Microsoft (MSFT) relaxes DRM barrier for disc games on Xbox

Microsoft MSFT recently rolled out an Xbox Series X update that allows users to play many more Xbox One games offline without mandatory digital rights management (DRM) checks. Update 2208 released earlier this month does not require users to complete an online compatibility check to play a game from an Xbox One disc.

DRM refers to online checks on platforms such as iOS, Android, Windows, and Xbox to ensure that the user actually owns the license for the content they are accessing. Without DRM, publishers would potentially lose millions of dollars in scenarios where users illegally share content, which could lead to a less sustainable gaming industry.

Xbox One and Xbox Series X | S DRMs have been criticized for being aggressive, essentially preventing users from playing many single-player games in offline situations, such as power or internet outages.

The change, which is not listed as a feature of update 2208 on Microsoft’s site, was confirmed by Xbox Engineering Manager Eden Marie, who tweeted that verification was removed as it was not needed in the vast majority of cases when playing a cross-gen game on Series X.

Users will now be able to install the Xbox One version of a game directly from the Xbox One or cross-gen disc and can start playing it. Internet will be required to download updates or enhancement packs for Series X.

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Boring consumer spending on video games is dampening the outlook

Microsoft has worked to make it easier to launch and play games on Xbox overall. It recently began testing badges on the console’s home screen that clearly indicate at a glance if a game is currently playable.

For the first quarter of fiscal 2023, Microsoft expects games revenue to decline to low to mid-digits due to the decline in first-party game content on Xbox consoles.

As for games that could be coming to Xbox Game Pass, ads for titles like Elden Ring, Soul Hackers, and GTA V have been spotted on the Xbox storefront. All of these titles also appear to have been recently made xCloud compatible.

The numbers reflect a broader contraction in consumer spending on video games. Americans spent $12.4 billion on video games in the second quarter, according to market research firm NPD, down 13% year-over-year.

In the three months ended June, Microsoft, sony SONY and nintendo NTDOY each posted disappointing results in their respective gaming businesses. In the last reported quarter, Microsoft’s games revenue declined 7% (down 5% at cc) due to a decline in Xbox content and services and Xbox hardware.

Nintendo posted a 15% decline in operating profit in the April-June period. The company behind the Super Mario The franchise claimed that the weak performance due to the global shortage of semiconductors has affected the production and sales of Switch consoles. Nintendo sold 3.43 million units of its Switch handheld console in the quarter, down 23% year-on-year, while software sales fell 8.6% to 41, 4 million units.

Sony sold 2.4 million PlayStation 5 consoles in the quarter, slightly more than the 2.3 million units sold in the same period a year ago.

Microsoft has hit back at Sony’s recent assertion that the upcoming acquisition of ActivisionBlizzard ATVI is anti-competitive and that the Call of Duty the franchise influences users’ console choices and has no real rival.

As the U.S. Federal Trade Commission continues to investigate the private sector deal, foreign regulators, such as those in Brazil and New Zealand, are releasing documents for the public.

Microsoft’s strategy of not distributing Activision Blizzard games on competing consoles would only be profitable for this Zacks Rank #3 (Hold) company if the games attract a high number of players in the Xbox ecosystem, which is would result in income to compensate for the losses linked to the non-sale of these. titles on rival consoles. You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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