MS Seeks Entrance Fee to XBox Accessory Market

pwnage writes "According to CNET, Microsoft's newest licensing model for the next-generation XBox will effectively lock out 3rd-party accessory manufacturers who don't enroll in Microsoft's licensing and royalty program. The new console will employ hardware security mechanisms to ensure that only products created by developers willing to fork over cash to Microsoft can connect to and work with the console. Is Microsoft shooting itself in the foot by making traditional 'approved product' licensing mandatory for 3rd-party developers? Or will companies line up by the dozens to tithe to King Bill? Finally, will Sony follow a similar strategy to eke additional revenues out of its PlayStation 3?"

Comments

I'll take hidden answer #4

[ZakuSage]

It'll probably be more reason for cash straped people will opt for the Nintendo Revolution rather then the more expensive options that are PS3 and X360.

Re:I'll take hidden answer #4

[Skim123]

Yeah, I don't think most businesses wanting to make an assload of money really are targetting the 'cash strapped' demographic. Rather, they are aiming for the pudgy middleclass, those will money to burn (or at least willing to go seriously into consumer debt to have their toys).

Re:I'll take hidden answer #4

[Total_Wimp]

You are very wrong. Companies that target the poor make big bucks. Wal-Mart is an excellent example. There's even a saying to go along with it: "If you want to be rich, sell to the poor. If you want to be poor, sell to the rich."

The fact is, there are way more poor people than rich. World-wide, there are way more poor people than middle class. Most of those poor people are buying soap, clothes and food. Many of them are buying entertainment too.

Cash strapped people can and do buy gaming consoles and will pick the lower priced ones when the cost comes down low enough. Sony still makes money off the PS1. It's still making tons of money off the PS2 as well. You can be sure the rich and middle class bought their PS1 or PS2 years ago, meaning a whold lot of that profit is coming from... you got it, cash strapped people that can only just now afford it.

TW

Re:I'll take hidden answer #4

[dnoyeb]

It just means their accessories and games, etc. will all cost more. MS is stupid if they think this cost wont be passed to the customer, directly.

Yes MS makes more, but its paid by the customer. And when the customer sees the expense of the whole system its just going to put a sour taste in their mouth.

I find it always odd why companies don't seem to realize other companies do the same things they do.

Re:I'll take hidden answer #4

[Skim123]

I should have been more specific. Sure, you can make an assload of money selling to the poor, but only if what you're selling can be obtained cheaply (i.e., food, soap, clothes, etc.). Clearly there's a certain cost that Microsoft or Sony (or Nintendo) incur to develop the console, produce it, ship it, market it, etc. That, along with projected sales, tells them what the minimum they could sell it for and break even. And that dollar figure is quite a bit higher than the break even point for buying tomatos and selling them to folks. Sorry, but they can't afford to sell an XBOX for $25, no matter how many 'cash strapped' folks would buy it.

In any event, why is anyone surprised at the 'high' prices of 'next generation' consoles? For electronics companies the formula is pretty well-established:

1. Invest serious $$$ into R&D and make a 'next generation' product
2. Spend big on marketing/advertising
3. Give it a price tag that may be a bit high, but one that early adopters will happily swallow
4. Over time lower prices to capture a larger market share

That's what you see with virtually every electronic toy out there.

Re:I'll take hidden answer #4

[Mr. Flibble]

You are very wrong. Companies that target the poor make big bucks. Wal-Mart is an excellent example. There's even a saying to go along with it: "If you want to be rich, sell to the poor. If you want to be poor, sell to the rich."

This is a good point, but it is slightly off base. Note, I am not saying that your point is not valid, only that it plays out a little differently than the saying.

This Excellent Book goes into great detail as to who the rich actually are, and what they actually wear, and what they really buy. I would actually be surprised to find a rich person shopping at high end stores after having read that book. In fact, I would guess you would more likely find them at Wal-Mart doing their shopping. High income earners such as Doctors, Laywers and Accountants generally shop at the "luxury" shops and buy the Ferrari's and Handmade Gucci's. The rich got to be rich by shopping at places like Wal-Mart.

Now, as to your point, you are entirely correct on the selling... Selling to the masses rather. The economics of scale will benifit you. If you can sell millions of products that retail for $2.50 you are going to make more money than selling a few items that retail for $10,000. Provided you can survive Wal-Marts "supplier squeezing techniqes" you can make a good deal of money selling volumes to them.

Bad idea

[kidfob]

Bad idea for MS. Don't 3rd party accessory companies have a hart time turning a profit as it is? How would paying royalties look like an attractive option. They'll likely just develop for the PS3 or Revolution.

Re:Bad idea

[ReverendHoss]

I'm not sure Microsoft would be overly upset if they were the only supplier of controllers, memory cards, etc.

I really can't think of any accessories that have ever influenced anyone's decision whether or not to buy a console. GBA attaching to a Gamecube, maybe? Gameshark? Eh.

Re:Bad idea

[prockcore]

oh no! What will I do? I won't be able to buy a crappy MadCatz controller for the xbox360!

I don't think it's a bad move on MS's part. 3rd party accessories have always been awful. It's especially frustrating when you want to go buy an xbox live headset and all the 1st party versions are sold out and the only thing left is a really horrible speakerphone made by Bob's Bargain XBox Stuff.

Crappy 3rd party accessories reflect badly on the console as a whole. A little bit of quality assurance is a good thing.

Re:Bad idea

[TheGavster]

There's always been QA in the form of 'official' accessories. Forcing *everyone* to use the official accessory licensing program just means that those of us willing to accept a crappy headset at a reduced price are out of luck. Preventing a transaction that would otherwise generate a surplus is just bad economics.

Four words...

[Black.Shuck]

...Nintendo Seal Of Approval.

How is Microsoft doing things differently?

Re:Four words...

[bhtooefr]

There's a difference.

The Nintendo Seal Of Approval means that that part is tested to work. However, I can buy a noname Gamecube/N64/SNES/NES controller without the NSoA, and it'll probably work.

However, this will mean that if it isn't an MS certified device (and the DRM isn't cracked), it simply won't work.

Bad move, MS

[Cerdic]

This kind of arrogance is often attributed to the downfall of Nintendo (though more so on a software basis). As N came to the top, they got greedy with their control on who could release hardware and also had ridiculous fees for being a developer.

With this in effect, suddenly hardware is going to be more expensive with less competition. With the PS3 and Xbox having basically the same game lineup, this could be part of keeps Sony at the top (assuming they don't do anything stupid like this).

Manufacturing costs

[volvis]

This would seem like a fair way to cover some of the huge manufacturing costs of these next-gen consoles. Don't know if that's the case in practice though.

Wow, and?

[pantherace]

Microsoft is legally able to do this. However, as with all known technical system protections, given enough time and effort, someone will break it.

I'm suspecting that after it's broken, either by Xbox-Linux people or by someone else, a company will create a peripheral that uses it. Then I suspect there will be a demand to stop based on the DMCA or similar. A nice long court fight, with either the status quo, or more money for Microsoft via the erosion of the idea that you actually own property. (and continuing with the idea that you can do what you want with your property. They do have court decisions about modchips in their favor.)

It'll end up like SCO. Endlessly debated, (Label A) then a court will rule, it'll be debated more, goto Label A.

I don't understand

[defile]

If console manufacturers could legally lock out third party accessories, wouldn't they have done it long ago? Nintendo sued Game Genie over patent violations but still couldn't keep them out of the market.

How is this any different from Lexmark's ink cartridge fiasco (a case they lost)? "We'll keep doing it in the face of all of this legal precedent that says we can't" doesn't seem like a sound long-term legal strategy.

Re:I don't understand

[nick_davison]

"We'll keep doing it in the face of all of this legal precedent that says we can't" doesn't seem like a sound long-term legal strategy.

You've not come across this Microsoft company of which you speak before, have you.

The same company that sucks up $1m/day fines for monopolistic practices, loses its case in the U.S. and just buys the Bush administration in order to have the government decide, "Pursuing any damages isn't worthwhile, even though we've already won."

Microsoft knows that with a five year generation per console, they can bury this one in court time for way longer than that, for a fraction of what they can make if they make $5/accessory sold to 30m users, and then meekly promise the courts, "Oh, OK, we see your point - but we stopped selling that console two years ago and our new one uses something different."

Re:Hopefully including some sort of quality contro

[Samari711]

Yes, rather than have the free market determine which brand X controllers stay on the market and at what price point, lets have one company control it and keep prices exorbitant!

I'm not too concerned though, it's going to be the same type of situation as it was with the chips in pinter ink cartridges.
1)DRM-like scheme locks out competitor
2)competitor reverse engineers said scheme
3)???
4)Profit!!

MS would be best off not suing under the DMCA, seeing as the SCOTUS was pretty firm in the Lexmark case about the DMCA not extending to interaction between components.

Re:Making the PC world a better place...

[Saeed al-Sahaf]

It's steps like this (by Microsoft and previously Nintendo) that may lead developers to return to the PC development environment.

You're kidding, right? This is nonsense. Third party makers will pay up, and proliferate. There is no shortage of people willing to pay, and they aren't interested in PC games, they want consoles. If you can't afford one you're probably not the market MS is targeting anyway, and will have to wait for second hand equipment on eBay.

It's just supply and demand

[RealityProphet]

Moves like these are based solely on the expected demand from consumers for these consoles. If consumers are frothing at the mouth to get their hands on the new xbox 360, then peripheral manufacturers are going to be frothing at the mouth to supply them with whiz-bang accessories. MS wins: a good business decision.

However, the opposite was true of Nintendo after their fatal decision to stick with cartriges for N64. For years, Nintendo dominated the console market, and for that, they required that all games were authorized by them and I believe even manufactured at one of their own sites. They could do this solely because there was incredible demand for their consoles. When Sony entered the market and support for Nintendo waned, all of a sudden they needed to offer game producers incentives to keep making games for Nintendo consoles.

The only thing that this sort of decision by Microsoft is saying is that they believe very strongly that their next gaming platform is going to be massively successful. And to me, that isn't really such a bad thing.

Re:Missing an option...

[glesga_kiss]

More likely... Manufacturers will circumvent the protections and make compatible items anyway like with the original NES.

That was pre-DMCA however; laws have changed now. If the new xbox was some sort of "trusted computing" device, they could argue that the entire system used the same protection and this was breaking it. Might not be a credible case legally or technically, but the threat can be enough to make some manufacturers back out of the market. It's all risk assesment.

If they were to sue for some of these more recent laws, it may backfire and have some of the laws repealed/modified when everyone realises how sneaky it is. Which would be nice.

Re:Nintendo had something similar

[MaxCreamer]

The big difference here that you have to mod the Xbox360 to accept non approved controllers which is easy, but which manufacturer would build a controller just to sell to the 1% of the market that would be modding their xboxes.

M$ have created a classic chicken and egg situation here.

Re:This is a good thing.

[vsprintf]

This will force MadCatz to start putting out quality accessories, and not crappy controllers that break 2 weeks after you buy them.

It won't force MadCatz to do anything except pay money to Microsoft and charge more for their products. If you know their stuff is crap, don't buy it in any case. A MS hologram isn't going to make it any better. If you think otherwise, I suggest you go look at all the dead Compaqs and Emachines with a MS sticker on them.

Re:Nintendo wouldn't do something like this

[Saige]

Anyways, we all know that Xenon and Cell suck - Anandtech had an article on it but that article was mysteriously removed from the website, no doubt because of Sony or MS putting (legal?) pressure on them. Luckily, you can read it here.

Actually, the article was pulled from the site because it was full of inaccuracies, and was just, in general, crap. I've seen the parts about the article regarding the 360 torn apart completely, internally, by people who actually know about and helped create the thing. People who were very upset to see something they've worked on get blasted with repeated falsehoods.

Re:No hobbyists?

[Gogo0]

Really, did you ever truly believe that MS embraced the hobbyist with the original xbox?

This tactic not only provides them with more money, but it has a neat side-effect where it creates another hurdle for hobbyists and pirates to have to jump over (or perhaps its the other way around).

They do not want anyone hacking their console for any reason.

Should be a warning to game devs.

[incom]

This should be a warning to any game developers and publishers of the type of control MS plans to enduce if they get significant control over the console market. If you thought the restriction and high liscensing fees of the snes were bad, imagine what a console monopoly by MS would yeild.

Re:Hopefully including some sort of quality contro

[earnest murderer]

Their "Windows Certification" program has certainly shown that a barrier to entry rarely produces a "better" product. Just a product with a logo on it's box. I've owned a lot of Logitech gear and their high end stuff is certainly decent enough. Their low end however, is as craptacular as any other.

Re:I bought it i own it

[KillShill]

welcome to the console business.

where the big monied 'holes can do anything they want at the expense of the customers.

what? you had a foolish notion that you owned the hardware you paid money for?

silly capitalist, ownership is for corporations.

looks like they found another way to lose money

[Locutus]

all this is going to do is reduce the number of hardware options for the product, raise the price of the accessories, and reduce sales. Add this to the added( +$10 ) per game MSFT is requiring and it all adds up to a win for Sony.

It's kinda strange that they are doing this considering for the life of Windows CE, they've been willing to lose ~$1 billion per year and haven't resorted to this kind of extortion from its WinCE cohorts. Then again, WinCE is a software product and Xbox 180 is hardware. And expensive hardware at that.

I just loved how they are not only requiring accessory vendors to pay MSFT, but they also must sign an agreement to NOT develope certain accessories. For instance, nobody but MSFT can build wireless accessories. Good luck with that.

LoB

Re:Quality Control or Absolute Control?

[Moofie]

Yeah, we can't have the market deciding which products should win and which ones should lose. Let's just have Microsoft do all the hard thinking for us!

If you don't want an accessory that turns a cup holder into an iPod holder, don't buy one. (Me, I think it would have been a very handy thing to have in my Miata...would have worked beautifully...)

Microsoft is Desperate for Control and Revenue

[Anonymous Coward]

I disagree that it's about quality control.

Ever since the beginning of the nineties, Microsoft has been working to change the commodity PC into a Windows-only platform. What used to be commodity PC hardware interfaces, have gradually been replaced by complex, undocumented protocols requiring proprietary, vendor-specific drivers.

And Microsoft was succeeding in their decommoditization scheme... until Linux came along.

Now, Linux has an even wider range of hardware support than Windows. The only place where Windows still has a lead is in the latest hardware releases from a shrinking number of companies still willing to partner with Microsoft. Those companies include NVidia and ATI, who, case in point, were convinced to stop supporting Linux Open Source drivers when Microsoft offered to make them partners in the XBox.

It's not only Linux. Apple and Sun have also released PC-based versions of their operating systems. As a result, commodity PC hardware is back in vogue, and Microsoft is losing control.

Microsoft is desperate to get that control back. Otherwise, without the means to sabotage and block their competition, Microsoft might actually have to start to compete. That prospect scares Bill Gates, who knows that Microsoft has lost every fair competition it has faced, and has always found it necessary to resort to unethical, and even illegal means in order to prevail.

The XBox was one of Microsoft's strategies for regaining that control. But it hasn't given them enough control, apparently, so they're making it even tighter.

The other purpose of this step is to increase revenue. It's not that Microsoft is going broke, however, again thanks to competition from Linux and other Open Source software (Apache, OpenOffice, etc.), Microsoft's revenue has been shrinking, or at least growing more slowly. It is getting harder and harder for Microsoft to hide this trend, and, once the markets notice, Microsoft's stock price could take a huge hit.

Hence, this move comes as no surprise to me, and I expect to see more schemes from Microsoft aimed at gaining income, and raising the barriers to compatibility.

Re:Quality Control or Absolute Control?

[benbean]

if it was a quality control issue they wouldn't allow third-parties to release crappy bug-ridden games either.

Re:Quality Control or Absolute Control?

[benbean]

I bought a couple of Logitech Precision Xbox controllers to replace my broken original Microsoft ones, and you know, I think they're better designed and better built, and were less than half the price. IMHO of course.

Third-party products aren't always going to be cheap tat. It'd still be nice for the consumer to have the choice.