After listening to the Xbox Podcast yesterday, the company revealed where it stands brings four older titles to non-Xbox consolesa question popped into my mind: Why does Microsoft, a software and services company, need a console business?
When was the same question asked The Rock announced the original Xbox console in 2001, but the industry has changed a lot in 23 years and it’s worth asking again. After initially struggling to make an impact with the Xbox, Microsoft established itself as the top player with the Xbox 360 before settling into second place with the Xbox One and now a distant third with the Xbox Series of consoles.
As much as the industry has changed, no company has changed as much as Microsoft. It is now a mega game publisher with over 30 in-house studios. Many of these development teams are world-renowned with a rich, multi-platform history. It is also the operator of Game Pass, one of the world’s largest game subscription services. Microsoft’s plan is clear to all: Sell the console and grow a subscription service filled with games produced by in-house studios.
There’s just one problem: it doesn’t have an audience.
The pandemic years saw the rapid growth of Game Pass, from 10 million subscribers in April 2020 to 25 million in January 2022. Since then, a total of 9 million subscribers have been added, and now the total number is 34 million. The caveat to this statistic is Microsoft’s rebranding of the Xbox Live Gold service 11.7 million subscribers in 2022, to Game Pass Core. Company he said The Verge and later confirmed to Engadget that Core subscribers were included at 34 million, indicating that the total number of Xbox subscribers is stable through 2022, although the mix of Ultimate and Core subscribers may be more favorable.
Any thoughts that Game Pass could emulate Netflix’s decade-long growth are long gone, but there’s an important difference between the two services: Netflix isn’t trying to sell its customers a $400 box to watch Netflix.
Microsoft struggles with the duality of its gaming strategy: A subscription service requires a constant stream of content to feel worthwhile, but a console requires “system vendors” to entice people to buy it over competition. These are very different things, with very different budgets and timelines. Game Pass, as attractive as it is, is not a system vendor 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 are laser-focused on exclusive experiences for their customers, which both see as key to console sales. Microsoft once again found its hardware outsold by Sony 2:1, and the Switch likely tied the Xbox One and Xbox Series consoles. Sony is growing Understanding the power of the PC marketand Nintendo still retaining at least a few cash-generating mobile games, there’s little chance of either company changing their overall console strategy.
Microsoft’s promise to bring four untitled titles to “other consoles” is intriguing. I subscribed to Game Pass, but I’m not sure if I paid $30 for it Hi-Fi Rush or $40 Grounded, as much as I enjoy these games. According to the way Xbox boss Phil Spencer described the company’s cross-platform quartet, these games Penitentiary and Sea of Thievesthe topic of this experiment is:
“We looked at games that are over a year old… A few of the games are community-driven games, new games, first iterations of franchises that have reached their full potential, say on Xbox and PC… Two other games are smaller games that , they were never intended to be built as platform exclusives and all the fanfare surrounding it, but games that our teams really want to go for, regardless of size, we love to support creative endeavors in our studios. .”
Porting these four titles to other platforms won’t do much to change Microsoft’s fortunes. Yes, I’m glad more people are getting a chance to play Hi-Fi Rush and Penitentiary, and I’m sure Microsoft will make some money from Switch and PlayStation owners. But from Microsoft’s perspective, why give your potential audience four less reasons to buy an Xbox?
Cloud streaming and the ability to turn any screen into an Xbox is clearly a long-term plan for Microsoft. There’s been some progress in getting its app on more platforms, but few TVs or streaming boxes support Microsoft’s Game Pass for cloud streaming, and Xbox Cloud still isn’t close enough to native play to be a viable option for many games. More expensive options like GeForce Now show some promise, but it’s clear that cloud gaming won’t be the mainstream gaming platform for the masses for many years.
What is Microsoft doing in the meantime? 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’s no convenient way to play Xbox games for PlayStation or Switch players who don’t have a gaming PC. It’s a lot like the Xbox One generation, except Microsoft now owns about $76 billion more game studios. It is easy to understand in this view rumors of high-end Xbox games being released on other consoles after a short exclusivity window.
The economics of making big games for small audiences are difficult. 2024 will be an even better year for Microsoft with first-party titles Hellblade II, Indiana Jones and the Great Circle and Sure on the way. But even if combined, it seems unlikely that these titles will significantly boost Xbox sales or Game Pass subscriptions. Very few gamers are willing to commit to a second console, let alone a third.
There is no easy path to success as a third tier player in the console market. Releasing AAA titles on PlayStation would massively boost sales of Microsoft games, but it could also take away the point of owning an Xbox. Microsoft could probably afford to go multi-platform while still maintaining its console business if it could keep a few true AAA franchises, but despite spending $69 billion on Activision Blizzard, it’s given newfound system vendor Call of Duty exclusives. agreed not to. Xbox by 2034. In 2024, Halo and Forza are not enough.
So maybe it’s time for Microsoft to stop making consoles and just focus on being the biggest company in gaming. If Phil Spencer hadn’t confirmed that future hardware is on the way, I’d almost suggest that’s the plan. It’s obviously not a good idea to give up on this console generation, but it’s definitely a good idea to start planning a graceful exit from the hardware by developing for competing platforms.
If Microsoft believes in the transition to cloud gaming, it shouldn’t be planning to release a next-gen console. Why do you keep losing the console war that you believe is about to end? Stepping back from competing with Sony and focusing on making the best games for the biggest audience will put the Xbox division in the strongest position to take advantage of the post-console future. Publishers like Ubisoft and EA already sell subscriptions on the PlayStation store, and Microsoft might as well – a subscription to every Call of Duty and Bethesda game will probably go down well with PlayStation gamers.
While Microsoft expects cloud gaming to be affordable for billions of active players worldwide, the best place for its games and Game Pass may be PlayStation, Switch and PC.
Update, February 16, 12:30 p.m. ET: This story has been updated twice since publication. The first update added the detail that Game Pass Core subscribers were included in Xbox’s 34 million figure, and a later update included Microsoft’s confirmation of that detail.
Jessica Conditt contributed to this report.
