Microsoft Sees Consequences of Capitalism

Competition Drives Battle between Xbox One and PS4

by Keith Farrell

As two entertainment giants battle for better positioning, the gaming world waits in anticipation for the next generation of home gaming consoles.  Microsoft and Sony both plan to release new versions of their flagship gaming consoles this fall.  However, while the Xbox One and Playstation 4 won’t hit shelves for months, the competition between the two entities has already caused numerous design changes.  Microsoft’s scramble to correct several issues which its consumer base loudly rejected has given Sony an opportunity to scoop up dejected XBOX users.  The gaming console war is not only great for gamers, it is an example of how markets are forced to meet the demands of their consumers.

Competition between Microsoft’s Xbox and Sony’s Playstation forces each company to anticipate the other’s next move.  The result is constant innovation and an ongoing to strive to better serve game console consumers.  This past June’s Electronic Entertainment Expo (E3) was to be the unveiling of each company’s new vision for the next generation of home gaming.  Microsoft certainly had the most changes to announce—however, several were restrictive to the user experience and gamers vociferously rejected them.

Just prior to E3, Microsoft announced that their new Xbox One would necessitate the use of Kinect, a voice and movement sensing interface which many users already disliked.  Kinect has never really caught on and rather than taking that as a sign of what the market does not want, Microsoft decided to bundle it with their new system.  Kinect also raised privacy concerns, as it is a live microphone and sensor in your living room.  Serious concerns regarding this technology and Microsoft’s implication in the NSA PRISM scandal have been raised.  Their second, and arguable their gravest mistake was to limit the gamer’s ability to lend or borrow games, thus hindering their ability to sell their games or buy used games.  Their new games would be registered to the user’s console and could only then be transferred for a fee.  This was an obvious attempt from Microsoft to get their fingers into the lucrative used gaming market.  Finally, Microsoft’s new system would require users to be online whenever the system was in use—an obvious restriction for many users.

Perhaps if Microsoft was the only gaming console available users would have swallowed hard and begrudgingly dealt with these new impediments.  But in a free market, choice exists and Sony wisely pounced when the backlash against the new Xbox One features and policies began.  They no longer had to prove superiority in gaming or performance, they could simply demonstrate their console was more user friendly.  Sony released the following YouTube video demonstration on how to lend your friends games.

Official PlayStation Used Game Instructional Video

As a quick perusal of internet discussions shows, users were not amused with Microsoft’s new tactics.  Even self-described Xbox fans were making their intention to buy a PS4 known.  Microsoft had to act and reverse their most restrictive policies.  They reversed their used gaming policy, nixed 24hour online checking and recently clarified that Kinect would not be required to use the system.  However, as Forbes reported last month, even though Microsoft’s reversal marks “a breath of fresh air in the video game industry,” it may come too little, too late.  Sony has not only equipped their Playstation 4 with more impressive hardware, it is also going to hit shelves at a price $100 lower than the Xbox One.

While it is unclear which system will be more successful, the true victor of this competition is the consumer.  In a free market competition drives innovation, causes producers to more closely respond to the demands of their constituents and leads to better products at lower prices.  The Xbox One vs. PlayStation 4 matchup is a great example of how markets self-regulate in response to consumer demand and preference.  If not for the competition presented by the PlayStation 4, Microsoft would have had little incentive to reverse their plans.  It is another reminder: when it comes to the delivery of goods and services, competition is the key ingredient to ensure constant progress and happy consumers.