How Sony Won the Next-Gen Console War in a Country Where Consoles Are Illegal

Monday saw the beginning of American megagaming conference E3, and with it came keynotes from Microsoft and Sony about their upcoming next-gen consoles, the XBox One and the Playstation 4 (respectively). The common take in the West seems to be that Sony “won” the PR battle by a mile, offering up a console that doesn’t restrict the use of secondhand games and doesn’t require a persistent broadband connection to play. The PS4 also costs a full $100 less than the XBox One, which does have the aforementioned restrictions.

And if the early response is any indication, Chinese gamers feel, if anything, more strongly about the PS4. Game consoles may be technically illegal in China, but there’s a vast gray market for the machines, and anyone who wants a console can buy one quite easily at electronics shops in any major city. They may be gray market imports, but most of them were legitimately purchased in other territories like Hong Kong, so they do represent actual sales for the gaming companies. And despite the comparative popularity of the Xbox 360 in China, Microsoft, it seems, has shot itself in quite squarely in the foot when it comes to the XBox One.

First off, the $100 price difference is a big deal to Chinese gamers, most of whom are young and aren’t making boatloads of money. Neither console is cheap, but $100 can go a long way in China, so gamers will have to ask themselves why they should spend an extra $100 on the Xbox One. And unfortunately for Microsoft, there doesn’t seem to be any reason. The console’s always-online restriction for all games is likely to make it virtually impossible to play even single-player games on the machine in China (where Microsoft won’t have official servers; connections to overseas servers can be quite spotty in China sometimes). And it’s probably also going to make it more difficult for Chinese vendors to jailbreak Xboxes to play pirated games, which is something many Chinese gamers want. The consoles being hacked are still machines that were originally purchased from Microsoft, some the company does profit a bit even from the sale of pirate Xboxes; if the new machines can’t be hacked, they’re likely to sell less well in China.

Although there are still months before the consoles are actually released, the early response in China’s gaming press seems to indicate that Sony has won the war quite completely. Take, for example, major gaming portal Netease Games: its top two stories are about the Xbox One and the PS4, but the PS4 story has attracted three times as many comments. And, tellingly, the Netease chose to print the PS4’s price in the local currency — RMB — for that headline, whereas the Xbox One’s price is in USD.

That might seem thin, but if you look at the actual comments on the stories, they bear out the theory that Microsoft’s advantage is dead. The most popular comment on the Xbox article is: “There’s nothing to say here, Sony has won.” The second most popular comment begins “Garbage!” before launching into a profane rant about Microsoft’s policy of limiting secondhand game sales.

On the Playstation article, the top comment is a rebuke towards another commenter who tried to rally people against Sony on nationalistic grounds (in general, Chinese net users don’t tend to be enthusiastic about Japan or Japanese companies). The other top comments are mostly praise of the PS4, and it’s telling that even the appeal to nationalism apparently isn’t stopping China’s internet hive mind from going with Sony on this one.

No one knows for sure how much this will actually affect either company, since the gray market nature of console sales in China makes them extremely difficult to track accurately. But it’s hard to overstate how easy it is to find game consoles in China despite the fact that they’re “banned”, and I suspect that over the long term, the country amounts for — at the very least — hundreds of thousands of unit sales, and probably more. (I’ve read estimates of a 2-3 million unit install base for the Xbox 360 alone, for example, though I’m not sure how reliable those numbers are). I imagine that folks in Redmond right now are a bit upset with how their E3 keynote was received in the US and Europe, but the company seems to stand to lose a fair share of ground in China, too.