Exclusive Xbox console games will be the exception rather than the rule moving forward — inside the risky strategy that will define Xbox's next decade

Xbox's logo at Summer Game Fest 2024
Xbox enjoyed a wave of optimism at Summer Game Fest 2024, now replaced with nerves about its future plans — at least for some customers. (Image credit: Windows Central | Jez Corden)

2024 will be remembered as a pivotal year not only for Xbox, but the game industry at large.

With game industry growth stagnant at best and costs rising faster than ever, many of the alarm bells being rung years ago that AAA gaming was unsustainable have been playing out in slow motion over the last few years. Mass publisher layoffs, studio closures, and a decrease in venture capital investment in new gaming projects has led to vast disruption across the industry this year. Few are feeling that more than Xbox right now.

Xbox has had thousands of layoffs within its bulky Microsoft Gaming division, which counts Xbox studios, Bethesda, and Activision-Blizzard within its operation. Xbox has also had some huge content wins this year too, with Indiana Jones and the Great Circle delivering what might be the best "Xbox exclusive" the company has had in years, despite the discourse surrounding it. Because indeed, it isn't truly console exclusive, it's coming to PlayStation in a few months.

After The Game Awards this year, Microsoft's previously-confirmed exclusive The Outer Worlds 2 was revealed for PlayStation, which reveals the next phase of Microsoft's gaming content strategy code-named Latitude. With comments from Phil Spencer describing how there are no red lines for what games could come to PlayStation, it's time to accept that Xbox will no longer have "console exclusives" moving forward — everything will either be timed, with a few outliers remaining console exclusive for incidental reasons, like developer bandwidth and so on. Even Halo, Forza, and Gears of War, games commonly associated with the Xbox brand, are not off the table.

Why is this a big deal? Is it even a big deal? Why is Microsoft doing this in the first place? Without exclusives, where does that leave Xbox console hardware? Let's analyze.

The dilemma

The excitement from the initial Xbox Series X reveal "it eats monsters for breakfast" feels so far away in 2024. (Image credit: Microsoft)

Coming out of the pandemic, gaming engagement is largely flat, with playtime hours and spend down based on some analyses. Analytics firms like Newzoo and Circana both describe how industry growth has been knee capped by rising costs and a downturn in organic user acquisition. PlayStation alumni Shawn Layden recently laid some of the blame for that not at other gaming companies, but at social media sites like TikTok, Instagram, and YouTube, which compete for the attention of the new generation coming in.

Gen-Z is old news now (yes, you're old). It's Gen-Alpha that is coming up to the plate, and more than ever, youngers are more interested in watching videos about games than actually playing them. All markets hit their saturation point eventually, but the issue for the existing playfield is that costs have risen faster than growth, leading to a mathematical impasse which has seen PlayStation begin supporting PC via Steam and Epic Games, and Xbox supporting not only Steam but PlayStation itself.

The insta-gratification of short-form video content powered by algorithms that give you exactly what your brain at least thinks you want/need has become a central pass time for many, for better or worse. Since Xbox is on the lowest rung of the ladder compared to Nintendo and PlayStation, Xbox is feeling the pinch of the floodwaters first, which explains some of its recent decisions.

Growth has been modest in the game industry since the pandemic, although green shoots are appearing as we head into 2025. (Image credit: Circana)

Microsoft states that it is seeing record users on Xbox consoles, in direct, legally-binding comments to its shareholders. Microsoft could be sued by the U.S. SEC for misrepresenting its business, so there's no reason to think it's lying here. Indeed, things aren't as "doom and gloom" as the internet might have you think, particularly given AAA publishers are still eagerly building games for the Xbox ecosystem. If things were truly as dire as people suggest, we'd see swaths of major AAA games skipping the platform — that simply isn't the case (for now). And in fact, we've seen games that were previously PlayStation exclusive come to Xbox to find new revenue streams. Genshin Impact and Death Stranding being two recent examples. If there was no business opportunity on Xbox, we simply wouldn't be seeing this happening, and sources suggest to me that even more unannounced and previously PlayStation-exclusive (third party) games are slated for Xbox in 2025 as well.

But fans like Microsoft predict and react to a projected future. If Xbox isn't growing, then developers could one day abandon the platform in bigger numbers. And if developers abandon the platform, then you could see exciting games you want missing the platform. If people start feeling they can't rely on Xbox for most content, then why stay? If people leave, then why would developers stay? Death spiral, etc.

The bulk of Xbox's income today comes from Xbox console, whether it's game sales, microtransactions, or services like Xbox Game Pass. The dilemma revolves around growth, and staying ahead of rising costs.

The solution

Xbox and its OEM partners are working to improve Windows 11 for gaming. (Image credit: Rebecca Spear / Windows Central)

In order to find new sources of revenue and stay ahead of rising costs, Microsoft began putting its games onto PC as far back as Quantum Break's launch almost ten years ago. Despite being in third place, the strategy has served them well.

Microsoft has been incredibly adept at monetizing the Xbox business, despite repeated disasters and missteps. The Xbox One messaging nightmare came close to killing the brand, not to mention RROD back in the Xbox 360 days. The Xbox Series X|S has had to navigate Covid-19, and also an enormous chip shortage that prevented it from getting consoles out fast enough at the start of the generation. Despite this, Xbox sees record revenue and users, thanks to innovation in services, inorganic growth investments like Activision-Blizzard, and expanding to new platforms.

Microsoft's struggle right now is on messaging perhaps more than anything, as it positions its business for a new era while managing the expectations of its most passionate fans and customers, and the investors who turned Microsoft into a multi-trillion dollar market cap company. If I'm an investor today, I'm asking why Microsoft sank $71 billion into Call of Duty and Candy Crush, and not AI start-ups.

And indeed, therein lies a lot of the scrutiny right now. Xbox went from being a well-funded start up within Microsoft to being bigger than Windows itself. Investors are now actively auditing what Microsoft is doing with that massive cash injection it sent over to Activision-Blizzard. Imagine if Call of Duty Black Ops 6 had been a huge flop instead of a massive success story — particularly as Google, Facebook, and xAI rapidly catch up to OpenAI and Microsoft's own AI platforms. As an investor, I'd be questioning CEO Satya Nadella's logic, and they most likely are.

This graphic from AppEconomyInsights reveals how Microsoft's financials breakdown as it enters FY25. Xbox is now neck and neck with Windows, inflated by the purchase of Activision-Blizzard. Q2 FY25 should be revealing about how Xbox is doing within this new reality. (Image credit: appeconomyinsights.com)

As such, Xbox has to grow. Microsoft CEO Satya Nadella said to shareholders today that it wants to "redefine what it means" to be an Xbox fan, with a bigger emphasis on finding players where they are, rather than sinking millions, maybe billions of cash into increasingly expensive user acquisition efforts. People's libraries are digitally-locked to the platforms they are in. Microsoft figures at events like Summer Game Fest told me they're not seeing users switch between consoles much, despite their multi-platform plan.

The Outer Worlds 2 being announced for PlayStation was not a result of a game being delayed out of 2025 nor was it the result of Xbox or developer Obsidian needing a rapid cash injection. It was decided as a result of the "four Xbox games" previously slated to move to PlayStation having no material impact on active Xbox console users. Microsoft is taking this as a signal that people are happy where they are, and aren't willing to move platform on the basis of what the "other side" has access to.

Microsoft considers that the bulk of those younger Gen-Alpha and Gen-Z users I mentioned earlier are graduating from iPad and Nintendo Switch all the way to Windows PC, which more closely mimics the versatility and openness of a mobile device.

Microsoft is reacting to this trend early, by talking about putting Steam and Epic Games Store onto future Xbox consoles. It's reacting to this by investing a huge amount into improving Windows gaming performance, as well as its usability on devices like the ASUS ROG Ally and Lenovo Legion Go. Microsoft is also known to be building its own Xbox handheld. Sources tell us that Microsoft is also working on a set of in-game APIs and user interface features, called Project Rainway, which is some form of cross-platform Xbox guide menu. Microsoft has been inspired by the in-game Battle.net social features seen in Hearthstone, Diablo IV, and World of Warcraft, which lets you share and communicate cross-platform. This means that for games running on other platforms from Xbox, they will still have an Xbox flavor and in-game Xbox systems, maybe even cloud saves. Indiana Jones on Steam, for example, supports Xbox cloud saves. Diablo IV keeps your progression no matter what platform you're on, too. Microsoft wants to extend that to all of its games, and that's what Microsoft ultimately means with its marketing campaign "This is an Xbox" — every Xbox game itself will become an Xbox, if this Rainway project reaches fruition.

This strategy is, of course, fraught with risk.

The risks

Microsoft has worked tirelessly to improve the Xbox app on PC, with a focus on value via PC Game Pass. Developers still largely avoid it, without some kind of Game Pass deal, however. (Image credit: Windows Central | Jez Corden)

Microsoft is a data-driven, telemetry-obsessed company, and it sort of has to be. When shareholders are involved, there's always a weird disconnect between what shareholders want and what customers want. There's a desire for on-paper accountability, which leaves little room for gut instinct innovation or a customer-first culture.

This is why you often see things fall fast through the cracks at Microsoft. Skype was the world's number 1 consumer communication platform for a time, but corporate inertia saw it get utterly destroyed by rapid innovators like Zoom and Discord. When there are so many options out there, a company that can invest 100% of its profits back into customer-friendly initiatives can cut through and accelerate above legacy corporations that rest on their laurels, and leave accountability to Excel spreadsheets.

On paper, Xbox is cleverly getting ahead of trends over which they have no control. I worry that Microsoft is simply ceding ground based on faulty data, creating a self-fulfilling prophecy. But it doesn't matter either way. When you're a company as big as Microsoft, you have enough liquid cash to simply invest in the next big tech trend. During the pandemic service game boom, that was Xbox, and likely informed their decision to acquire Activision-Blizzard. Now, we're in the AI boom, where funds are bending over backwards to buy up pieces of AI start-ups. Microsoft even have a brief investment spree into the faddy "metaverse" which obviously went nowhere.

Microsoft is seeing significant growth on Xbox Cloud Gaming owing to its partnership with Samsung TVs, which have Xbox features built in. Others are catching up, though. (Image credit: Samsung)

With Xbox, the bulk of its investment is being spread towards areas where it is seeing growth. I'm told that Xbox Cloud Gaming, for example, is seeing a large run on growth lately, buoyed by the recent decision to expand the list of playable games to games you can actually buy, beyond Xbox Game Pass. PC gaming is also a huge growth area for Microsoft, which is why so much investment is hitting the Xbox PC gaming systems underlying Windows.

My concern, again, is that Microsoft is spreading themselves thin here. With Xbox Cloud Gaming, they're competing against NVIDIA GeForce Now, which is 100% all in on cloud as their only gaming platform, while Xbox can only commit so many resources. On PC, Microsoft is going head-to-head with Steam, which is 100% all in on PC, while Xbox can only invest so much. On console, PlayStation is 100% all in on cannibalizing Xbox's market share, while Xbox is fighting with one arm tied behind its back.

Splitting the effort against so many different fronts could risk potentially losing all of them, and seeing Xbox collapse in on itself to become another third-party publisher akin to EA or Tencent. For Xbox customers who are digitally locked specifically to Xbox hardware, the phrase "This is an Xbox" when referring to a Samsung smartphone rings utterly hollow and out of touch. If I can't play all of my games on all of these devices, they are certainly not Xbox, and they're certainly not the Xbox that Microsoft seems to be moving away from.

You will see the first third-party SteamOS handhelds at CES 2025 in Las Vegas, as Valve continues to target PlayStation and Xbox's traditional user base who favor console-like simplicity. (Image credit: Rebecca Spear / Windows Centarl)

These weaknesses are rife for exploitation by companies who would be happy to see Xbox fall apart. Many Xbox fans would sooner likely to go to PC, given that all of Xbox's games support cross-buy on PC anyway. But there are so many more who simply want a console that can sit under their TV, and is usable with a controller, and doesn't ask you to reach for a keyboard and mouse. For them, the only options will be PlayStation or Nintendo.

Windows itself is under threat from Valve's Steam Deck and SteamOS, which will debut its first third-party SteamOS hardware at CES 2025 in Las Vegas. These devices will be certified by Valve, and will give us the first examples of how much more optimized SteamOS with Proton is for gaming over Windows itself. Windows has come under scrutiny by gamers and consumers in general for its hardware restrictions in Windows 11, its privacy-mocking features like Windows Recall, and its insistence on putting ads within the Windows shell. If Valve's SteamOS could eventually evolve to be a more user-friendly version of Windows for multi-modal gaming, that potentially presents an existential threat to Microsoft too. Fixing that technically falls under both Microsoft Gaming and Windows, which historically don't seem to be particularly great working together.

But ... that's what competition is supposed to be for. Valve, PlayStation, Nintendo, Microsoft, NVIDIA, and whoever else are supposed to compete for our money and attention, leading to better products and better value. Competition gave us Steam sales and Xbox Game Pass. Competition keeps prices from spiraling out of control, and they help foster innovation. Despite all the competition Xbox is facing, there are a lot of opportunities, as well as reasons to be optimistic.

The reward

The Xbox fandom and customer base are split on Xbox's strategy. (Image credit: Windows Central)

I've said it before. When Valve starts putting Steam-based home consoles out that are at least comparable in power to a PS5 and Xbox Series X — filled with "exclusive" games from those companies — the whole multi-platform debate is going to seem a bit silly.

On paper, it would be great if no games were exclusive. If my PC truly were an "Xbox" as Microsoft claims it is, letting me play my entire Xbox library on my Lenovo Legion Go. I'm catching a flight tomorrow, and my options about to play are limited to Xbox Play Anywhere. I love Xbox Play Anywhere, it's just frustrating so few games, mostly from third-party, actually support it.

I believe Microsoft when they say this is where things are trending. The idea of my content being locked to one device is silly. The problem is, they've built a platform where 90% of my content is locked to one device. Xbox Cloud Gaming "bring your own games" will help, but it's really the native experience many or most will want here.

Redefining what an Xbox fan is isn't really something Microsoft or Satya Nadella can claim control over. You can't force someone to be a fan of something they don't like, nor understand. Microsoft hasn't done a good job of explaining their plans for delivering upon their "This is an Xbox" message. It feels more like a vision, than something that they can truly execute. There are so many constraints, so many competitors, so many moving parts — to get their entire legacy of content, and its legacy fanbase, and its third-party devs on board with supporting its vision for the Xbox PC store, Xbox Cloud Gaming, and future Xbox hardware seems utterly alien to me right now. There's almost zero association between games like World of Warcraft, Call of Duty, Candy Crush, and the "Xbox" brand. How can Microsoft claim to be pulling those people into the fold too when none of them have so much as an Xbox logo present?

But what if they pull it off?

What if all Xbox games had Xbox Play Anywhere? What if all Xbox games were cloud-capable on any device at any time? What if I could benefit from Xbox ecosystem features even when I was running an Xbox game from PlayStation, Steam OS, or Nintendo Switch 2? What if I didn't need to jump through weird hoops to play with friends on other platforms? What if my cloud saves were truly universal and platform-agnostic? What if indie devs supported the Xbox store on PC, and by extension console, as aggressively as they do Steam? Xbox's upcoming slate of games, regardless of platform, is stronger than it has ever been. What if the Xbox OS was extended onto my Windows PC, giving developers building games in the Xbox ecosystem a vastly bigger platform than Xbox could offer on its own hardware endpoints? What if Xbox console hardware could benefit by pure virtue of being adjacent to a more gaming optimized Windows?

I would love to see Xbox consoles find a future as part of a wider, broader, device-agnostic ecosystem. I'm not sure Microsoft has been able to make a compelling nor confident pitch for that so far, to customers or developers. It's evident in the fact Microsoft seemed to misunderstand how difficult it would be to build and deliver a mobile gaming store for Android. It's evident in the fact very few PC devs organically support Xbox on PC. It's evident in the fact many vocal Xbox fans don't feel confident in Xbox's future.

... But what if they pull it off?

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Jez Corden
Executive Editor

Jez Corden is the Executive Editor at Windows Central, focusing primarily on all things Xbox and gaming. Jez is known for breaking exclusive news and analysis as relates to the Microsoft ecosystem while being powered by tea. Follow on Twitter (X) and Threads, and listen to his XB2 Podcast, all about, you guessed it, Xbox!

  • fatpunkslim
    Windows Central said:
    Microsoft's strategy has Xbox's core fans upset about the future of console hardware. Today, we're going to analyze the strategy that will define Xbox over the next decade, and settle its future once and for all.

    Exclusive Xbox console games will be the exception rather than the rule moving forward — inside the risky strategy that will define Xbox's next decade : Read more
    @Jez Corden When Xbox talks about Xbox everywhere, they are not talking about PlayStation, but mainly about PC, cloud, mobile, and portable consoles. As you said, most of the investments made (cloud for owned games, PC application, cross-save on Steam, etc.) are directed towards these platforms, towards growing markets, not towards PlayStation consoles which are not growing.

    Concretely, a year ago, 2 small games and 2 old ones from 5 and 8 years ago were moved to other platforms, nothing major, and since then, nothing more! In fact, like you said, there have been more major PlayStation licenses moving to Xbox than the other way around! It's quite ironic! The example of Indiana Jones is very bad since the game was initially planned to be multiplatform before the acquisition and it is a Disney license.

    If I understood correctly what Matt Booty said, who wants Xbox players to have a privileged experience, it was even Xbox that insisted on making the game temporarily exclusive, which proves the importance of maintaining a level of exclusive games. The example of The Outer Worlds is also very bad because it simply confirms that 99% of multiplatform games remain multiplatform, nothing more. The fact that they considered making the game exclusive at the start just proves the case-by-case strategy, because even a multiplatform game can potentially become exclusive, as was the case with Hellblade 2. So it proves the importance of exclusive games, otherwise, they wouldn't even consider it.

    It's funny that with the same level of information, we can have different interpretations of the situation. In fact, you interpret things in your own way, without even taking the trouble to specify that the game was already multiplatform, which proves that you consciously or unconsciously omit certain information to fit what I would call an obsession.

    It's funny that you were already saying in 2023 that Microsoft was going to become a third-party publisher, did that happen? No! Is that the path they are taking? I don't think so either, and you don't seem to believe it anymore! It's interesting to see that your narrative has changed, from Xbox becoming a third-party publisher to Xbox exclusive games being an exception! One more effort and you will understand that it is actually case by case, as Phil Spencer and Matt Booty have been repeating for months, no more, no less, with a distribution between multiplatform games and exclusive games much more balanced than you think. I look forward to your next article in a year.

    You talk about the next decade, but at this rate, I really don't see that happening since 99% of games remain multiplatform and 99% of exclusive games remain exclusive. In reality, there have been more assumptions and rumors than facts! And that's what hurts the brand, not what Xbox actually does! And you are largely contributing to it!



    Let's talk about exclusive games! What is the purpose of an exclusive game? To create frustration to sell a product and/or a service!

    Does a temporarily exclusive game create frustration and encourage the sale of a product and/or a service? The frustration and therefore its impact on sales depend on the exclusivity period:

    3 months: little frustration, little effective
    6 months: quite frustrating, quite effective
    1 year: frustrating, effective
    2 years: very frustrating, very effective.I think that from 2 years, a temporary exclusivity has the same level of effectiveness (or very close) as a permanent exclusivity, and we can consider it equivalent. So when you say that there are no real exclusives, it's not that simple, it depends on the exclusivity period! A temporary exclusivity remains an exclusivity, with a level of effectiveness relative to the period.

    I am convinced that they also have this reflection at Xbox, otherwise, your assumptions would have come true a long time ago, but I am sure you will continue to repeat the same thing by looking for interpretations in facts that do not exist. Xbox knows very well that a certain level of exclusive games is necessary to maintain the attractiveness of its ecosystem, consoles, Game Pass, etc. Phil Spencer, Matt booty and even the last annula report confirm that !

    In fact, with your fears and caricatural assumptions, you have probably helped them become aware of it if it wasn't already the case!

    What sells consoles are the games, and that's what was missing at the launch of the Xbox Series S/X. That's what's responsible, not the so-called confusing communication about their strategy. It's not true; most players don't follow that, and at the console's launch, there weren't as many stories about Xbox's strategy.

    With a production capacity and a number of licenses 3 times greater than PlayStation, for the next generation, if Xbox manages its game lineup well for the release of their new consoles, I guarantee you that these games will be exclusive, with at least a significant period of exclusivity (see what I said above) and consequently the consoles will be attractive and will sell. It's the games that sell, and Xbox understands this very well. We can bet whenever you want that these games will not be multiplatform, at least not for a long time!

    Furthermore, Gamepass is console exclusive (pc, xbox, cloud), you'll never see gamepass on Paystation !

    However, where I agree with you is that Xbox could communicate about the exclusivity period, but even PlayStation doesn't do that. We don't know when Lego Horizon will arrive on Xbox, or Death Stranding 2, but it will happen!
    Reply
  • fjtorres5591
    Minor detail: OUTER WORLDS has never been XBOX exclusive.
    Seriously, the game wasn't even published by Microsoft but by PRIVATE DIVISION.
    To repeat: OUTER WORLDS, like DOOM, COD, ELDER SCROLLS, FALLOUT, MINECRAFT, and on and on, has always been multiplatform.
    And way back when MS bought ZENIMAX Spencer made it clear they were not interested in taking games away from anybody. They haven't. Not from XBOX and not from any other platform.

    Major detail: MS now own 100 distinct game development studios scattered around the planet. The majority of them have *always* been multiplatform, which means the existence of the studio and the paychecks of the staff depends upon those studios remaining multiplatform.

    That most directly applies to INDIANA JONES, a licensed property and a game that was well under development before MS took over ZENIMAX. At that point MS negotiated with Disney to release the game as a timed exclusive. And timed exclusivity has value, otherwise Sony wouldn't have paid for it for GHOSTWIRE and DEATHLOOP. So yes, INDIANA JONES will be coming to Playstation...months after XBOX gamers have finished it and moved on. And XBOX gamers get it during the holiday season and winter months, prime gaming months, and while the game is a hot topic of discussion. Make no mistake, MS is paying Disney for those 3-6 months.

    Finally, about the horde of studios MS now owns: even excluding the mobile studios and the support studios, that still leaves some 60-70 studios (plus second party studios and outside contractors) producing content. Even assuming they only produce so called AAA games averaging 5 years between releases, they can easily be releasing a dozen or more games a year by 2028-30. That's the next console generation. Does anybody want to seriously argue that the console market, across all platforms, can support that many releases along with the output of the rest of the industry?

    Console gaming is stagnant.
    Adding up all active consoles across the three platforms you get 200-250M console gamers. And that tally goes back to the 360 era. That is the total addressable market for consoles. In the age of $200M/5 year average development time games, where are the revenues coming from? Existing console owners are locked in to their existing platforms. XBOX has always had backwards compatibility and now even the japanese boxes have had to adopt it to seal off their installed bases. Nobody is abandoning hundreds if not thousands of dollars in their old games over a few exclusives on a different platform (even if the game genre is one they like).

    There is no growth in consoles. Not when the new games require more expensive hardware and making the hardware means competing with other industries for advanced semiconductors. Why do you think consoles haven't dropped in price this generation? Why is Sony's much needed mid-generation box costing $1000 and more in most market? Because that's the best they can do without ending up with a PS3 launch fiasco.

    Spencer said there is no growth down that road.
    Believe him.
    Growth (and studio survival) needs to take the games beyond the locked-in pond of console. MS has a head start of over five years on Sony, who still think windowing their PC releases is necessary, out of fear of retribution from their fans. (Really? What are they going to do? Buy XBOX? Just one more Ryan mistake.)
    Nintendo hasn't even started and all their efforts are buying them is a never ending war with PC based emulators.

    Reaching into the PC market is just a start.
    XBOX games on console, PC, and XCloud today have a potential market of a billion users. Expand XCloud TV presence beyond Samsung to other brands and you are looking at 3Billion potential customers.

    That is what Latitude is all about.
    Not about reaching a few million Sony locked-ins but about reaching billions with TVs and tablets and phones who can't afford or don't want a console.
    That is what EVERYTHING IS AN XBOX is about.

    About making sure the games sell enough to justify making them.

    And as Nadella said, redefining what it means to be an XBOX fan from a person willing and able to afford a $500 console to anybody who supports their games regardless of what they game on.

    It isn't about abandoning the console market, much as Sony and Nintendo would like it, so they can marginally grow their locked-in bases, but about monetizing Microsoft full game production capacity. And unlike Sony, MS is not about to cripple their gaming business to cater to a few entitled online chicken littles.

    Make no mistake, the best way to play XBOX games is and will continue to be on $2000 gaming PCs. (Look at INDIANA JONES if in doubt.) Next on the $500 Series X and $300 Series S. Cloud is lesser and MS is making sure it stays lesser. But it is good enough and way cheaper. That is classic consumer marketing: good enough, better, best.

    MS is not run by idiots or gamblers but by sharks.
    The consoles bring in billions in profits every year and they are not abandoning that locked-in market. They are just looking to supplement it by taking money from other platforms.

    Microsoft's secret motto remains: "What's mine is mine. what's yours is negotiable." That is the meaning of "embrace, extend, extinguish" as well as "DOS5 isn't done until Lotus won't run."

    Sharks like that you want on your side.
    Reply
  • Lurking_Lurker_Lurks
    There's a lot of discussion on the Xbox's direction with exclusivity, so I want to take a step back and talk about the console market and gaming industry on the whole. I think what no one wants to admit is that consoles screwed themselves very early on and we're now seeing the consequences come to fruition, which is scary for us primarily console gamers.

    For a moment let's use our imaginations and replace Sony with Apple. Now in this setup Apple just one day out of the blue swapped the iPhone with the PS_. Apple just announced that their new console, and the first one to ever sell at cost (as in not at a loss), surpassed 70 million sales after four years. They assure investors they are on track to hit 120 million users in 8 years, after which they'll do this all over again. The shareholders would lose their minds. In 8 years the best selling console sells less than an iPhone ships in its first year. The iPhone 16 had "slow" sales and it reported 37 sales in its first WEEK. I know what you're thinking: I'm comparing smartphones to consoles, that's not fair... but is it unfair? A quick search says it costs Apple in the ball park of $400 to $700 to make an iPhone these days. If Sony is now forcing themselves to sell Playstations at cost, that should be around the same cost to make a Playstation. And the first iPhone came out in 2007. That's really really recent. Even Xbox is older having launched in 2001. In a mere decade, Apple entered a market and completely changed perception of how people interact with the world in their daily lives. Guys 2007. That is so recent, and it's not like you actually "needed" a smartphone back then any more than you needed a console. Yet Apple has since made it the narrative that people do need iPhones.

    Now let's talk about consoles. The latest console brand is the Xbox and after over 20 years... it has peaked at a little over 80 million sales in 10ish years (it was discontinued in 2016, but of course the Xbox One dropped in 2013). Nintendo and Sony are arguably looking worse considering how old both brands are. Sony peaked with the PS2 at 160ish million sales and Nintendo is peaking now at similar numbers. Gamers and gaming sites keep focusing on "X console is doing better than Y console." but never stop to acknowledge that all of their sales are kinda... really terrible. And we really have to ask ourselves why? Why haven't consoles grown like at all?

    This is what I mean by that they screwed themselves. The console market took a long hard look and the mirror and said "what if we competed by hoarding games and having inconsistent platform support?" From the outside looking in why would you want to get into console gaming? You're locked into a platform for the games on that systems. Games didn't even historically carry over from future iterations in the same ecosystem (backwards compatibility has always been a toss up). Third party games just completely flip flopped between platforms. Platforms limited who you can play with as online multiplayer came about. Now we have the technology to have cross multiplayer between all platforms and even cross saves between all platforms, and yet that is still a toss up for no reason other than control and money. Why would anyone want to get into consoles when it's this much of a mess of a market. There is a very good reason why PC can report over a billion gamers and mobile billions of gamers and yet each console platform would be lucky to have 200 million gamers.

    Okay, so this is a problem for the console market, but what about the gaming industry? Well, I think we can safely say that consoles are meant to serve as the more accessible gateway for high end video games that aren't on mobile and would cost a fortune of a PC. Games that have these huge budgets and need sales. So there's a problem when consoles keep things this fragmented. Video game sales suffer as well and costs only continue to increase. So we're in this state where games are costing more to make and yet because the console market has utterly failed to take off with the general public, game sales haven't had the ability to increase as much. This is why third parties are rapidly abandoning any exclusivity. This is why everyone is putting so much into cloud. They see it as an opportunity to reinvent the wheel and this time make sure it actually turns.

    This obviously isn't a problem that solely affects third party publishers and developers. Going back to the Apple example, imagine if after reporting that they have less than 70 million customers to service on the PS5 after four years, and then they came out with the big guns and talked about the exclusives their teams are working on. You're an investor and just heard that the company you're investing in, has not only not failed to move even 100 million pieces of hardware globally, but has not spent who knows what amount of money on first party game development... and it can only possibly sell to those who already bought your hardware. That's just not good and it literally constantly gets worse as these margins get tighter and tighter. And we are seeing consequences there too. As Xbox fans complain about their first party games getting ported to PS, PS fans complain about no games period. The volume of first party releases this generation for PS5 just has not been there. In 2024 it's what... Astrobot and Concord? The latter of which was a complete failure and still serves of an example of Sony trying to find new ways to increase revenue. In this case they want live service money, and ultimately the live service push and increased prices just say the same thing. Sony does not forsee a significant amount of new gamers, and they're looking for new growth strategies under that realization.

    There's this whole back and forth on exclusives, and I just want to say I think they'll be gone in their entirety eventually. The video game industry is just realizing that they are never a good idea. Splintering the existing console market and making it hard for consoles to actually be accessible to non gamers and invite them in created this problem. There is no reason why home game console shouldn't have become like iPhone's for your living room. People convinced they need at least a console as their gaming and home entertainment device. I mean long before the Xbox One, consoles could watch DVDs and play groundbreaking games. Yet here we are.

    I do genuinely think Microsoft has the winning strategy and they have the platforms and technology and capital to pull it off. However, that's only and only if they can go all in on it. The Xbox App has recently improved more rapidly than it did in the past, but it's not enough. Mobile hasn't even gotten off the ground and cloud is still waiting on internet infrastructure globally to catch up. Despite fears, console probably continues to see the most consistent growth from Xbox. Microsoft has done a great job bringing more games to the platform than ever. More games than ever are on Xbox and launching same day on Xbox. For everything else, it isn't even a matter of Xbox stretching itself too thin. Microsoft very uniquely has more than enough capital to properly invest in every venture. They just don't. That's the problem. Microsoft not taking this seriously and not putting their best foot forward at this pivotal evolutionary moment in gaming. They could honestly reignite the market and reshape the industry if they can pull off proper execution of this strategy. I could in fact see consoles really take off for the first time if it was made clear that the walls have come down. If it was just clear that when you buy an Xbox series S at $300 you're not locking yourself into a contract where it's a toss up if your games even make it to the next Xbox console. If it was just clear that Xbox has a shared library across PC and Console with many cloud enabled games you can pick up on your phone (and some really high end ones without a controller even). If Xbox enabled cloud and play anywhere for more games and got off their butts and slapped their logo on all the new first party brands/games and properly unified their gaming initiative. Xbox should be the first ubiquitous gaming ecosystem and there's a lot of ways that can lead to more console sales.

    Bottom line, I don't think this is a conversation about just Xbox. This is a conversation about gaming, and at a time where gaming is going through it. Xbox's strategy represents an evolution and one I think is long overdue and much needed. I hate Apple btw so they make for a good comparison, but once again using them: even Apple puts their software products on other hardware. Heck, we're now even getting better cooperation between windows and iOS natively just on the basic windows experience. Again consoles are far older and yet stubbornly remain more fragmented and I think it's clear that that choice hasn't done the industry any favors.
    Reply
  • Gabe Szabo
    Loved the article, loved all the comments. Very good conversation all around.

    Jez, I think you should write an article about what you would have Xbox do if you were in charge. What's the dream scenario? I think if you outline it, you'll see that a good way to achieve that is through the steps Xbox are currently taking.

    I think their end goal is to have their cake and eat it too, with having a dedicated console for the core (you called us "legacy", lol) audience, and having a reach beyond that to essentially all devices they can touch. Run your Epic Store games on Xbox! Run your Xbox games on Steam! Buy your game on Xbox, play it on your PC, PlayStation, cloud or on your phone! Buy once, play anywhere! Cross-progression, cross-play, cross-entitlement! Everything... is an Xbox?

    I think we're in the "change is scary" phase right now. And you and many of us know full well how Satya and company could burn us just as hard with Xbox as they did with Windows Phone... But take a look at the countdown sale with thousands of games available on the Xbox Store. Doesn't look like a sinking ship. Sure, we console heatens are being largely ignored, but if everything doesn't get worse, it'll be as great as it ever was.
    Reply
  • fjtorres5591
    Gabe Szabo said:
    And you and many of us know full well how Satya and company could burn us just as hard with Xbox as they did with Windows Phone...
    How much money was Windows Phone making for MS?
    Did it ever get anywhere near the $15B XBOX made pre-ABK to say nothing of the $21B it made in FY24? Or the $30B it could be making by 2030?

    All the debate over the "demise" of the consoles completely ignores the role it plays in anchoring DirectX gaming platform and, more critically, xcloud. XBOX console hardware is of strategic importance to MS, second only to the Intel PC architecture as a whole. WinPhone never got that important before it was shut down. People keep comparing it to Sony and Nintendo consoles that are older and more deeply entrenched in Asia and europe (where regulators publicly talked about concerns that the ABK deal might hurt our PlayStation".) and that is before factoring in Sony's anticompetitive spending.

    The playing field has never been level. That XBOX manages to secure even a 50-80M strong locked-in base is a major triumph that is boosting Game Pass, PC sales and cloud. And bringing in something like $6B in net profit in FY2023 (pre ABK). MS abandoning that kind of revenue stream (don't forget that 2/3 of Game Pass subscribers were on console before Gold became Core) is not and never has been in the cards.

    All the handwringing and hyperventilating is unnecessary.
    Just remember that MS gaming brings in as much revenue as Windows and get over it.
    Reply
  • Gabe Szabo
    fjtorres5591 said:

    If these paragraphs were directed at me, I don't think you got the point I was trying to make at all.
    Reply
  • fjtorres5591
    Gabe Szabo said:
    If these paragraphs were directed at me, I don't think you got the point I was trying to make at all.
    Not at all.
    Just pointing out that that there is no reason to be apprehensive.
    XBOX is actually ahead of the curve.

    As I pointed out earlier, they have correctly identified the challenges of the gaming industry and have positioned themselves to thrive long term. Like a skeet shooter they are aiming where the market will be when their gaming factory reaches peak production instead of where it is now or, as the gaming media wants, where it was in decades past.

    The past is no indicator of the future for gaming.
    Reply
  • Papictu
    I don't know where Xbox will be in the next decade, but the situation is a disaster. In my country (Spain) Xbox sales are at rock bottom, these last weeks the Spectrum re-release has sold more units than Xbox Series, it's really devastating.

    I don't know how the new hardware is going to be, but at this rate nobody is going to trust it, the management of Series X and S has never been particularly brilliant, but since the beginning of the year the feeling of abandonment is absolute. In the same way that nobody can trust Microsoft smarphones anymore after all the incompetence seen with Windows Phone, the Xbox brand is going to be mortally cursed forever.
    Reply
  • fjtorres5591
    Papictu said:
    I don't know where Xbox will be in the next decade, but the situation is a disaster. In my country (Spain) Xbox sales are at rock bottom,
    And how is that Microsoft's fault?

    Are they available for sale? Is the price excessive?
    Is the XBOX NETWORK available?
    Are the games localized to Spanish?
    Is Game Pass available?

    What more can they do? Give them away? Drop horse heads on gamers beds?

    You can lead the horse to water but you can't force it to drink.
    Reply
  • Papictu
    fjtorres5591 said:
    And how is that Microsoft's fault?

    Are they available for sale? Is the price excessive?
    Is the XBOX NETWORK available?
    Are the games localized to Spanish?
    Is Game Pass available?

    What more can they do? Give them away? Drop horse heads on gamers beds?

    You can lead the horse to water but you can't force it to drink.
    The distribution in Spain is very limited, there is little presence of Xbox in stores, very few consoles and no advertising, here the Xbox marketing does not exist, many people no longer remember that Xbox exists.

    But what is really missing are games!

    There are no games to justify the trust in the platform, there were with Xbox 360, with Xbox Series no, you can lead the horses to the water, but the river is dry!

    Right now Gamepass is the only card left to convince people to stay on Xbox, and obviously it is far from be enough.
    Reply