Microsoft Corporation (MSFT) Pulls a Dramatic 180

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It’s safe to say that Microsoft Corporation (NASDAQ:MSFT)‘s next-generation Xbox One game console has gotten off to a bad start.

Microsoft Corporation (MSFT)

Many gamers slammed the console for its restrictive policies. They cited its digital rights management system that requires users to check in online once every 24 hours or else the console shuts down, its lack of freedom over trading or lending used games, and other policies. Microsoft Corporation (NASDAQ:MSFT) tried to counter at last week’s E3 conference with a slate of high-profile future games for the Xbox One, but the furor over the console drowned out anything else. Competitor Sony Corporation (ADR) (NYSE:SNE) was all too happy to capitalize at E3, pointing out how its next-gen PlayStation 4 won’t require an “always-online” connection and will support the trading and resale of used games.

After E3, momentum largely shifted to Sony Corporation (ADR) (NYSE:SNE), with Microsoft struggling to fend off the intensifying criticism over the new Xbox. Yesterday, Microsoft gave in and offered consumers an olive branch.

Giving in to what consumers want
Microsoft Corporation (NASDAQ:MSFT) announced on the official Xbox website that the company will drop several of the major hot-button policies that so riled up consumers. According to Microsoft, the Xbox One will no longer require an Internet connection to play games offline. The console will still require gamers to log on to the Internet while setting up the device, but after that, no more checking in every 24 hours for offline play.

In a huge boon for the used games market, Microsoft Corporation (NASDAQ:MSFT) also reversed course on its previously draconian used games policy. Microsoft originally planned to restrict the sale or trading of game discs, a major issue that won points for Sony Corporation (ADR) (NYSE:SNE) when it made sure to support used games during E3. Yesterday, Microsoft Corporation (NASDAQ:MSFT) stated that disc-based games won’t have any new restrictions. The market for used Xbox One discs “will work just as it does today on Xbox 360.”

Digitally downloaded titles will still be restricted — but that’s no new revelation to the industry — and digital titles will also be available to play offline without any checking in. Microsoft also pulled back its regional restrictions, where games and devices had once been locked depending on location.

Microsoft Corporation (NASDAQ:MSFT) had to make a move after watching consumers and analysts rally around Sony Corporation (ADR) (NYSE:SNE)’s PS4 after E3, particularly after GameStop Corp. (NYSE:GME) representatives claimed that PS4 pre-orders were sharply outpacing those of the Xbox One. No digital rights management restriction is worth lost sales, and Microsoft couldn’t afford to let Sony Corporation (ADR) (NYSE:SNE) get an early lead in the next-generation console battle before either device even launched.

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