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How pirates lost the console wars

DJ Glo Xbox

Modified Xbox by DJ Glo

Mike Masnick at Techdirt wrote about piracy as an innovation strategy a few weeks back, and this comment caught my eye:

“A great example of this is the original Xbox. A modified Xbox had a lot of great features like the Xbox media center and emulators that let you play ROMS of classic games. Microsoft, Nintendo and Sony all copied this feature in their current generation of consoles. Xbox Live for the 360 and Virtual Console for Wii both make Microsoft and Nintendo a lot of money. This was copied straight from the pirated, modified Xbox.”

This is a story of the console giants responding the right way to a Pirate’s Dilemma. They didn’t just fight piracy, but co-opted the good ideas the pirates came up with.

Illegally modified or ‘chipped’ Xboxes started with private owners eking out ways to improve the machine, dropping in custom-built mod chips such as the X-ecuter 2 Lite and upping the horsepower of their sytems by adding in 80+ gigs of extra hard drive (the original Xbox came with just 8 gigs). Some fans simply wanted to play or back up other media they owned, such as their legally purchased games, mp3s and movies using their machine. But this warranty-voiding practice was understandably frowned upon by Microsoft, because it turned the Xbox into a giant iPod for storing pirate video games. And soon enough, custom-built chipped Xboxes were appearing in stores, selling for $500, that didn’t just come with more hard drive space, but fifteen or more pirated games pre-loaded as well.

Microsoft, true to form, sent in the cavalry. In 2003 and 2004 stores were raided, modded machines were confiscated, store owners were arrested and some even imprisoned. Fans and modders had mixed feelings about this. They recognized that the piracy was wrong, but they liked the new features of the modded versions as well. Xbox owner and modder Karl Reinsch wrote about what he saw going on in his local mod chip store on BoingBoing in 2004:

“I stopped in one of the locations just about two weeks ago looking into PS2/Xbox mod chips and was stunned to see them selling modded systems with games already copied onto the hard-drive (They were defintely doing it with Xbox systems and may have been doing it with PS2 systems as well).

“They even printed up stickers with the list of included games and attached them to the packaging for each system. You could pick your Xbox based on the size of the hard-drive and the list of included games. “Oh look, this one has ‘Halo 2′ on it!”

“They were also preloading the Xbox systems with tons of emulators (arcade and console) and as many ROMs as they could find. I watched a customer walk in and ask about a specific original GameBoy game – the employee immediately fired up a GameBoy emulator with the appropriate ROM right there on the demo Xbox and handed the customer the controller to play with. I was shocked.

“They appeared to be to be doing pretty brisk business. I left the place seriously disturbed by what I had seen and wondering whether to report them. Guess somebody already had. They definitely crossed the line. And it is sad to see that happen with one of the few reliable local suppliers of mod chips.”

Microsoft had every right to go after the pirates, but they were smart about it – they didn’t go after individual modders and private owners like Keith, only the store owners selling the machines on the grey market. But the real reason this was a winning strategy was Microsoft recognized the value in what the chip-modders were doing, and beat them by competing with them in the market place. When the Xbox 360 launched, the media center idea developed by modders was front and center, one of the most touted features of the new machine. The popularity of emulators, which let modders play old games from consoles of the past, is also a main feature of the Xbox 360, PlayStation 3 and Nintendo Wii.

The console companies didn’t treat fans like criminals. They gave the fans what they wanted instead, which meant the fans sided with the console manufacturers. Legitimate companies and copyright/patent holders are, in most cases, able to do what pirates are doing with their products more efficiently, more conveniently, and through legitimate channels more palatable to consumers. Often this leads to new revenues streams, as it did in this case for all three console giants. But all too often companies don’t compete with pirates, out of pride, ignorance or a failure to recognize that piracy can be a market signal. Piracy can be a way for fans to let companies know what they really want. It’s often advisable to fight pirates, but ignoring what consumers really need from you is the easiest way to lose the battle.

2 Responses to “How pirates lost the console wars”

  1. Nerdcore Shortcuts » How pirates lost the console wars Says:

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  2. Haritori Says:

    The Most stupid and factless opinion i have ever read!!!

    Media centre was in 360 because pirates added it to XBox1 lololol

    and you have homebrew and piracy mixed up they arent the same thing and should never be compared!

    pirates dont create software pirates copy use and profit from other peoples work, homebrew is indies working open source or closed source to benefit everyone, not just themslefs.

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