This whole discussion is so pointless. I don't see why it has to be an either/or situation? Why does a digital library require a draconian DRM system?
How about, oh I don't know... if you purchase a game digitally it gets added to your digial library of games. You can access this library while you are online. If you want to play offline, just buy a disc and slap it in the system. Problem fixed, no? Everyone is happy. The people who don't mind playing online always can do so and get the benefits of an always present digital library and the people who want to be able to play offline can do so with discs.
And why, if digital purchases are so much better for the industry are they always more expensive than their disc-based counterparts? A new game on Steam is invariably €5 - €10 more expensive to buy directly through Steam rather than getting a physical copy in a store.
Steam has a DRM system and PC games that you buy at retail have had one-use keys for even longer than Steam has existed. Microsoft's policies were modeled after that idea but their messaging and some of the concepts (the "draconian" ones) were taking away too much from the end user.
It would be nice if both could work but it would likely kill one of the markets, I'm guessing the downloadable side. In your scenario, if a person who uses the console primarily offline wants to purchase a downloadable title s/he would then be prevented from playing it offline like all the other games s/he owns. Unless you allow purchased digital games to be played offline, in which case why would an online connection be required at all?
To a company like Microsoft the solution is one or the other. If you allow unhindered offline play, there is no way to restrict who is actually playing the game; this isn't a loss of user rights, by the way, one purchased copy of a game should, hypothetically, only be played by one person and/or his/her immediate family. It is, however, a lack of faith in consumers to not unduly hurt the profitability of the games industry (which some would argue has been shown to be a reasonable stance and that even companies, like Gamestop, have practices in place that exist to leech money away from developers and publishers). If you have online verification that has to extend to all physical and digital copies of the game - only digital would just hurt digital sales outright and the real battle is over physical copies anyway.
I don't know about the euro cost for digital games, but that isn't the case in the U.S. Maybe it's tax related? A digital game is usually the same price if not cheaper on Steam than a physical copy.
The end result in all this is that Microsoft did an amazingly poor job of making the case that it wanted to be (or even could be) a console version of Steam; and Sony took advantage of the situation to better themselves rather than hold the line with Microsoft and, probably, the majority of the games industry that convinced Microsoft to go this route in the first place.
tl:dr Microsoft screwed up on the small details, not the bigger picture (moving toward a digital future). But Sony filled in those details in a way Microsoft believed it simply could not fight against, so it changed to level the playing field for this console generation.
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