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

[Windows Central]

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

 

[fatpunkslim]

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!

 

[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 say 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.

 

[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.

 

[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.

 

[fjtorres5591]

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.

 

[Gabe Szabo]

If these paragraphs were directed at me, I don't think you got the point I was trying to make at all.

 

[fjtorres5591]

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.