How Much Will Game Theft Harm Microsoft's Xbox 360?

by: Bruce Everiss November 17, 2008 | about stocks: MSFT    

Bruce Everiss

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Gaming is growing massively and will soon be bigger than television and film combined. This is because gaming has the technical advantages of interactivity, connectivity and non linearity. No other entertainment medium can compete with these. These 3 technical advantages have the added benefit of making anti piracy measures relatively easy to implement. In fact, the main role of a game console is to act as an anti piracy dongle.

This anti piracy advantage is a great bonus for the games industry. The music and film industries are suffering horribly from thieves, precisely because their products are impossible to protect. However the game industry is extremely complacent precisely because of these technical advantages. So everybody does far less than they should and could to prevent piracy. And with our guard down it is very easy to experience a disaster. This happened with home computer gaming and PS1 gaming. It is happening right now with PC, PSP and DS gaming.

And now the Microsoft (MSFT) Xbox 360 could be heading for this same disaster. Basically it has become very easy and very common to chip the console to bypass the copy protection. And most customers would rather steal games than help to pay for their development.

Microsoft’s only recourse is to close the Xbox Live accounts when they detect a chipped deck playing a pirated game. This is circumvented to a large degree by having two decks. One chipped for playing stolen games and one not chipped for using Live. An extra deck only costs as much as three games.

But how bothered are Microsoft? Free, stolen games will make the Xbox even more desirable over its competitors and so will give Microsoft a great USP in the console war. Also Microsoft are almost certainly making a profit on every console sold, even at the new low price points. It is such an elegant hardware design. And then the company has all that regular monthly income from Live.

The real losers are the publishers. And via them, the developers. If a game platform is pirated excessively then publishers can vote with their feet. There are plenty of other platforms they can spend their time and money working on. This is what they have done with the PC and PSP. And the stupid game thieves end up with no games being made for them to steal.

So the danger for Microsoft is that publishers abandon its platform. It no longer works as an anti piracy dongle. This was part of the downfall of the Dreamcast. In fact the bigger problem is publishers deserting the whole console business model. There are areas of gaming that are growing much faster and which are pirate proof, offering far better prospects. In fact, a lot of the console game business looks like people doing it just because they are in the habit of doing it. You can all name publishers doing this.

One thing is for sure, Microsoft must really get its whole anti piracy strategy a lot better for the upcoming Xbox 720. It would be sad if the billions it has invested in console gaming became a dead end.

Disclosure: None

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This article has 12 comments:

  •  
    Nov 17 08:17 AM
    You dont "chip" a 360 ! You have to flash the DVD drive's firmware to a 3rd party one to play pirated games.
    Reply | Link to Comment
  •  
    Nov 17 09:29 AM
    I think you've self defeated the piracy argument. The fact that if they want to play online with their friends requires a non-chipped Xbox 360 means that they have to buy the games anyway.

    I'm sure there are some people that have a chipped only version for ripping games and not paying for them, but that means no XBox Live, which means no online play. Half the fun of a good percentage of the games for XB360 is the online content. I can't imagine that there'd be a lot of people that have chipped consoles compared to the number of people that have non-chipped systems.

    You're working under the assumption that there are a large number of people that are pirating games, and until I see numbers, I can't see there being a concern for the industry.
    Reply | Link to Comment
  •  
    Nov 17 11:00 AM
    If a company can sell 2 million products at 60 dollars a pop and cannot make a profit they are spending money in the wrong places. Too much money on kushy chairs, bonus money for execs, and other rediculous perks to draw in programmers makes a company lazy. Look at EA. Bloated and cannot figure out why it cannot make a profit selling Millions of games on three platforms. A game is a SMASH if it sells a million copies. Says there is a downturn in music games. WOW with microtransaction sales cannot see where the money went. I know 1 pirate out of 35 360 users. He annoys the hell out of me. He is not killing the industry. It is Retailers like Wallmart that accept failed modification attempts as returns for defective items. MS pays and pays too.
    Reply | Link to Comment
  •  
    Nov 17 12:18 PM
    Well, for sure there is mismanagement at EA but having worked for a small company that did game porting and some new development I can tell you that it's insanely expensive work. You need a crew or talented artists, programmers and testers. You need limited but effective managment. We're talking about staggering capital burn rates before you ever make a dime or even make the pitch! Then if you do manage to hit the home run you get ripped off by pirates.
    Reply | Link to Comment
  •  
    Nov 17 01:29 PM
    I don’t feel like you know what you are talking about. You read a few articles and put together your own assumptions. The publishers will never leave Xbox 360. Xbox is a cash king. The Press just tries to glorify the numbers so it looks like an epidemic. There are so few modded consoles overall. It’s like this, say you get a check for $200,000,000 and you lose a few thousand. Are you going to spend a $1,000,000 to try and recoup your loss? I don’t think so. Would you still invest next time even though you had a loss? I think so. Quit shooting from the hip and find some real news.
    I just can’t understand why they let you write. Why do we have people writing crap about things they know nothing about? We need to have a rating system for writers so we can eliminate the bad ones from the net.
    Reply | Link to Comment
  •  
    Nov 17 03:40 PM
    @root4rd3d

    Actually chipping is a hardware addition to the console that does the same thing as flashing the firmware on the drive. Hardware modders are easier to catch from what I've heard but I'm not so sure if that holds true for firmware flashers. As I understand it MS bans the serial # of the modded console but not the live account, kind of odd don't you think. Maybe not if you take into account that MS knows they'll buy another 360 because they saved some much money pirating they can justify an extra 360, then in six months there will be another banning cycle if the crook tries it again, and the merry go round keeps spinning. If MS was serious about stopping cheaters they would not only ban the console but also the live account of the cheater, for say a year, to teach them that it won't be tolerated. But hey as long as their buying new hardware isn't MS getting what they want and it's the developers that are getting screwed the most? Just a thought.
    Reply | Link to Comment
  •  
    Nov 17 04:02 PM
    The vital difference b/w PS3 and XBox360 is that Sony cannont compete online. If you have a chipped 360 its as good (many will say as bad) as a PS3. Saving the PS3 is the fact that it has a blu ray player. It's basically a movie player than a gaming console. Almost no titles. It is for this very reason hard core gamers will be on the 360. People want to play the Halos and the Gears of Wars online. Once GTAIV came out for the 360 before the PS3 the console wars were officially over. Will pirated software developers leave 360 and go to PS3? There's no games on PS3. Is pirated software even a problem? This article is really bad.
    Reply | Link to Comment
  •  
    Nov 18 12:57 AM
    Are you retarded? First of all GTAIV came out for the ps3 and 360 at the same time. That right there tells me you don't know what you are talking about. Secondly, yes the 360 had the best and most exclusives for a while, which is why i have a 360 also. But if you take a look at the exclusives that have released, and are continuing to be released, for the ps3 vs. the 360 you would see ps3 has the better exclusives by a mile. Learn what your talking about before you make yourself sound dumb.


    On Nov 17 04:02 PM waf76 wrote:

    > The vital difference b/w PS3 and XBox360 is that Sony cannont compete
    > online. If you have a chipped 360 its as good (many will say as bad)
    > as a PS3. Saving the PS3 is the fact that it has a blu ray player.
    > It's basically a movie player than a gaming console. Almost no titles.
    > It is for this very reason hard core gamers will be on the 360. People
    > want to play the Halos and the Gears of Wars online. Once GTAIV came
    > out for the 360 before the PS3 the console wars were officially over.
    > Will pirated software developers leave 360 and go to PS3? There's
    > no games on PS3. Is pirated software even a problem? This article
    > is really bad.
    Reply | Link to Comment
  •  
    Nov 18 03:17 PM
    bdub, ur right, i misspoke they came out at the same time but before that it always came out on PS before coming out on Xbox. Big win for Xbox there. Name me some of these great exclusives for PS3. Please also send me the reviews for these titles preferably from videogames.com Other than Metal Gear Solid there is not title on PS3 that is that good. U wanna call me dumb and retarded go ahead...ur comment has no specific factual content in it...and u dont even address online...how is that on PS3? pretty shitty...


    On Nov 18 12:57 AM Bdub87 wrote:

    > Are you retarded? First of all GTAIV came out for the ps3 and 360
    > at the same time. That right there tells me you don't know what you
    > are talking about. Secondly, yes the 360 had the best and most exclusives
    > for a while, which is why i have a 360 also. But if you take a look
    > at the exclusives that have released, and are continuing to be released,
    > for the ps3 vs. the 360 you would see ps3 has the better exclusives
    > by a mile. Learn what your talking about before you make yourself
    > sound dumb.
    Reply | Link to Comment
  •  
    Nov 22 05:51 PM
    First of all the online on ps3 lags a lot less than games i play online on 360. Im not biased i have both and love my 360 too but i have no problem out of the playstation network. Yes it has a few less features than Live but definatelty not enough to warrant paying for it. And there are plenty of AAA Playstation exclusives already out and coming out. I have a life and don't feel liek looking them all up plus their review scores, but just take a look at uncharted, resistance 1 and 2, littlebigplanet, motorstorm, Killzone 2 (out in february) and many others already out and coming out. The only must have 360 exclusives, to me at least, is ther Gears franchise which was the reason i bought a 360. Like i said i like both and prefer a lot of little things about the 360 but as far as upcoming announced exclusives ps3 wins by a mile. And I was harsh calling you dumb, it made me sound like a fanboy which im definately not, I just get tired of ignorant fanboys talking about stuff they know nothing about.


    On Nov 18 03:17 PM waf76 wrote:

    > bdub, ur right, i misspoke they came out at the same time but before
    > that it always came out on PS before coming out on Xbox. Big win
    > for Xbox there. Name me some of these great exclusives for PS3. Please
    > also send me the reviews for these titles preferably from videogames.com
    > Other than Metal Gear Solid there is not title on PS3 that is that
    > good. U wanna call me dumb and retarded go ahead...ur comment has
    > no specific factual content in it...and u dont even address online...how
    > is that on PS3? pretty shitty...
    Reply | Link to Comment
  •  
    Dec 02 06:39 AM
    @Waf76, you are clearly very narrow minded and I assume you only play games with big guns. That is what the xbox has to offer, shooting games. I have both of the consoles and I cannot possibly say that one console has better games than the other as both consoles are great in different areas, infact their impossible to compare for that reason. I use my xbox for fps and my PS3 for anything else, like Motorstorm, LittleBigPlanet.

    Back on topic; anyone caught using ilegal software should have their console taken away from them.
    Reply | Link to Comment
  •  
    Dec 02 03:38 PM
    You stated
    "In fact the bigger problem is publishers deserting the whole console business model. There are areas of gaming that are growing much faster and which are pirate proof, offering far better prospects."

    Which Publishers are deserting the console business model?
    Where are the developers going to go? To the PC?
    What areas of gaming are growing faster than console gaming?

    This sounds like a completely made up lie just to bolster a weak argument. Still you got people to view your page with this tabloid style nonsense.
    Reply | Link to Comment
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