Console Business Model at Risk of EU Disruption?

The current console business model has been established for long enough that most of us take it for granted. Develop great hardware, sell it near or below cost, then generate profit by taking a cut of the revenue from all future game sales. If nothing else, this gets consoles into more homes, which benefits everyone in the long-term. But what would happen if the model were somehow disrupted?

I started thinking about this when I found out that the EU had voted to ban printer manufacturers from forcing consumers to buy their own-brand refills. The business model for printers is very similar to consoles: sell the printers cheaply, then profit from ink sales. (The major difference is that console makers don’t completely lock out third parties; they just exercise quality control and take a big cut of profits.)

The EU justified the vote in part by claiming that it would reduce “electroscrap”, but lawmakers must have realized that they were putting a giant industry’s business model in some jeopardy. (I suppose they didn’t lose much sleep over this, since none of the major printer manufacturers are based in Europe. Uh oh — neither are the console companies!)

This isn’t an isolated occurrence. Europe has, in general, always been less friendly to corporate acts of protectionism. For example, French lawmakers recently approved a bill that would require Apple to open the iTunes music format, breaking the exclusive connection between iTunes and iPod. Apple immediately announced that it would abandon the French market rather than comply. But if this were an EU law, it’s less clear that Apple could react so forcefully.

And, of course, we’re all familiar with the way the EU has hounded Microsoft to share information about Windows protocols and code. The EU has justified its efforts by citing Microsoft’s dominance of the OS market. So what might happen if one console maker ever managed to resoundingly defeat the others? Especially if that maker were Microsoft?

This is all wild speculation, of course. I’ve never heard or read anything that suggests imminent EU action, or even preliminary investigation. But as consoles become ever more central to digital life, it’s worth thinking about how European agencies might react. Could they force console makers to accept any third party game onto the platform? Force alterations of the revenue model? Unlikely, but perhaps…

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