Today, reports are coming out claiming that Microsoft’s next Xbox video game console, referred to as Xbox 720, won’t allow used video games. The speculation stems from the fact that the upcoming device will apparently require an active and persistent Internet connection during use of the device. Speculation exists that physically distributed games will come with an activation code that will link a game to one Microsoft account in a non-transferrable manner.
Upon the circulation of these rumors earlier today, shares of video game retailer GameStop declined, and remained down roughly six percent throughout the day. GameStop’s sales are fully one-quarter dependant on used video games. No indication has been given as to whether or not video game rental services will be likewise affected, or if they will have access to special unlocked versions of games that will allow for repeated short-term use.
The measure seems directly related to stopping the second-hand market for lower priced, used video games. Current consoles already prevent games from being played without having the physical media present, so this measure will not drastically help with piracy.
If Microsoft does propose to limit second-hand software exchange, they could be forfeiting a key competitive advantage to Sony’s competing, and also yet-to-be-announced, Play Station 4. One possible business work-around that Microsoft could easily implement is a retailer reactivation method that would allow used video game retailers, such as GameStop to generate another Microsoft-certified activation code for a small cost. This will allow Microsoft to essentially “tax” and earn income from the trade of used games while simultaneously limiting the second-hand market by forcing all exchanges into being processed, and regulated, by authorized retailers.