Are “Digital Edition” Consoles Worth It?

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Last Christmas, after experiencing the real struggle of living in a household with one Xbox, one 40 year-old video game junkie (that’s me) and one teenager video game junkie (that’s my daughter), we relented and bought my daughter a Xbox One Digital Edition (in bright white.)

The benefits were immediate. No more fighting over the Xbox console in the living room. However, the games she was able to play were limited to downloadable games only. Though we have a limited collection of games on disk, she could not play them.

In our current day and age, purchasing and downloading games is fairly commonplace. Game makers like EA and Paradox have their own online portals and services you can buy and download PC games from. Mass retailers like Steam offer the same sort of services and provide a way for PC and Mac gamers to purchase and download from an almost endless library of titles. The PC gaming world has, for a while now, been a largely media-free world.

Why is this?

There seem to be a few factors. First, since ISPs have advanced to the point that downloading GB’s of data takes minute and not days, and given the PC has generally outpaced consoles on most tech fronts, PC’s (and Macs) had generally outpaced their lesser console brethren on a number of fronts, especially on storage capacity.

Secondly, and probably more importantly, there is a HUGE market for resold console media. Stores like Gamestop do a huge business in the trade-in and resell of recycled console games. PC games? Practically zero. Here-in is probably the biggest motivator for pushing the “digital” console for game and console makers.

Follow the money

At the end of 2019, Gamestop had a total of 5509 stores worldwide, with a total software sales of just over $3.00B. Gamestop doesn’t disclose the proportion of those sales attributed to pre-owned sales, but it does acknowledge in its 2019 annual report that, “we generally obtain higher margins on our pre-owned product,” and even comments in the same report that efforts by game makers to limit both legally and technologically Gamestop’s ability to resell these pre-owned games “could have a negative impact on our results of operations.” (Gamestop, Inc. Shareholders Annual Report, 2019)

Game makers aren’t stupid. They see a substantial sum of money that they are being cut out of by the pre-owned market and it bugs the crap out of them. When developers sell new games, they make profit off those games. Unfortunately for those developers, when physical media allows for the transfer of ownership through a second-hand store, they make nothing on the resale. That reduces the amount of new copies sold and ultimately hits their bottom lines.

And its not just the developers. Its also the hit that retailers take from the lost sale opportunity on a new game. Even many gaming consumers vent their ire at (especially) Gamestop for the pittance they offer for trade, which can often be as little as 5-10% of the original sale price of a game, and varies with the likelyhood that Gamestop can quickly turn the title over in their stores. In spite of this, they still take in a load of products for resale. Why? Because in the end, many savy consumers know that its worthless to them once they have played it, especially if it is a title they have no hope of ever replaying. $12.00 for a copy of Red Dead Redemption 2 they spent $50.00 on six months ago is better than another box on the bookshelf collecting dust.

However, the efforts by console makers and game developers to redirect revenue streams from pre-owned games sales is still a pittance compared to what is probably the bigger motivator. I would argue, that is capturing the “non-gamer gaming crowd”.

As seen just this week with the release of the first images of the PlayStation 5 and with the Xbox Series X rumormill working overtime, it appears that both console makers will release a optical-drive free console version of their next gen consoles. While nothing official has been released yet, its also likely that these “digital edition” consoles will likely sell at a lower price (as was the case with the earlier mentioned Xbox One my daughter received for Christmas.

These lower priced versions have the certain appeal of a lower price tag, and on the surface, appear to be essentially the same as their optical-drive wielding cousins. With the Xbox One S, this is basically the case. For about $100 less, the Xbox One S “All-Digital” is essentially the same console, minus the drive.

However that may not be the case with the PlayStation 5 and the Xbox Series X. In our article yesterday, we reported how a regular Xbox leaker poster on the beyond3d.com forums, suggesting that Xbox “Lockhart”, the apparent code name for Microsoft’s all-digital Xbox Series X console, was being designed to deliver about half the video performance of the full system. They also suggested a significantly lower price, and a likely delayed release, sometime several months after the full Xbox Series X lands.

However, it will still likely be designed to play most, if not all, the same titles as the full systems, with some understandable compromises on video quality and frame rate delivery. These performance limitations would likely be lost on the average gamer playing anything but the absolute most resource intensive games.

It stands to reason…

While we question the reliability of the supposed “leaks,” the logic is there.

There is a large market to sell consoles to “non-gamer gamers.” What do I mean by this? People that like video games, but aren’t hard-core. They use their consoles more for streaming and casual play, and don’t spend inordinate amounts of time and money on gaming. Its probably a big market.

Look at it this way: If you go back 10 years and look at flat-panel displays, most of them were “dumb.” No built in software. It was just a TV. Console makers were really about the only access point (aside from a PC) in the early days. Consumers had to access streaming content and send it to a TV via a console, which many already olwned. Services like Hulu and Netflix only had to build software that was compatible.

Then entered Roku, Amazon Firestick, and the like, providing an access point exclusively for streaming content for “dumb” TV. Still, fairly limited competition to console makers, because those early devices were cheap and didn’t work that great.

However, flash-forward to today and its almost impossible to NOT buy a new TV that is a non-smart TV. So, if you are very casual gamer, you might be just satisfied enough with the performance of your last gen console to hold out for years. Especially if you’ve just invested $1000 or more in a new higher or very high-end smart TV, that has loads of options for streaming content and entertainment.

Microsoft and Sony are, no doubt, looking for ways to entice those hold-outs to buy a new console. They can pretty well rely on the hard-core gamer crowds to go for the new system in the first few months. However, they will want to sustain sales of the nextgen consoles and look for ways to continue to grow sales outside of their core.

So, are Digital Edition consoles worth it? (Continue…)

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