After listening to yesterday's Xbox podcast, where the company announced that it bringing four older titles to non-Xbox consolesa question came to my mind: why does Microsoft, a software and services company, need a console business?
The same question was asked when The Rock announced the original Xbox console in 2001, but the industry has changed a lot in 23 years, and it's worth asking the question again. Microsoft, after initially struggling to establish itself with the Xbox, firmly established itself as a leading player with the Xbox 360, before settling for second place with the Xbox One and finding itself currently a distant third with the Xbox Series consoles.
Although the industry has changed, no company has changed as much as Microsoft. Today it is a mega-game publisher, with more than 30 internal studios. Many of these development teams are world-renowned and have a rich, cross-platform history. It is also the operator of one of the world's largest game subscription services, Game Pass. Microsoft's plan is clear for all to see: sell a console and sell a subscription service filled with games produced at cost by in-house studios.
There's just one problem: he doesn't have the audience.
The pandemic years saw rapid growth in Game Pass, which grew from 10 million subscribers in April 2020 to 25 million in January 2022. Since then, it has only added 9 million subscribers, with a total current 34 million. The idea that Game Pass could mimic Netflix's decade of growth is long gone, but there's one crucial difference between the two services: Netflix isn't trying to sell its customers $400 boxes for watching Netflix.
Microsoft struggles with the duality of its gaming strategy: a subscription service requires constant renewal of content to be worthwhile, but a console requires “system salespeople” who entice people to buy it over to competition. They are very different things, with very different budgets and deadlines. Game Pass, as attractive as it is, isn't a system seller in and of itself.
While Microsoft has balanced its dual goals of Game Pass growth and console sales, its competitors have stolen its audience. Nintendo and Sony focus on exclusive experiences for their customers, which they both see as key to console sales. Microsoft once again found its hardware being outsold 2:1 by Sony, and the Switch likely outsold the Xbox One and Xbox Series consoles combined. While Sony is increasingly understand the power of the PC marketand Nintendo still maintains at least a few of its lucrative mobile games, there's little chance the two companies' overall console strategy will change.
Microsoft's commitment to bringing four unnamed titles to “other consoles” is therefore intriguing. I subscribe to Game Pass, but I'm not sure I would have paid $30 for Rush to Hi-Fi or $40 for Based, no matter how much I enjoy either game. Based on the way Xbox boss Phil Spencer described the company's cross-platform quartet, it seems reasonable that these games, as well as Penment And Sea of Thievesare the subject of this experiment:
“We looked at games that are over a year old… A few of these games are community games, new games, sort of early iterations of a franchise that have reached their full potential, say, on Xbox and PC… Two of them the other games are smaller games that were never really intended to be built as a sort of platform exclusive and all the fanfare that goes around that, but games that our teams really wanted to build and that we love supporting the creative efforts of our studios, regardless of their size. .”
Porting these four titles to other platforms won't do much to change Microsoft's fortunes. Yes, I'm glad more people have the chance to play Rush to Hi-Fi And Penment, and I'm sure Microsoft will make money from Switch and PlayStation owners. But from Microsoft's perspective, why give your potential audience four fewer reasons to buy an Xbox?
Cloud streaming and the ability to turn any screen into an Xbox is clearly Microsoft's long-term plan. Progress has been made to bring its app to more platforms, but few TVs or streaming boxes support Microsoft's Game Pass app for cloud streaming, and Xbox Cloud still isn't close enough to local play to be a viable option for many games. More expensive options like GeForce Now are promising, but it's clear that cloud gaming won't be a viable mainstream gaming platform for many years.
In the meantime, what is Microsoft doing? We're probably nearing the midpoint of this console generation, and its current systems have a relatively small audience. Game Pass subscriptions are slowing down and there is no viable way for PlayStation or Switch players who don't own a gaming PC to play Xbox games. This is a lot like the Xbox One generation, except Microsoft now owns about $76 billion in additional game studios. In this landscape it is easy to understand rumors of top Xbox games coming to other consoles after a brief window of exclusivity.
The economics of creating big games for a small audience are difficult. 2024 is shaping up to be a better year for Microsoft, with first-party titles like Infernal Blade II, Indiana Jones and the Great Circle And Declared on my way. But even combined, it seems unlikely that these titles will significantly increase Xbox sales or Game Pass subscriptions. Few gamers are ready to commit to a second console, let alone a third.
As a third-tier player in the console market, there really is no easy path to success. Releasing AAA titles on PlayStation would massively increase sales of Microsoft games, but it could also erase the point of owning an Xbox. Microsoft could probably afford to go multi-platform and still maintain a console business if it had true AAA franchises to hold on to, but despite spending $69 billion on Activision Blizzard, it agreed not to entrust its new seller to systems, Call of Duty, to an exclusivity. Xbox until 2034. Halo and Forza won't be enough in 2024.
So…maybe it's time for Microsoft to stop making consoles and just focus on becoming the biggest gaming company. I'd almost say that was the plan, if Phil Spencer hadn't confirmed that future material was on the way. It's obviously not viable to abandon this generation of consoles, but it is definitely viable to start planning a soft release of the hardware by developing for competing platforms.
If Microsoft believes in the transition to cloud gaming, it should not consider releasing a new generation console. Why keep losing a console war that you think is about to end? Moving away from its competition with Sony and focusing on creating the best games for the biggest audiences would put the Xbox division in the strongest position to capitalize on the post-console future. Publishers like Ubisoft and EA already sell subscriptions on the PlayStation Store, and Microsoft could do it too: a subscription with every Call of Duty and Bethesda game would probably suit PlayStation players.
While Microsoft waits for cloud gaming to become viable for the billions of active gamers around the world, the best place for its games, and Game Pass, could be PlayStation, Switch and PC.
Jessica Conditt contributed to this report.