Microsoft Talks Digital-Only Future, Kinect, and Why Xbox One is Worth $100 More Than PlayStation 4

Senior director Albert Penello declares a digital-only future for gaming is inevitable; says pack-in Kinect will allow for greater innovation and premium price won't be dealbreaker this holiday despite less expensive PS4 and Wii U.

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In the wake of consumer backlash, Microsoft in June backed off a number of its policies relating to digital games, but that doesn't mean the company has abandoned its vision altogether.

A digital-only future for gaming is "going to happen," Xbox director Albert Penello told GameSpot during PAX Prime recently in Seattle, Washington.

Though Microsoft is sticking with a disc-based model for the Xbox One launch, Penello said the company plans to support trading, loaning, and reselling of digital games down the road.

"I think we need to do that. That has to be part of the experience," Penello said.

During our conversation, Penello touched on the possibility of backwards compatibility coming to Xbox One, how the company feels about being the most expensive console this holiday, and why Kinect is bundled with every system.

I think I heard a quote, it might have been from Major Nelson, that you guys had started over with essentially a blank slate [for the Xbox One]. When you were designing the Xbox One, how much of the legacy of the platform did you want to bring forward, and how much did you want to leave behind?

I think you always start with what do you want to do. Because you absolutely get a chance to start over. So that is always the first question that you ask. What are the things that we want to do? And then as you're working through it, you decide to make trade-offs about what stays and what carries forward. Certainly, we wanted to be a great next-gen game [console] delivering awesome next-gen graphics. Certainly, we wanted to have a great multiplayer environment. Certainly, we wanted to be able to do other types of things. But like, you definitely start with all of the learning you had on [Xbox 360] and say 'god, if we could do this all over again, how would we architect the system differently? What would we have done if we knew we were going to do these things?' That's always the first question you ask.

One of the things that's really surprised me is that my Xbox 360 is still in my house right now. It's an eight-year-old device. It's the only eight-year-old piece of technology that I use today. That kind of tail that it's enjoyed is really impressive. How are you going about future-proofing the Xbox One to have a similar eight, nine, fifteen year tail?

So, you probably heard us talk about the Xbox One architecture; this idea that we have multiple environments that the box can run in. That's probably the least publicized but the most significant thing that we're doing in the system to keep it future-proofed. A lot of people don't realize this, in the old days of gaming--and I've been in this business for a long time--if you wanted a new dash…you bought a new console, that's when a new UI came in. When we did NXE, we changed up the blades to that new design, that was like revolutionary. And that's one of the things that has allowed the Xbox 360 to endure. But we didn't build the system anticipating that we were going to do that.

We architected Xbox One so that the game environment and the application environment are totally independent. So the game performance, just like a game console; developers can write to the metal, keep making the games better and better and better. And we have this other area over here that we can play in that can run on top of it, that can run side-by-side; you can have current things running without touching the game. That's going to give us a lot more flexibility to adapt and change than we had on the Xbox 360.

The Xbox One is going to have a pretty significant digital ecosystem, I would say. You're really making a stance there. Do you see a digital-only future someday happening?

"We probably said [digital-only] was going to happen sooner than people were ready for it to happen. And I’m glad we've gone back."

Yeah. It’s going to happen. I don’t think there's anybody in the industry; no matter what you thought about our original policies around DRM; I don't think there’s anybody that doesn't know that someday, it’s going to happen. Right? It’s already happened on tablets and smartphones. It’s mostly there on PC. If you look at what’s happening with Steam. And just the congregation of gaming on Steam. It’s already basically happened with music and it’s on its way to happening with movies. So it doesn't take a big leap to say it’s going to get there. For us, we probably said it was going to happen sooner than people were ready for it to happen. And I’m glad we've gone back to the disc model. People have to accept it. The Internet bandwidth caps have to support it globally. Internet infrastructure has to support it globally. So it’s going to happen, it’s just a matter of time.

Another thing that comes along with digital games is…something that holds them back is you can't resell them right now. There's no kind of commerce between users. Is this something Microsoft is potentially interested in?

Well, actually I think if you go back and you look at some of the things we said, that was one of the places that we were actually trying to pioneer. We were trying to implement the ability to trade [and] loan digital games with your friends which is something that no one else was doing. I believe, in retrospect that people have calmed down and gone back and actually looked at what we said, people are starting to understand, ‘Wow, they did want actually to allow me to loan and trade’ which other digital ecosystems don’t want to do. And so, yeah, I think we need to do that. That has to be part of the experience. Right now, we’re focused on launch and we switched the program back to discs, because that’s what customers wanted.

But you're open to revisiting that stance?

I get a lot of mails saying ‘god, please bring back the family sharing.' We’d love to figure out how to bring that back. I still think it was a good idea. Maybe it was a little too soon for some people, but I still think there were a lot of good ideas in there. And we’ll bring it back when the time is right.

Was the Xbox One ever conceived, at any level, without a disc drive?

No. Because I think right now we realize the size of the games that are coming now. What we conceived was that the disc was the delivery medium. But that the licensing and all of that was happening in the cloud. So yeah, you're always going to need a disc. But for some people, there will be a time when that's not necessary any more.

Kinect is something that, you've talked about it as a core component of the Xbox One; that the Xbox is Kinect. There is no difference. But it's still something that I've seen as kind of a sticking point for people online. Why is Kinect such an integral part of the Xbox One?

I think one of the things that's happening is when we launched the Kinect on Xbox 360, it came five years in on the platform; it was an accessory. And it did some really cool stuff. But I feel like it never reached its full potential. Because developers have to decide; does my customer have it? Who’s going to have it? If I do this game, what percentage of users have it? And one of the things I think we’ve learned, is that when you launch something as part of the console, it changes how it gets used.

"[Kinect for Xbox 360] did some really cool stuff. But I feel like it never reached its full potential."

Today, you can't use your voice on Kinect for Xbox to buy a movie. Eventually, you stop and you have to pick up a controller. On Xbox One, we've architected the whole UI. I can literally just talk to it, ask it for different genres, ask if for new releases; and I can change whether I want it in SD or HD, purchase it, start it, play it, pause it, fast forward it, rewind it, all with my voice. The idea, today, if you want to switch games, you've got to make a commitment. I have to get up. I have to take the disc out. I have to boot back to the dash. I have to put a new game in. On Xbox One, 'Xbox go to Ryse.' New game starting.

That kind of stuff, it's easy to pick it apart when you haven't experienced it. But I believe that everybody is going to…want to interact with their console in that way in the future. It is going to be so much faster [and] so much more convenient. And that's just the voice stuff. The recognition stuff, the sign-in that we can do. You can walk in front of the console, it recognizes you. Now we can have six of us in the room all signed in with our own profiles. That kind of stuff, when people get to use it, I think it will be really obvious why we bundled it with every box.

Do you think this is a major advantage you have over your competitor, who is selling [motion control] as a peripheral?

Obviously I can’t speak to what Sony’s doing. I don’t know what their plans are with their camera. But I think, they had this with Move, we had it with Kinect versus Nintendo with the Wii. When you bundle it, you get more innovation, you get better and more interesting types of experiences; so I do think that bundling it in every console, and the fact that technology is so much more advanced than what anybody else is doing; yeah, I do think it is an advantage.

Because you're going to be so embedded with TV providers [for Xbox One], is there any chance that we could see a subsidized [Xbox One]?

I think there will be a time and place to bring that back. I think at launch, most people are saving up and they’re going…they want in. The subsidized model really makes a lot of sense towards the end of the life. People are more price sensitive. They are more cost conscious. It's a model I like; I’m sure we’ll bring it back. But not right now.

Do you have an Xbox One in your home right now?

I do.

What's one thing that's surprised you or stood out compared to having it in the lab or in the office?

The voice stuff works awesome. When we demo, it's always in these artificial environments. But when you're actually sitting on your couch with your feet up and [see] how good it works, how responsive it is. It works great and it's so much easier to use now.

The Xbox One taps into the power of the cloud quite a bit. We're seeing one of your competitors, Sony, doing backwards compatibility through streaming. Does the cloud-powered nature of the Xbox One leave it open for things to change in the future for something like that?

"But there are so many things that the servers can do. Using our Azure cloud servers, sometimes it’s things like voice processing. It could be more complicated things like rendering full games like a Gaikai and delivering it to the box."

Yeah, absolutely. That's one of the things that makes [the cloud] at the same time both totally interesting and hard to describe to people. Because what the cloud can do is sort of hard to pin. When you say to the customer, we want the box to be connected, we want developers to know that the cloud is there. We’re really not trying to make up some phony thing. But there are so many things that the servers can do. Using our Azure cloud servers, sometimes it’s things like voice processing. It could be more complicated things like rendering full games like a Gaikai and delivering it to the box. We just have to figure out how, over time, how much does that cost to deliver, how good is the experience.

As things become more dependent on the cloud nature of things, it seems very dependent on Microsoft staying in business and staying very interested in gaming.

I think that's a great question for the industry. Because I could point to the fact that there are still plenty of games on Xbox One and Xbox 360 that are total offline mode. You could ask the same question for World of Warcraft. Like someday, what happens if Blizzard turns off the switch? Where's all my money, where's everything? That's a great question the industry is going to face. And it's going to be game-dependent.

There's a lot of discussion today in this post-NSA and everything going on about privacy, and then you've got the Kinect sensor pointing at you. I know you can turn it off, you can turn it the other way. But since it's connected to the Internet, people are always going to the think that the government can have a backdoor to anything that's connected. What's Microsoft's take on this?

This is a great one. The answer to this one for us was very simple and everybody misinterpreted it. Unplug it. Like, originally, we had said people who understand the technology behind this would quickly get to 'If I have this 1080p HD camera that's always on, how is all that data going to get off my machine?' So first off, it's somewhat implausible, technologically that you would be able to have high-definition video feeds being served out of your house without you knowing about it. But let's just pause on that for a second because not everybody's technically savvy. We sort of felt like 'of course people are going to understand that's not going to happen.' Some people don't understand. It's just a thing that people feel. So that's why we said, you know what, just let people unplug it. If you really just don't believe or are uncomfortable or whatever, we let you unplug it and then it's off.

To your point, laptops, phones, security cameras everywhere; if you believe that that thing is happening…I know we're not doing it. I'm not worried about it in my house because I know what's happening. But you know, we let people unplug it if they're really super-sensitive about it.

As the most expensive console this holiday season, how are you going about communicating your value proposition against those others?

It’s up to us to prove that it’s worth $100 more. I think it is. I think we do more. I think our games are better. I think as people start to experience Kinect and see what it can do using voice, I think that's better. I think the ability to have an all-in-one system where you can plug in the TV, that’s better. I think we’ll have a better online service.

I just believe that we’re going to have a better system. $100, when you’re talking $400 vs. $500 [shrugs shoulders]. I don’t believe it’s going to be the deal-killer.

'

Discussion

1770 comments
IMDLEGEND
IMDLEGEND

In the years to come,  xbox one will have to compete with the TV's themselves.   Have you seen the Samsung smart TV commercial?  It does a lot of what Kinect is doing (voice command,  hand gestures, etc).

Tixylixx
Tixylixx

A game console should just be a game console, If I was still at home sharing a TV my family would not be interested in getting a games console to do anything on, they'd just use the inbuilt freeview or whatever to watch TV on. The other thing is you wouldn't want them using your console to do that, then it means you cannot play games when you want....... how realistic is it that a family is going to buy multiple Xbox Ones? I don't think that is likely, at least at launch prices.

So in the end I just want games, leave the TV shit to the TV.

Tesla2014
Tesla2014

It's funny to hear all the people hating on a game system. It infuriates you that much? Really? Daddy didn't bring home exactly what you wanted so you're throwing a fit? Love or hate it folks. This format IS the future. One in all home entertainment system. Think about ..pretty soon your TV WILL be your bluray, xbox,ps6, pc,telephone, even your job. Why have several seperate componets when it can be combined into one? MS is ahead of the game in this area and should be applauded. It's not a true game system people will shout ! Why can't a home gaming console offer great gaming and internet capabilites at the same time? There's a large elephant in the room about this and I can't understand why? Just because it has other features makes it less of a gaming console?That seems absurd, and it is.

Tesla2014
Tesla2014

It's funny to hear all the people hating on a game system. It infuriates you that much? Really? Daddy didn't bring home exactly what you wanted so you're throwing a fit? Love or hate it folks. This format IS the future. One in all home entertainment system. Think about ..pretty soon your TV WILL be your bluray, xbox,ps6, pc,telephone, even your job. Why have several seperate componets when it can be combined into one? MS is ahead of the game in this area and should be applauded. It's not a true game system people will shout ! Why can't a home gaming console offer great gaming and internet capabilites at the same time? There's a large elephant in the room about this and I can't understand why? Just because it has other features makes it less of a gaming console?

That seems absurd, and it is.

fattycoles
fattycoles

I'm sorry but ms can not be trusted anymore, I don't want a digital only future, I won't buy the games and so won't other people, Do you think people are buying music and movie digital copies.....I'm sorry but they need to expand there user base not to shrink it, I will not touch the xbox one as they will simply try to reverse back to there policy's, I am ps4 all the way and until they change to digital ill will stick with them but if they change ill will be buying very little games, I have a vita and the games I have got digitally haven't been more than $15, I will not spend big money for a product that is not mine, Ms you are liars and you can shove your product and burn in hell.

jark888
jark888

I support the idea of rent, trade, and resell digital files.

Beasley2K
Beasley2K

No way is it worth $100 more. Yes, you think it's better, but you're working for Microsoft, so you're opinion means nothing. Just like how Sony think the PS4 is better.

You do very little more, if anything. Many people, myself included, think the PS4 games are better. The PS4 is also an all-in-one system that plugs into the TV, the only difference is that they put and emphasis on games rather than the other features, like Xbox did. There's not much more the Xbox One does than the PS4, if anything, besides probably voice control. The "better" online service is debatable. Sony offers something like 3 free games a month - and not ones that are like 5 years old. In the end, I'm not going to be paying $100 more essentially just for voice control.

I don't think the price will be a deal-killer, no - but to people that are unsure, no-one's going to be buying an Xbox One when they're essentially paying $100 more for something that does the exact same things as the PS4, especially when you consider it's actually less powerful.

supermarioooooo
supermarioooooo

still making statement.. this shit company fucked up. thats why they are talking often.. why cant we see sony's statement often? cuz they got consumer trust and doesnt need to talk to nonsense..

htthanh86
htthanh86

Imagine you have to download a game with its huge size (35 GB, for example God Of War III, TLoU, etc ... ) via ADSL connection. Should take a month to be done.

Imagine one day your internet is off and you can't do anything with your 24/7 internet-require console.

At3fD
At3fD

ps fanboys you should stop commenting like 12 year olds on every related xbox one article, at this point you guys are ridiculous, don't spend your whole day just waiting for xbox one news, it's kind of pathetic GET A LIFE.

sincerely EVERYONE !

jekyll
jekyll

Like it or not, this is the last generation to have physical media. I wasn't even 100% sure this generation would have physical media, and I wouldn't be shocked if later console versions come without physical media capability. If you've seen how much Best Buy has scaled back even their TV/movie disc sections in their stores, it's easy to see videogames will soon be off physical media forever. We don't buy CDs anymore, many stream over Netflix over getting DVD/Blu-ray, so games will be the same soon. It's just the march of the future.

corteztheg
corteztheg

why couldn't  they make xbone backwards-compatible. it would probably motivate more people to adopt the damn console. but instead they are gonna do the opposite because they have plans to sell gears of wars trilogy HD and 3D Collection to gullible customers.

OldKye
OldKye

Probably shouldn't have started this with "We're going to go back on our fixes it's just a mater of time." Microsoft.

Can you just wait tell you release the system before you run your mouth?  

Terrible marketing once shame on us, Terrible marketing twice shame on you, Terrible marketing 20-30 times Find a new job.....

Grimkillah
Grimkillah

This is why I will not buy Xbone, they still pushing for an all digital future, therefore I can't trust them at all with next gen console. Disc based game must be an option in any future gen console.

moesuir
moesuir

Maybe you guys should stop acting as if you are broke and stuck on welfare, and just buy BOTH consoles.

wowgrandpa
wowgrandpa

so this is like how Target stores want to be perceived as the snobbier pricier version of Walmart. 

gotcha.

but i'm pretty sure i'll just get my shampoo and toothpaste from Walmart. thanks.

Senor_Kami
Senor_Kami

There will never be a digital only future

I do think there is a future quickly coming where a ridiculous majority (like over 90%) of sales are digital and the only physical copies are exorbitantly priced collector's editions for those who won't feel good about themselves unless they let a corporation take them to the cleaners.

Mercgamer74
Mercgamer74

Digital only should never happen there should always be physical media options.

djdan200
djdan200

@Tixylixx Good for you, don't use it. Now what about the 100's of millions of people who watch TV/Movies and play videogames? 

djdan200
djdan200

@fattycoles Hey, what OS did you type this on? What type of computers do you use at home?

C8M
C8M

@fattycoles  Dude you still buy CD's? WTF?

Get a Spotify or Xbox Music account.

I still rent DVD occasionally, but I prefer to have my Windows/Xbox videos stored in the cloud and accessible on any Windows device.


"I have a vita"

Oh, so you're the guy.


"you can shove your product and burn in hell."

No need to get angry. Just ask your parents for it for Christmas if you can't afford it.

jmw1981
jmw1981

@fattycoles did you hear what you said? "DO YOU THINK PEOPLE ARE BUYING MUSIC AND MOVIE DIGITAL COPIES"

Have you seen how large the CD section is at Best Buy/Target? Well its shrunk every year I walk in one. Digital is right for the creators, not us. Its convenient for us if we actually embraced it. Whens the last time most of us popped a CD into our car stereo or even our PC?

Sure, it ain't right for everyone, but to act as though this is some new weird society-shifting technology is dead wrong.

djdan200
djdan200

@Beasley2K Oh, I didn't know you tried out both systems already and used the kinect. Great opinion

cvjr
cvjr

@Beasley2K Better online is debatable, but I have personal experiences with both. I have a PS3 and an XBox360, and in certain parts of the world, I could often not get as good an online game as on the Xbox360. Sometimes, no game at all. Nonetheless, it is debatable.

cvjr
cvjr

@supermarioooooo Silence doesn't necessarily equate to consumer trust. I don't trust overweight physicians to tell me about my diet and exercise habits, but do i tell them that? Hell no. I quietly go somewhere else.

djdan200
djdan200

@htthanh86 Pay the extra $10 for the better internet, or move to a civilized area. Either way, if you don't have good internet now days, you should probably not buy a next gen system..

eiji1
eiji1

@htthanh86 I pay the equivalent of $35 a month to my ISP. I download at (actual) 1.5 MB/s. 35 GB can be downloaded in 6 hours 40 minutes, if the connection is fully used up all the time. Maybe the infrastructure where you are isn't where it probably should be. In five years it'll probably be where it needs to be.

And as to the other thing, imagine one day your engine breaks down and you can't do anything with your car. It's one day, maybe 3 or 4. Go out, grab a drink, chat up a lady. There are worse things.

htthanh86
htthanh86

@jekyll It's NEVER a good thing that everything depend heavily on internet.

Karjah
Karjah

@jekyll at least internet providers will start competing for fast cheap connections. 

cashx002
cashx002

@corteztheg 

My sentiments exactly. Xbox always had this ability. Why would they take it away like that? To get you to keep your old console too, that's why. Greedy pieces of _ _ _ _ . 

StrangeQuark42
StrangeQuark42

@Grimkillah Seriously? Why can't people figure out that a digital future is a wonderful thing? People need to stop being so regressive. Digitizing everything makes everything more efficient. Everyone benefits as the marketplace gets more efficient. Take an econ class

Beasley2K
Beasley2K

@moesuir Are you really that stupid? A console is a luxury, not a necessity. There's little reason to have both, and a lot of people can't justify spending that much money on one console, so certainly won't buy two. What's the point in buying both if one of them's clearly better to you? There are a lot more important things to people than having every console, and to some, such as myself, there's not much point spending twice as much just so you can play a few extra games when I'll be spending 90% of my gaming time using my first and preferred choice of console - especially so when it does everything the other console can do.

If you genuinely want both, get both, but don't be so retarded to suggest that every should do so when not many people have an incentive to spend an extra $500 on something they won't use.

OldKye
OldKye

@moesuir Maybe you should buy us both ^.^ you seem to have cash to burn.

I'm mean how many of us are there really? few thousand? 

Stop acting like your broke and on welfare and buy us new consoles already!

corteztheg
corteztheg

@moesuir hey not everybody have awesome internet and money to waste on buying new hard drives every freaking time.

corteztheg
corteztheg

@Senor_Kami thats funny, i though microsoft was already taking you to the cleaners with digital, when was the last time you bought a digital game on xbox live instead of physical on amazon. don't fool yourself, digital only will never be based on low cost but market control and eradication of the second market.

PsychoChick966
PsychoChick966

@Mercgamer74 I completely and emphatically, agree.  I won't buy any system that makes my purchases be all digital.  Never.  

Suhn-Sol-Jashin
Suhn-Sol-Jashin

@djdan200 @Tixylixx I'll double tap the ps button on my dualshock 4 and switch between Netflix and Assassin's Creed 4 instantly. Did I mention that it looks better on the ps4 than the xbox one?

Such a dumb question.

htthanh86
htthanh86

@djdan200 @htthanh86 "Either way, if you don't have good internet now days, you should probably not buy a next gen system.." ... You're totally right in case of Xbox. I go with PS4 then.

Vodoo
Vodoo

@eiji1 @htthanh86 So you're the one causing all the lag in online games!!! At 1.5mb/s it sounds like your infrastructure isn't where it needs to be. I pay $30 to my ISP and I get 50MB/S down (actual is 53MB/S) and 8MB/S up. And that's not even the highest tier, which is 101MB/S. I use cable for my ISP, not fiber or anything like that, but from the sounds of it you're using a DSL service. Anything through the phone lines is terrible. You must live out in the sticks. I don't think they even offer DSL in my area anymore. It's either cable or Verizon Fios.

djdan200
djdan200

@htthanh86 @jekyll Um how about electricity? Or electronics? I am pretty sure at least 80% of currency worldwide is all electronic through the internet as well. I think we already all depend on it

ry_guy_46853
ry_guy_46853

@cashx002 @corteztheg to make it backwards compatible, they would have to tack on probably about another 200$ to the system. Do some research before you start bitching

fattycoles
fattycoles

How so, I buy game for price I want to pay I can sell to someone else for even a profit, I want to do what i want with my games, Why change something that isn't broken, the only thing that needs to happen is that places like GameStop need to be regulated and stop there massive profits and for the developers to get some back and for consumer to get a fair price back.

Beasley2K
Beasley2K

@StrangeQuark42 @Grimkillah Some people want physical media. Downloads take up harddrive space. It's not as safe storing your content digitally when you can have aphysical copy.

Stop acting like digital is the only option. It's an additional option and nothing more. It shouldn't be the only one too.There are plenty of arguments against an all-digital market, some of them based on people's opinions and preferences, and some based on what's intelligent.

I don't think having everything stored digitally is a great idea when there's a chance that everything could get lost. There needs to be a fallback.

GeminiEntity
GeminiEntity

@StrangeQuark42

Internet speeds need to become more "bang for your buck" and DRM needs to be worked out to suit both consumers and companies before digital only becomes a big yay for everything and everyone.


htthanh86
htthanh86

@djdan200 @htthanh86 You don't get it, do you? It's M$'s policy, so it's Xbox future. For Sony, I can purchase physical copy OR buy it on PSN. It must be optional choice, not the only choice, man.

djdan200
djdan200

@htthanh86 @djdan200 Another misinformed Sony fanboy.. Have you read any of the articles about PS4 game size? Killzone is 40 GB. You think that is all on a disk? No you download the entire game basically or you can't even play it. WELCOME TO THE FUTURE

eiji1
eiji1

@Vodoo Nah, I hardly play online. Also, different countries, different speeds, different prices. But I wonder, are you talking megabits or megabytes?

htthanh86
htthanh86

@djdan200 @htthanh86 @jekyll I mean why we have to make it so hard? With traditional way, just go out to game store, pick a physical copy of game you want, come back, turn on console put the disc in, then voila enjoy your game. Now with "future" way you have to wait for M$'s confirmation everytime you want to play your own games, wait hours for downloading things, can't share what you bought with your friends, HDD malfunction and you totally screw ... Which way you want?

fattycoles
fattycoles

In the reality of it people will be buying less games, I don't want to be directly dictated on what my games are worth, I'd be more selective and I'd imagine game sales we shrink, I don't want to be force to keep games and I won't commit to high price games, Why would you pay $60 for a full release digital game.

corteztheg
corteztheg

@Senor_Kami@PsychoChick966@Mercgamer74Hey did you ever wonder why the psp-go was phased out? like it or not people prefer having a physical collection not virtual libraries especially when they have to pay 29.99 pounds for it.