OPINION: This week's big Xbox drama showcases how little people trust Nadella's Microsoft — a legacy forged in the death of Windows Phone

[TheFerrango]

Again, as I've stated before for many MS changes we'll be fine until the critical mass of players will be on Xbox/maybe PC.
Microsoft's modus operandi in this case works in stages, first we'll see them focusing more on the competing platform (tHaT's wHeRe tHe uSeRs aRe!!1!), then ignoring support for the native MS platform (say, new games will be available as stream only via GP even on Xbox), and only after that they will axe the physical console because it was no longer profitable.

 

[jlzimmerman]

This mindset is embarassing. Nothing is going to happen to your Xbox games. You will still play Xbox games now you're just getting the choice where to play it on.

Call it whatever you want. Patterns don't lie. Nobody is going to buy an Xbox when they can play Xbox AND PlayStation games on a PlayStation. Sony will increase exclusives to drive the wedge deeper. Xbox will turn to a service and then sold off, leaving one major console and a toy console. Competition is good for the consumer and anyone who cares about choice should want Xbox to stay in the game.

 

[TBBudak]

Again, as I've stated before for many MS changes we'll be fine until the critical mass of players will be on Xbox/maybe PC.
Microsoft's modus operandi in this case works in stages, first we'll see them focusing more on the competing platform (tHaT's wHeRe tHe uSeRs aRe!!1!), then ignoring support for the native MS platform (say, new games will be available as stream only via GP even on Xbox), and only after that they will axe the physical console because it was no longer profitable.

Physical co

Call it whatever you want. Patterns don't lie. Nobody is going to buy an Xbox when they can play Xbox AND PlayStation games on a PlayStation. Sony will increase exclusives to drive the wedge deeper. Xbox will turn to a service and then sold off, leaving one major console and a toy console. Competition is good for the consumer and anyone who cares about choice should want Xbox to stay in the game.

People aren't buying Xbox' anyway LOL. And the people that do have an Xbox aren't buying Xbox games. There is no losing in their new strategy. And i completely disagree about what you think Sony is going to do when there isn't competition. Xbox hasn't competed with PS since 2014.

 

[ShinyProton]

Well written article, and it echoes what I've said for years. Microsoft's problem isn't that it can't innovate, deliver on a vision or create great products, it's that when the going gets a little rough, Microsoft gives up and slinks away.

They key difference here between Apple and Microsoft is market timing and involvement.

Microsoft never understood timing and likely will never. For involvement, we all know their motus operandi - "appears not to be working then kill".

Apple, to the contrary, releases stuff when they think timing is good. And if it does not seem to stick right away, they continue to invest and make it better.

The Vision Pro is an excellent proof. Apple gets the all the credits for this fantastic innovation - that Microsoft released five years ago. Will it become a profitable market? No one knows for sure yet.
Meanwhile, Apple, instead of killing it, will release a Vision (non-Pro) in 18 to 24 months at a significantly more affordable price. And this is when it will all make sense. It's also when commenters will remind people that Microsoft exited this market too early - as usual.

 

[TBBudak]

They key difference here between Apple and Microsoft is market timing and involvement.

Microsoft never understood timing and likely will never. For involvement, we all know their motus operandi - "appears not to be working then kill".

Apple, to the contrary, releases stuff when they think timing is good. And if it does not seem to stick right away, they continue to invest and make it better.

The Vision Pro is an excellent proof. Apple gets the all the credits for this fantastic innovation - that Microsoft released five years ago. Will it become a profitable market? No one knows for sure yet.
Meanwhile, Apple, instead of killing it, will release a Vision (non-Pro) in 18 to 24 months at a significantly more affordable price. And this is when it will all make sense. It's also when commenters will remind people that Microsoft exited this market too early - as usual.

They key difference here between Apple and Microsoft is market timing and involvement.

Microsoft never understood timing and likely will never. For involvement, we all know their motus operandi - "appears not to be working then kill".

Apple, to the contrary, releases stuff when they think timing is good. And if it does not seem to stick right away, they continue to invest and make it better.

The Vision Pro is an excellent proof. Apple gets the all the credits for this fantastic innovation - that Microsoft released five years ago. Will it become a profitable market? No one knows for sure yet.
Meanwhile, Apple, instead of killing it, will release a Vision (non-Pro) in 18 to 24 months at a significantly more affordable price. And this is when it will all make sense. It's also when commenters will remind people that Microsoft exited this market too early - as usual.

I agree what you said about Apple. But it's important to note that the reason why Microsoft abandons hardware faster than Apple is because Microsoft is a software company. It's why their profits are much larger than Apple.

The Hololens may be dead, but guess what, Office 365 is available on Apple Vision Pro, and it's actually one of the most important parts about it. Their services are still being used on other platforms that's why they "give up" easier on hardware than Apple.

 

[Zachary Boddy]

Amazing, thoughtfully written article, Jez.

I personally believe that Xbox as a brand, ecosystem, and platform is here to stay. However, it's undeniable that the Xbox community is drowning in uncertainty at the moment, entirely driven by Microsoft's infamously poor communication. Xbox leadership has been slow to respond to rumors, and that's only doing more damage.

If Microsoft intends to bring some of its games multiplatform in the search for larger audiences and more profit, it needs to deliberately and carefully outline its intentions to do so (what games can go multiplatform, which won't, how will this affect Xbox consoles, how will this affect Xbox Game Pass, etc.). Players are rightfully concerned given Microsoft's history that years of investment into the Xbox platform is at risk because Microsoft lost the console war (even though the Xbox division is still profitable in third place).

I hope the meeting next week sheds all the light on the situation. Unfortunately, it seems Xbox is committed to making us wait until then.

EDIT: As a side note, I love seeing this level of activity in our comments section.

 

[GraniteStateColin]

Couldn't agree more, Jez. It echoes what a lot of people have been saying for years, back to when there was a comment section and Rubino would get into flame wars arguing the opposite (using the now seemingly soon to be moribund Surface line as the proof).

I gave up on MS hardware several years ago because I stopped trusting the company. It seems more and more people are doing so. As a consumer, the company has become a massive and untrustworthy disappointment. But the growing truth is that every company cares more about their shareholders than their customers... some are just better at hiding it than others.

I think you and I agree on the folly of MS' lack of perseverance with its consumer-facing hardware, but that theme "every company cares more about their shareholders than their customers" reflects a massive misunderstanding of how companies make decisions. It concerns me that anyone would think that way.

EVERY company cares about its sources of revenue (sales). Shareholders ONLY care about a company that can believably forecast short and long term growth in revenue as a key component to profit growth (cutting costs can also increase profit, but cost cutting is finite, revenue growth is unlimited). Revenue for a company like MS comes from many sources, but all of them eventually trace to customers who pay MS. So to say that a company only cares about its shareholders also REQUIRES it to care about its customers, albeit indirectly as measured by sales.

There is a huge folly among many people that seeking profit is somehow a negative. It's absolutely not. Seeking profit is what motivates companies to innovate in ways that either reduce wasteful costs or develop new products or services that customers will want to spend money to acquire, whether that's new medications, methods of surgery, forms of entertainment (including video games), transportation, or experiences (like space tourism and all the innovations that go along with it). Seeking profit is what motivates companies like Apple to provide great service to its customers. Seeking profit is also why MS created the Xbox in the first place.

 

[GraniteStateColin]

Jez, great article. I think I agree with 100% of what you wrote here.

Having said that, and while personally think going cross-platform without waiting to see how the exclusives launching in 2024 affects customer attitudes toward Xbox and MS would be a strategic mistake, if MS does start selling cross-platform, I think it can be done in a way that boosts Xbox.

1. Timed exclusives, if set for a long time period, minimum of a year, 2-3 years being better, could open PS players up to franchises they may not otherwise experience. This becomes especially important in an era of franchises and ecosystem lock-in, where players lose any reason to switch to another console. Exposure to franchises outside their traditional ecosystem can steer customers to the platform that provide earlier access. In fact, that maybe the only good way to break through that lock-in.

This has no short-term impact, but if planning for multiple generations of console success, this could be a good strategy even for the Xbox console.

2. MS and Xbox gain goodwill for being more open than Sony with respect to exclusive releases. This goodwill has some value. It may not be large among customers directly, but in the media, I think this helps make MS the "good guy" in the space (or at least harder to paint them as the bad guy). If it can be done in a way that doesn't hurt the business otherwise (see #1 above), then this added media benefit might make a difference over time.

3. As a partial alternative, if they are committed to gaming over the Xbox hardware, they could announce that they're making all of their games available across all major platforms via Game Pass. Make a big public statement that they are ending exclusives, provided, of course, that hardware makers and app stores allow their games via Game Pass. This would put some pressure (not sure how much, maybe not much at all) on Sony, Nintendo, Apple, and Google to allow Game Pass on their respective consoles and app stores.

 

[GraniteStateColin]

A baffling article, with baffling replies (only 3 but still) here in the comments.

"it's MS fault a bunch of us got whipped into a fury of mass hysteria online over what amounts to basically nothing, magnified by society-failing social media, and MS didn't come right out to claim they are not going 3rd party just a few months after closing the deal to own Call of Duty and Diablo and Overwatch!"

It's almost like you SHOULD wait for next week, and perhaps also come up with sky-not-falling possibilites as to why they said basically nothing, and why next week. Nintendo is doing something next week. That's interesting.

Nah, never mind that, let's get toxic on the internet and then blame the large trillion-dollar corporation for why we act like fanboyistic babies. Even if you are correct and Halo is going to PS5 - the stress and all that over a week is for what? Who is getting anything out of that, other than twitteroids and failed website writers who got TONS of juice out of the Next Shocking Story Click Here to Find Out!

BTW - Windows Phone, by nearly all accounts, should have been killed off sooner - anyone's possible actual regret is not an admission they should have stayed the course. And the Hololens stuff is an entirely different beast altogether, and quite frankly, that stupid iWhatever that Apple just launched for over 3 grand proves that, actually. No one would bother caring about that if the same exact thing was made by any other company. If it really is the start of something, well too bad, its late for even that, AR and VR are already things long before Apple chose to show up and this is not an iPod moment.

Anyway - your claimed lack of trust, or your willingness to automatically believe all or most of the 3rd party "rumors" has almost nothing to do with Nadella or Spencer. That is, again, if any of this is even real - I mean, I too, I guess, could pretend to care about fake news if it meant it kept my paycheck going.

Companies have an obligation to maximize their profitability over time. The primary way companies do that is via growth. When they alienate their customer base, it makes it difficult for them to do this. Obviously, MS is managing just fine for now, but Jez' reaction reflects the reactions of millions of MS former and current customers.

Market trust lags actions by a substantial amount. It is possible that MS is yet to feel the full pain for the trust it has squandered. Yes, in the near term, they cut some costs and increased short-term profitability, but they may have also created an environment where they effectively can't introduce a new product, because no one trusts them not to kill it, so no one is willing to risk being an early adopter, thus guaranteeing every new product launch fails (or is incredibly costly to win back trust).

A tech company that can't introduce new products may be in long-term trouble.

It is also possible that MS has made the calculation that it doesn't want to make products, just provide services to businesses. IT teams at many companies still love MS (there really is no one else who offers the wonderful suite of business services and applications that MS does). But that seems unlikely because that would mean carving off many billions of dollars in annual consumer revenue (e.g., I'm writing this on a Windows PC in my home, OK home office, but my wife and each of my kids have PC's too). Hard to show growth to shareholders when you're shrinking your customer base.

But even then, businesses are made up of people who are consumers when not working. MS originally got into small businesses because they had the home PC market sewn up. They leveraged that to get into small busineses, then rode those small businesses growth into supporting large businesses. MS' own history surely teaches them the importance of retaining at least some facets of consumer mindshare. They can also see the erosion in parts of that business IT market to Apple and Google based largely on IT people who have personal preferences for those brands based on their consumer lives.

In short, Jez' article reflects the thinking of millions of MS' customers. That means that it correctly warns MS about its decision-making. I hope they listen, for their sake as well as for ours.

 

[RedRingOfDeth]

Microsoft was originally a small software company then a large sfwe company, then a sfwe and database company. Apple has been a hardware company from day 1.
I think some people see MS hdwe efforts as a spinoff category .
Then there was the "You can only use the xbox one online" debacle.
Microsoft has been the victim of many unforced errors in its pursuit to become IBM.

 

[naddy69]

"MS originally got into small businesses because they had the home PC market sewn up. They leveraged that to get into small businesses, then rode those small businesses growth into supporting large businesses. "

No, that is not how it happened.

Microsoft got into corporations due to signing a deal with IBM to provide the DOS and other software for the IBM PC. Small computers were not taken seriously by large businesses until IBM got involved.

The "home PC market" at the time was all hobbyists. People with Radio Shack TRS-80s, Apple 2s and Commodore PETs. All of these had some version of Microsoft BASIC. But that is a far cry from "having the home PC market sewn up". They were not even called PCs until IBM came along. They were called "home computers".

Also, none of the above were business machines. None were made by a long term business products company. The IBM PC was a business machine, for obvious reasons.

There were a many "business computers" from several companies at the time. All were running CP/M (DOS) from Digital Research. The problem with these computers is that they did not share a common disk format, nor graphics format. The IBM PC changed all of that, by standardizing everything.

Had Gary Kildall (the head of Digital Research) reached an agreement with IBM, CP/M would have become the dominant business computer DOS instead of MS-DOS. Had that happened, Microsoft might have been a distant memory by now and this place might be called GSX central. GSX being the Graphics System Extension to CP/M. Windows was originally the Graphics "extension" to MS-DOS.

 

[taynjack]

Spot on. What more could be said?
Satya stepping down is the absolute first big step in a series of big steps that will be necessary for them to move into the future that is quickly leaving them behind.

 

[fatpunkslim]

The equation is simple: No exclusives = No consoles = No gamepass

Without exclusive games, they can't sell a console, without a console, no gamepass, because most gamepass subscribers are on consoles. And seeing the gamepass on other consoles is impossible simply because PlayStation or Nintendo don't want it, they already have their own subscription, they are not going to shoot themselves by adding another. And even if they wanted to, it would be complicated to convince players attached to ex-competitors' consoles to subscribe. We could even go further by adding:

No exclusives = No consoles = No gamepass = No third party games

no console, no third-party publishers making games for Xbox

So unless they stop the gamepass and make games directly on PC and other platforms except for the Xbox console which will no longer exist. All the rumors about them shutting down consoles, or going full third party, or releasing all the big games on other platforms are absurd.

OR

The guys at Xbox are completely stupid !

But i don't think so !

PS: i forget one more thing

No exclusives = No consoles = No gamepass = No third party games = No games sales = Game Over

the negative impact on Xbox's brand image would be so terrible that even games from Xbox studios would sell less well.

 

[GraniteStateColin]

"MS originally got into small businesses because they had the home PC market sewn up. They leveraged that to get into small businesses, then rode those small businesses growth into supporting large businesses. "

No, that is not how it happened.

Microsoft got into corporations due to signing a deal with IBM to provide the DOS and other software for the IBM PC. Small computers were not taken seriously by large businesses until IBM got involved.

The "home PC market" at the time was all hobbyists. People with Radio Shack TRS-80s, Apple 2s and Commodore PETs. All of these had some version of Microsoft BASIC. But that is a far cry from "having the home PC market sewn up". They were not even called PCs until IBM came along. They were called "home computers".

Also, none of the above were business machines. None were made by a long term business products company. The IBM PC was a business machine, for obvious reasons.

There were a many "business computers" from several companies at the time. All were running CP/M (DOS) from Digital Research. The problem with these computers is that they did not share a common disk format, nor graphics format. The IBM PC changed all of that, by standardizing everything.

Had Gary Kildall (the head of Digital Research) reached an agreement with IBM, CP/M would have become the dominant business computer DOS instead of MS-DOS. Had that happened, Microsoft might have been a distant memory by now and this place might be called GSX central. GSX being the Graphics System Extension to CP/M. Windows was originally the Graphics "extension" to MS-DOS.

@naddy69 , most of your facts are correct, including CPM, but that largely predated PC's, didn't ever really compete with them (Digital Research lost the contract with IBM over legal concerns with the contract, so IBM went to MS who was hungrier and accepted it, then DR tried to compete with MS with DR DOS vs MS DOS, and I preferred DR DOS for a few features it had back then, but MS made sure it had compatibility problems from old MS' "destroy the competition and salt their land" business strategy model of the 1990s), but you then reach the wrong conclusions on the market development.

IBM PC's were not used by large corporations in the early days of the PC. They were used at home (I'm including PC and PC Jr), in schools, at home businesses, and at small businesses. Large businesses used mainframes and minicomputers. PC's were not considered serious enough or useful for enterprise use. And while much cheaper than a minicomputer, it was far more expensive for what they could do to put one every desk than something like a DEC mini with hundreds or thousands of dumb terminals, so not cost effective either. Different systems had different OS's, but if you had to pick a primary enterprise OS, it would have been a form of UNIX. MS had virtually zero footprint in that space even after they had already become a household name.

Microsoft dominated the small business market, beating TRS-80s and Apple ///'s (Apple's early attempt at a business computer, which flopped), but only became enterprise focused as those small companies grew and took their MS "infrastructure" (if you could call it that) with them.

Even after Windows 3 came out and the PC and Windows had already become dominant in the lower end market, Tandy having long since bailed and Apple falling to a niche among designers with the Mac and the negligible share for everything else that it's only slowly clawing upward from today, PC's and MS still had almost no presence among high end microcomputers. That space was also controlled by various UNIX systems, including Solaris on Sun's SPARC workstations, SGI (Silicon Graphics), and others running on various RISC chips. Windows NT was their answer to this, with early versions running on both Intel and RISC processors. That was really the turning point for them, and Moore's Law finally started to make PC's cost effective for enterprise.

Even today, you can still see echoes of their stumbling attempts to appeal to enterprise users, but a focus on small business, with some of the legacy networking components still built into Windows, like WINS.