Microsoft

When a NeoGaf user started leaking Xbox One-related bombshells Wednesday night, alarms must have started going off in Redmond.

Microsoft has since come out and confirmed that yes, its first Xbox One dashboard update will indeed come in March, and yes, the company will be releasing its previously employee-only all-white console later this year. The rumors didn't stop there, and ranged from leaked photos of the purported Titanfall bundle to a concise roadmap for the Halo series.

But what was most important to the future of Xbox hardware -- and the console market as a whole -- slipped in near the end of the rumor round-ups: that Microsoft was toying with the possibility of releasing an Xbox One with a 1TB hard drive and no optical disc drive for as little as $399.

It's a shocking revelation, which Microsoft has conceded contains an element of truth: the company is testing consoles without a Blu-ray drive, reported The Verge following the forum leaks.

A Microsoft spokesperson declined to expand further on its experimentation with Xbox Ones without Blu-ray drives, saying, "We do not comment on speculation or rumors."

Accelerating the inevitable

It's difficult to understate what a discless version of the Xbox One at such a price point -- one that would then reroute all game purchases through the Xbox Live marketplace -- would be for the industry. It's a rosy picture for consumers, meaning games accessible earlier and easier that also run faster on an included drive with twice as much space as the current model. From Microsoft's end, it would be emblematic of the console market's aspirations to transition to the neatly organized ecosystem of Steam.

But realistically, while all that sounds great if you happen to have a solid Internet connection, a discless console would effectively enrage the other end of a long-established power-sharing relationship, one between retailers and console makers that's inevitably heading in a direction the video game industry doesn't seem poised to be able to handle at the moment.

"This is something that will naturally happen. What's the point of accelerating it?" Michael Pachter, a game industry analyst and managing director at Wedbush Securities, said in an interview with CNET. He also pointed out that pushing digital downloads at the expense of what would essentially be a subsidized console would not provide financial benefits substantial enough to warrant the negative side effects. Furthermore, a discless Xbox One would almost certainly not be carried at stores trying to push the very products it's trying to make obsolete.

"I think that if Microsoft doesn't have GameStop pushing its content, it's gong to sell fewer consoles in the long run and it's going to lose a lot of money," Pachter added.

And not only would the discless Xbox One be incapable of competing with a more versatile, optical-drive carrying PlayStation 4 at the same price -- especially without the context offered by retailers' in-store sales reps -- it would also carry the potential of a now all-too-familiar PR disaster.

"It would demonstrate that Microsoft can afford to release a 1TB Xbox One at $399 with essentially the same production cost as the $499 model with a 500GB HDD and a Blu-ray drive," Pachter outlined in a Webush newsletter update Thursday morning. "That would likely cause gamers to believe that the model with a Blu-ray drive is overpriced, or would cause them to believe that Microsoft is greedy," he added.

This is something that will naturally happen. What's the point of accelerating it?" --Michael Pachter, game industry analyst and managing director at Wedbush Securities

It's clear that physical discs will disappear at some point. But the lack of a cohesive plan to make that transition, something Microsoft fumbled last summer when it originally tried to push controversial features with the launch of the Xbox One, makes a discless model not just unlikely but also a near-suicidal move for Microsoft.

After all, physical discs can be traded with friends and exchanged for other games or store credit -- which goes right into the pocket of the retailers, mind you. And they're still the basis of how most people buy new games and the average, nongamer gets information about which titles to buy their kids or relatives or spouses. None of that would be in place unless Microsoft overhauled its entire digital store, reintroduced used-game sharing, and somehow looped in every major retailer that sells boxed games on their shelves.

Without that, the physical disc would remain the foundation of a relationship that a discless Xbox One would single-handedly destroy.

Microsoft came away from the meandering mess of Xbox One turnarounds last summer with some sobering knowledge: The game industry is not quite ready for things like always-online, a quickened diminishing of retail power in games, and the erosion of the overall boxed product.

And GameStop and others would likely go to the end of the Earth to prevent those things from happening prematurely and without industrywide hand-holding in place. The retailer recently went so far as to release Tomb Raider: Definitive Edition before the announced street date that would have it in online stores. It even once had its employees open up copies of Deux Ex: Human Revolution, remove the coupon that offered a free digital download of the game, and reseal the box to send a message to publisher and developer Square Enix that it did not appreciate the notion of a physical-digital imbalance.

As Polygon's Ben Kuchera said on the subject, "To put it bluntly, Sony and Microsoft need to keep stores like GameStop and Walmart happy, or they lose the primary method for selling their hardware to customers. Publishers need to keep the retailers happy because they know stores like GameStop don't give two wet sneezes about yanking a game from the shelves if they think digital is being given an 'unfair' advantage."

Bringing it back to the idea of a discless Xbox One, there's no telling what GameStop, Walmart, Best Buy, and the other large retailers might do if Microsoft began shopping around a re-imagined vision for a world without discs. Retailers could pull entire hardware lineups if it meant hammering home the message that publishers and console makers need brick-and-mortar stores, no matter what trailblazing vision Microsoft may have for the future of games.

The mounting evidence that Microsoft and big-name publishers would rather be beholden to retailers than shake things up is clear from many angles. GameStop for instance pushes huge amounts of digital-only content, from pre-order exclusives to DLC season pass bundles pushed as aggressively as its used games at every point-of-sale interaction. The used-game market may be the single most aggravating aspect of GameStop and its retail companions, but it's just one necessary part of the current equation at a time when alternatives are not lucrative and are unjustifiably risky.

So whatever Microsoft is planning for by experimenting with a discless Xbox One, it will have to tread carefully for fear of upsetting a balance that the game industry is nowhere near ready to move on from. On the other hand, if Microsoft thinks it can pull it off, such a move could be the moment we see it try and revive all its ambitious plans for used games, digital subscriptions, and always-online authentication. Though that would again be radical, this time for both players and the companies that sell them their games.