporate PR guy for once, as Don tries to defend the DRM policies on the Xbox One, essentially telling people without a stable Internet connection to just play the outdated Xbox 360. The reaction to the Xbox One at this point ranged from neutral, to pretty upset, but the kicker was Sony's PS4 announcement later in the day after Microsoft's E3 presentation. The PS4 was announced at a starting MSRP of $399, $100 less than the Xbox One's $499 starting price. But more importantly, the PS4 was announced without additional DRM of any kind, essentially pushing the current form of console DRM, where the game license stays with the disc, into their next generation lineup. This meant that the PS4 would retain used game trade-in, sharing games with friends, and everything that gamers had come to love with console games. They even rubbed salt in the wound with this video, parodying Microsoft's hackneyed game sharing process.

At this point, it appeared that Microsoft was ready to bend, after being lambasted on social media for several weeks, in addition to having seen Sony play their DRM-free hand. A few days ago, Microsoft announced that it would be dropping all DRM for the Xbox One, including the always-online requirement, and utilizing the old system of disc-based licensing that they had used on the Xbox 360. The main sticking point appears to be the price, with the launch day PS4 remaining $100 cheaper than the Xbox One. In addition, there is already plenty of debate over the somewhat creepy, always-on Kinect sensor. But at the very least, the debate over the two consoles will be over the features and benefits of each one, and not about DRM.

It's certainly been interesting to see Microsoft make such a U-turn in product strategy, especially considering that the console isn't even out yet. There have obviously been many times where companies radically changed their products after they had been released, since consumers will vote with their wallets, and poor selling products are an indicator of poor strategy. But to witness Microsoft allow consumers to dictate product management months before a new device is even released is certainly a testament to the power of social media and vocal online communities, who often dictate the tone of the conversation about a new product.

While we're on the topic of product strategy U-turns, later this year Microsoft will come out with the Windows 8.1 update, a free release to anyone who already has Windows 8. Windows 8.1 will bring back the Start Button, a much heralded change which will certainly quiet some of the critics of Windows 8 and make the upgrade a little bit easier to swallow for legacy Windows users. This release will probably land in October. And additionally, Microsoft is finally launching a bug bounty program, offering rewards of up to $100,000 to computer security experts who can exploit the Windows 8.1 preview. The lack of a real bug bounty program at Microsoft was criticized by many in the tech industry for years. It looks like Microsoft may be allowing customers more say in their business strategy, and I'm guessing it will pay off. Whether this will become more of a trend in the tech industry, or whether more companies will lean towards the Apple-esque "we'll do it our way and you'll like it" strategy is yet to be seen. Regardless of how companies respond, social media and the vibrant online blogosphere have given angry consumers a united voice, unmatched by any consumer rights movement or boycott in history.