This article was originally published November 18, 2018 and has been updated on April 21, 2019.
Microsoft, back when the Xbox One launched initially, tried to create a digitally focused console that fell flat on its face when announced. So much so that after several years of that announcement, the Xbox One has been left playing catch up to the PlayStation 4 ever since. Fast forward to now, and Microsoft is looking to rekindle some of that original idea by releasing a disc-less version of the Xbox One that is 100% digital, enter the Xbox One S Digital. On the surface, this may seem like a bet worth taking: digital sales are on the rise, Microsoft can offer a console at a slightly cheaper price point, and the more purchases made on Microsoft’s platform means more money for them. But in this quest to switch to an entirely digital platform, there is a fatal flaw that, as a consumer, we should be concerned about—a platform monopoly. And by purchasing an Xbox One S Digital only furthers this potential future.
At first glance, having a digital-only system doesn’t seem like such a bad thing. You can easily play your games without inserting a disc, there would be no need to pick up games or have them shipped physically, and you can play them at midnight when they release. Through those conveniences, however, a lot in the process is lost. The first of the losses come from the product themselves, for both the consumer and the game itself. By having no physical versions of titles, it means that the value of owning those games after purchase is zero. Of course, as a consumer, you still own the game, but there is no value outside of that. There is no market to resell should you want to, all the value remaining is stuck with that sole purchase and nothing else. This issue exists solely as a lack of digital game purchases not giving you ownership of the game, but rather access to it, resulting in the inability to trade or sell those games. By extension, this decimates the used game market as everything in a digital-only system is bound by your account. For those looking to share or buy a game on the cheap, a digital-only marketplace—at least in its current incarnation—completely removes the ability to do so and with it, several other businesses that are built off of it. Companies like Gamefly, Gamestop, and local game stores all lose out (for better or worse) as they are unable to resell products to a whole console, leaving only what the console developers provide (in this case, Game Pass).
The consumer no longer has ancillary companies and services providing used games and suffers even further due to Microsoft gaining more control over their market. Major consoles (PlayStation 4, Switch, Xbox One) all operate on a closed system, that is—unless you make an effort to break into the system, the creator controls the system. The only place to buy a new digital game for the Xbox One is through Microsoft’s store and nowhere else, as opposed to the PC Gaming market which has multiple different stores which enable more competition. From an earlier article on why you should buy physical games, the PC Gaming marketing is uniquely equipped to have proper competition as opposed to consoles:
The most influential difference in price compared to the PC gaming market vs. the console market is competition. Many might believe Steam is the only true platform that exists for PC gaming, but in reality, there are dozens and dozens of different markets and platforms that you can purchase games on. Take for example GOG (Good Old Games) or Green Man Gaming, each fits into the marketplace in a different capacity. In the case of GOG, it is a similar type of company to Steam, it is a platform to play games, as well as a store to buy games and interact with players. For Green Man Gaming, they don’t have a platform to play their games on, instead, they act as third-party that strictly sells game keys to other platforms. In both of these cases, each acts as a form of competition in the PC gaming marketplace. One is competing for not only other game platforms but also the sales of those games to be on their platform, while the other is strictly in the business of selling codes for these platforms. Don’t like Steam or the price of a game on it? You can try GOG. Just looking for something cheaper? Maybe Green Man Gaming is a new venue to try. Because of the open nature of the PC gaming market, it welcomes in competition. Unfortunately, for the console market, this doesn’t exist.
When you have an open platform, competition is bound to form around it to become the dominant force. For closed markets, this type of competition is all but limited, resulting in higher prices. Consider Nintendo for a moment, who is notorious for not dropping prices for their titles. Super Mario Odyssey is still currently $59.99 on the Nintendo eShop, but on Amazon, it’s $48.66. If the only way to purchase a game digitally is through one vendor, why should they reduce the price? After all, the only method of obtaining that game is through their store, so why not just wait for them or someone else to take the plunge? Without competition to push prices down, the only driving force to reduce the price in a game is to spur up more sales with a discount.
Developers and publishers can still sell their codes, but all those codes are for Microsoft’s store and bound by that store’s rules. This puts more power in Microsoft’s hand to control pricing; being the only store, who else do you have to compete with?
This isn’t to say that there is no additional competition, but by the very nature of consoles’ being a closed system that one must buy into, the barrier to entry prevents an even playing field. If you own an Xbox One and want to swap to a PlayStation 4 for supposedly cheaper games, you will still need to purchase the actual PlayStation 4 ($200) that is also coupled with the sunk cost of purchases you made on the previous system. The more invested in one console makes the other only more expensive to recreate the same library. Competition, in this case, is uneven for someone already invested in an Xbox One, giving even more power to Microsoft to adjust prices in their favor. Not only do they have control of the market, but for those already a part of the market, it’s even harder to break from it—giving only further control.
For the Xbox One S Digital, we already seeing this take place in the form of the Xbox Game Pass. What started as an option for other Xbox One models, will nearly become a necessity in an all-digital landscape. The option to purchase the game digitally will still be there, but from a value proposition perspective, the most cost-effective way will be through the Game Pass. Here, Microsoft has nearly complete control to adjust this program in an all-digital landscape on what games are available, for how long, and how that relates to the rest of the games available on the Xbox’s digital store. Microsoft is then enabled to adjust the service as needed to make sure Game Pass is the defacto [continual] purchase for consumers looking for an immediate and extensive library available to them, netting them a constant source of income due to the console’s limitations.
This recent development raises many warnings that the digital game market on consoles is not equipped to create a healthy marketplace. Instead, in their current incarnation, it’s only prepared to consolidate more power in the console developer’s online store and to stifle competition. While there may be a few benefits for switching over to an all-digital console, the sacrifices are just too high and will only harm consumers in the long term until a healthier solution is established. Unfortunately, we are not there yet, so until we are, do not purchase the Xbox One S Digital or else risk sending the wrong signal and promoting a product that is toxic in its current state for the industry.