Microsoft launched its long-awaited X-Box One games console at the E3 expo 2013, to a somewhat muted applause from journalists and spectators.
The launch didn’t quite achieve the whooping and cheering you might have expected at a Steve Jobs keynote, despite this being a product they have been working on for several years.
Microsoft made three big announcements at the exposition which caused outrage amongst core X-Box enthusiasts:
- The console would be priced at $499. Whilst independently not a major issue, Playstation who launched their rival PlayStation 4 console the following day priced theirs at a healthy $399, leaving some X-Box fans feeling short-changed.
- Microsoft stated that an internet connection was essential.The X-Box One must connect to the Microsoft servers daily in order to play games; not something that is every customer’s priority when playing video games in their living room. It was clear that Microsoft was using this change in policy to alter the behaviour of their customers. In the future, this would open many doors to all sorts of online content that Microsoft can monetise.
- No free trade of preowned games. Microsoft stated that it would restrict the free trade of pre-owned games, which includes lending a game to a friend and trading it in. This may have been caused by pressure from software companies who make no revenue when someone trades in an old game; however, this announcement was met by anger from fans. Sony capitalised on this by making a clear statement in their launch of the PlayStation 4 (the next day) that they would allow free trade.
One man’s trash is another man’s treasure.
Within a week (19 June 2013), Microsoft’s Don Mattrick (President – Interactive Entertainment Business) bowed down to consumer power and performed a major U-turn on their business model. They tried to undo some of the damage in a statement posted online:
You told us how much you loved the flexibility you have today with games delivered on disc. The ability to lend, share, and resell these games at your discretion is of incredible importance to you. Also important to you is the freedom to play offline, for any length of time, anywhere in the world.
- An internet connection will not be required to play offline Xbox One games– After a one-time system set-up with a new Xbox One, you can play any disc based game without ever connecting online again. There is no 24 hour connection requirement and you can take your Xbox One anywhere you want and play your games, just like on Xbox 360.
- Trade-in, lend, resell, gift, and rent disc based games just like you do today – There will be no limitations to using and sharing games, it will work just as it does today on Xbox 360.
What went wrong???
They underestimated their ability to move technology forward a step, and take their customer with them for the ride. Playstation didn’t hold back the punches and showed upset customers a clear alternative.
Let’s not forget, this is Microsoft’s second high-profile U-turn in the last few weeks. In May 2013 they announced that they would bring back the iconic “start” button to its Windows 8 operating system after initially confirming they would remove it from their redesign.
Microsoft’s team had the learn the hard way that you cannot implement unfavourable changes to your product without the support of your core customer and furthermore, without a clear value proposition.
- Listen to your customer. This should have been identified as an issue prior to the launch. Microsoft will have to go back to the information they used to inform their business model. Had they been better informed, they may have been able to implement the changes in a way that was acceptable to the market.
- Timing is everything. Microsoft announced their console first and probably saw this as advantageous. It wasn’t! Sony’s PlayStation team listened closely to the chatter on social media and strengthened their value proposition at their launch.
- Listen to your competitor. Playstation got it right! Within 24 hours of watching Microsoft’s launch, they rewrote their presentation and won the day.