Xbox CEO Phil Spencer comments on the Xbox Series S, and why it actually gives Microsoft a key advantage — "I want us to innovate and make hardwar...

[Windows Central]

The Xbox Series S could be an unwitting ace in the hole for Microsoft, which has lagged heavily behind competing platforms.

Xbox CEO Phil Spencer comments on the Xbox Series S, and why it actually gives Microsoft a key advantage — "I want us to innovate and make hardwar... : Read more

 

[fatpunkslim]

It's quite intriguing, in any case, he seems quite confident in this famous innovation. But I think it also has to do with the OS, which will be disruptive compared to the previous generation.

'whether it's controller, power, or mobility.' .......

Let's wait and see!

 

[GraniteStateColin]

I agree that having a lower-powered system to undercut the competition is good strategy. I also think requiring games run on it in a rare feat of MS standing behind its hardware is a solid choice, even if it does carry some negatives for games that struggle to run on it. The solution to that is to increase its market share so it's not an afterthought, at least until they move on to the next generation.

However, to Phil Spencer's broader point that rather than focusing on game advantages (exclusives), he wants to win market share based on hardware, that's inconsistent with MS' strengths and proven abilities. Unlike Nintendo, who took big innovative risks and won with both their Wii and then Switch, MS cannot innovate in gaming hardware. It's a demonstrated cultural weakness of the MS team. They tried with Kinect and failed. Since then, they've moved further from that (think Windows Phone, Band, etc.). Granted, those are not gaming systems, but the MS cultural problems appear to be consistent across the entire company, meaning they come from the top.

In defining strategy, success comes from finding ways to better leverage existing strengths and clever ways to avoid weak areas. MS' strengths are in its first-party game development, its possible tie-ins with Windows, its backward compatibility, GamePass, and possibly some others. It's weaknesses, especially now that it has lost much of its hardware innovation and engineering team, include its ability to create consumer-desired innovative hardware and now its perception of abandoning everything it starts -- this is a real liability. To bet on both of those over leveraging their ability to put out strong exclusives is just bad strategy.

Sometimes companies get lucky on bad bets, because sometimes chance rewards the lottery player, but that doesn't make it sound strategy.

 

[Tales Normando]

with blame falling on the Xbox Series S' 12GB RAM allocation.

Jez, I'm fairly sure Series S has 10 GB RAM, not 12 GB. In fact, these 2 extra GB would've gone a long way to help alleviate the hardships to adapt a game to run on both SKUs.

 

[Jez Corden]

Jez, I'm fairly sure Series S has 10 GB RAM, not 12 GB. In fact, these 2 extra GB would've gone a long way to help alleviate the hardships to adapt a game to run on both SKUs.

you are correct sir, corrected that. god knows how I landed on 12. :') not much sleep last night.

 

[Jez Corden]

I agree that having a lower-powered system to undercut the competition is good strategy. I also think requiring games run on it in a rare feat of MS standing behind its hardware is a solid choice, even if it does carry some negatives for games that struggle to run on it. The solution to that is to increase its market share so it's not an afterthought, at least until they move on to the next generation.

However, to Phil Spencer's broader point that rather than focusing on game advantages (exclusives), he wants to win market share based on hardware, that's inconsistent with MS' strengths and proven abilities. Unlike Nintendo, who took big innovative risks and won with both their Wii and then Switch, MS cannot innovate in gaming hardware. It's a demonstrated cultural weakness of the MS team. They tried with Kinect and failed. Since then, they've moved further from that (think Windows Phone, Band, etc.). Granted, those are not gaming systems, but the MS cultural problems appear to be consistent across the entire company, meaning they come from the top.

In defining strategy, success comes from finding ways to better leverage existing strengths and clever ways to avoid weak areas. MS' strengths are in its first-party game development, its possible tie-ins with Windows, its backward compatibility, GamePass, and possibly some others. It's weaknesses, especially now that it has lost much of its hardware innovation and engineering team, include its ability to create consumer-desired innovative hardware and now its perception of abandoning everything it starts -- this is a real liability. To bet on both of those over leveraging their ability to put out strong exclusives is just bad strategy.

Sometimes companies get lucky on bad bets, because sometimes chance rewards the lottery player, but that doesn't make it sound strategy.

agreed entirely that it's inconsistent with their strengths. Microsoft lacks consumer awareness and its corporate structure is antithetical to hardware innovation and product development.

 

[fjtorres5591]

Several points need highlighting:

1- Series S games are required by MS because those are the games Cloud streams. And building a catalog of streamable XBOX games is strategic.
2- Series S games, if properly written (as in using all the features of the hardware and not just those in the PS5 truncated RDNA) can do everything the Series X can do, just at a lower native resolution.
3- At the time the Series consoles were introduced, 75% of all TVs in use were 1080p. Even today, most monitors in use for gaming are either 1080p or 1440P.

4- Series X SOC is in fact better hardware than the PS5 overclocked, variable clock system. But because developers rarely fully optimize for the full ANACONDA feature set it gives the appearance that the two platforms are comparable..they are not, the ANACONDA GPU is 25% more capable which is why it ocassionally matches or exceeds the PS5 pro's 30% better GPU. When Spencer said XBOX doesn't need a mid-gen refresh, that is why.

5- Even on PC, most developers release un-optimized games to meet deadlines that are usually set a year too soon, counting on gamers to serve as gamma testers and subsidize the final release a year or more later. This needs to change.

 

[LumiaWin8]

Several points need highlighting:

1- Series S games are required by MS because those are the games Cloud streams. And building a catalog of streamable XBOX games is strategic.
2- Series S games, if properly written (as in using all the features of the hardware and not just those in the PS5 truncated RDNA) can do everything the Series X can do, just at a lower native resolution.
3- At the time the Series consoles were introduced, 75% of all TVs in use were 1080p. Even today, most monitors in use for gaming are either 1080p or 1440P.

I really wish Microsoft/Xbox would counter argue with these facts against the "Series S holding games back" -crying developers/studios.
No need to antagonize, but clearly state these reasons.

Few Tech reviewers understood that, the Phawx or whatever his name is who does handheld reviews primarily, is one of the few for example.

5- Even on PC, most developers release un-optimized games to meet deadlines that are usually set a year too soon, counting on gamers to serve as gamma testers and subsidize the final release a year or more later. This needs to change.

This x1000.

Obviously for gamers, pc/console/handheld makers these are big issues, but it applies to all tech.

For example, that's why awesome things like the efficient Intel Lunar Lake SoC get misunderstood, it's should and is not always about being on the top of the chart, but having good (enough) performance AND good efficiency.

*caugh* DeepSeek vs ChatGTP and Co... as another example

 

[Thretosix]

When Microsoft had the better hardware with RT cores on the XBOX Series consoles, instead of getting ahead of Sony, they did nothing, no innovation, never came up with their PSSR solution when they had the opportunity. Sony went and innovated and left Microsoft in the dust when discussing consoles. Now there is no reason with Microsoft putting games on every platform, why someone wouldn't just buy a PS5, so they can play all games Microsoft and Sony. They aren't innovating, they are throwing in their white towel with consoles. I don't see how the strategy of putting all your games on superior consoles is a good one.

 

[Lurking_Lurker_Lurks]

I agree that having a lower-powered system to undercut the competition is good strategy. I also think requiring games run on it in a rare feat of MS standing behind its hardware is a solid choice, even if it does carry some negatives for games that struggle to run on it. The solution to that is to increase its market share so it's not an afterthought, at least until they move on to the next generation.

Several points need highlighting:

2- Series S games, if properly written (as in using all the features of the hardware and not just those in the PS5 truncated RDNA) can do everything the Series X can do, just at a lower native resolution.
3- At the time the Series consoles were introduced, 75% of all TVs in use were 1080p. Even today, most monitors in use for gaming are either 1080p or 1440P.
5- Even on PC, most developers release un-optimized games to meet deadlines that are usually set a year too soon, counting on gamers to serve as gamma testers and subsidize the final release a year or more later. This needs to change.

I'd argue that there are NO true negatives with developers needing to optimize their games for the Series S. As stated it is more than doable and more important than that it gives all gamers in the industry (on all platforms) a better experience. This has been proven time and time again. In a time where games are selling at a higher price than ever (not counting for inflation) and yet giving us less stable products filled to the brim with technical issues, optimization for a lower end system is desperately needed. The series S has kept gaming accessible (not just on the S but lower end PCs and now handheld machines). In the Destin interview Phil Spencer made a comment about being proud that games made to run on the series S are already optimized for a more smooth experience for the PC handhelds rising up now. Not a perfect experience (they still need to optimize for that specific hardware), but one that is generally much more playable on these lower powered devices.

What is essentially being complained with the Series S is that developers aren't allowed to brute force their games on the more powerful systems, which is what has been happening far too much this generation. That the media and certain gamers try to spin the Series S as a detriment to the industry and failure of Xbox really just tells me how much of a hate boner is had for Xbox (and Microsoft). It's to the point where gamers are engaging in self sabotage. We are the CONSUMERS not the producers. We shouldn't want producers to be charging more while taking as many shortcuts as possible and putting the consequences of those shortcuts on us. No shade to the game's success, but Black Myth Wukong was a worrying development to watch unfold for me. Despite it's many technical issues, high minimum requirements, and unstable and inconsistent performance even on hardware that exceeded it's recommended requirements (I'm speaking of the game on both PC and PS5/PS5 Pro), BMW sold in droves and recieved numerous accolades. The developers themselves have stated the issue with bringing the game to the S isn't the hardware, but their inexperience with development and optimization and that's very very apparent. What I find difficult to cope with is how much we as gamers have enabled that behavior and shifted the blame to being on Microsoft for making developers actually optimize. Had the BMW developers bucked down and optimized for the Series S and delayed the release on ALL platforms then every gamer who bought the game would've spent their money on a much more stable and better product. Of course people are allowed to make their own decisions and compromises with their wallet, but the situation tells me that we as consumers have lowered our standards for what an acceptable product (game) is. And I think that's because the industry has delivered us products that have all these technical issues and poor to no optimization more and more. The even more depressing bit is forced series S development pushing back against this and hatred for Xbox (or console war nonsense or just media looking for headlines) have turned the net positive of this into something "holding back the entire gaming industry" . If this attitude wins out next hardware generation we are so ******. Even more powerful hardware with upscalers and AI tools will be abused the heck out of to once again brute force games.

 

[Lurking_Lurker_Lurks]

However, to Phil Spencer's broader point that rather than focusing on game advantages (exclusives), he wants to win market share based on hardware, that's inconsistent with MS' strengths and proven abilities. Unlike Nintendo, who took big innovative risks and won with both their Wii and then Switch, MS cannot innovate in gaming hardware. It's a demonstrated cultural weakness of the MS team. They tried with Kinect and failed. Since then, they've moved further from that (think Windows Phone, Band, etc.). Granted, those are not gaming systems, but the MS cultural problems appear to be consistent across the entire company, meaning they come from the top.

In defining strategy, success comes from finding ways to better leverage existing strengths and clever ways to avoid weak areas. MS' strengths are in its first-party game development, its possible tie-ins with Windows, its backward compatibility, GamePass, and possibly some others. It's weaknesses, especially now that it has lost much of its hardware innovation and engineering team, include its ability to create consumer-desired innovative hardware and now its perception of abandoning everything it starts -- this is a real liability. To bet on both of those over leveraging their ability to put out strong exclusives is just bad strategy.

agreed entirely that it's inconsistent with their strengths. Microsoft lacks consumer awareness and its corporate structure is antithetical to hardware innovation and product development.

I'll say I think Phil Spencer is wrong on specifying hardware as where Xbox should innovate, and in the interview with Destin Phil Spencer didn't really make any hardware claims for examples of innovation. He spoke about Xbox Play Anywhere and innovations in Cloud Gaming and benefits of being in the Xbox ecosystem as reasons to questions of "why Xbox" post multiplatform releases. The hardware differentiators spoken about are all from windows OEMs (and Valve). It's true. Microsoft isn't a consumer hardware first business and that is not where their strengths lie. Let's pretend for a second they know how to be a consumer business at all (they struggle with the consumer part in general), and focus on their strengths as a consumer software provider.

For the most part people don't mourn the hardware of the windows phone or zune or whatever (though Nokia is missed). People mourn the operating system and software and consumer value offered by each. Truly I was surprised when I learned the Zune was doing stuff way back when which has now come to dominate how we interact with music not on a hardware level but a software and business model one (streaming apps and subscription libraries). I think a big part of Microsoft's problem is that they tied their success in these markets based on the success of their hardware entirely. They nearly fell into a similar trap with Xbox, but it looks like they're starting to wake up.

From the very start Microsoft has subjected Xbox to following behind Nintendo and Sony willingly because they chased and measured success in the traditional ways the console market had set. But none of those ways took advantage of the strengths Microsoft has as a software based company. I don't think exclusives were EVER the strategy for Microsoft. If nothing else leveraging PC and building a first party gaming empire and experience on both Xbox and Windows PCs using the Xbox brand should've been a day one thing. Not something only started in the Xbox One generation and even now still years behind where ti should be. Now we're at least seeing a unique Xbox taking advantage of their strengths with features like Xbox Play Anywhere and cloud service that while not the strongest are more widely available and promise a seamless expansion of your Xbox library.

Nintendo certainly has proven to be the best at hardware innovation and providing consumer hardware in the traditional console market (well... every other generation historically; hopefully the Switch 2 breaks that pattern). But does Xbox really need to follow in their footsteps? Even before the Zenimax and ABK aquistions and when Nintendo hardware was selling far better than PS and Xbox's new systems, Xbox had higher gaming revenue than Nintendo. We're not privy to margins, so for it's size Nintendo might see more profit, but regarding revenue itself Xbox already had Nintendo beat. Now Xbox dwarfs Nintendo post Zenimax and ABK. Success in gaming as a platform for Xbox isn't limited to the console market, and I think they would do much better in the console market if they did a better job marketing their strength as a gaming platform and brand beyond a singular gaming market.

As a gamer, I don't see why I would ever buy a console other than Xbox in this day and age when Playstation and Nintendo don't even offer free cloud saves. Xbox is an extension of a wider gaming platform that I can access on various devices I already own and a whole heap of windows PC hardware. I think there's a lot of reasons why I consumer could list every benefit of each console platform and choose Xbox everytime because instead of offering a pristine walled garden with lots of exclusive candy to invite you in, it offers a wider ecosystem that let's you play without limit (ironically Sony's tagline which is FAR from true on Playstation consoles). In the Destin interview spoke about how Xbox's work with Xbox play anywhere gives consumers on their platform the most value and security in their purchases. Playstation and Nintendo don't even have free cloud saves for consoles themselves. In a world where more and more games continue to support as many platforms as possible, the importance of the value a platform provides only grows. Sony as well is seeing less and less exclusives as third parties move to supporting Xbox, PC, and Nintendo (if they can) day one and shy away from exclusivity deals. Sony is also seeing that the increased cost of development has massively impacted their ability to ship their blockbuster first party exclusives.

Looking outward to the console market as a whole, I question whether exclusives have ever been successful. Console hardware unit sales has never significantly grown. The peak is around 150m in a lifetime. That's really not amazing. Even worse that peak was reached in like 2006 (and has been dwindling since until the recent success of the Nintendo switch). I see a LOT of room for Xbox to win with Xbox hardware in the console space by just offering the best ecosystem and software innovations that appeal to the inherent value of Xbox and Microsoft. Sell Xbox consoles as a budget gaming only extension of their wider gaming ecosystem and platform (with the Series X SKU as the high end and S SKU (which can become a handheld) as the budget , but continue to expand this platform with first party efforts on cloud and PC (and mobile if they can manage). Let windows OEM hardware manufacturers innovate on the hardware side and just give them better tools and users better operating system experiences. During the Xbox One generation PS4 saw a lot of success with attack ads that highlighted their strengths and attacked the weakness of the Xbox and they really worked because people scratched their heads at the common sense features not available on Xbox. I think this would benefit Xbox a LOT because they could properly advertise Sony not having an answer to Xbox Play Anywhere or how the PS console doesn't have free cloud saves or how Game Pass just offers more value at the highest tier with PC and day one offerings. Even if not attack ads, Xbox needs to run more ads in general that actually shouts loud and clear what their unique value as a platform is. Stuff like the dev direct starting with an announcement that all games are Xbox Play Anywhere, but far far louder. I think Microsoft's biggest mistake was ever subjecting themselves to the traditional method of competition in the console market. It now makes them look weak as they rely on their strengths to provide a more valuable platform, and Xbox will HAVE to do a lot of heavy lifting in the marketing department if they want to reap any level of success from their current strategy.

 

[Lurking_Lurker_Lurks]

When Microsoft had the better hardware with RT cores on the XBOX Series consoles, instead of getting ahead of Sony, they did nothing, no innovation, never came up with their PSSR solution when they had the opportunity. Sony went and innovated and left Microsoft in the dust when discussing consoles. Now there is no reason with Microsoft putting games on every platform, why someone wouldn't just buy a PS5, so they can play all games Microsoft and Sony. They aren't innovating, they are throwing in their white towel with consoles. I don't see how the strategy of putting all your games on superior consoles is a good one.

Well I mean why don't we look at how Sony is doing with their strategy? Their console is chasing PC and costing more than ever to provide that PSSR AI upscaler. I don't see that as innovation when the same tools for lower prices have existed on PC for a while now (and I mean lower prices; it would take work, but you can build a very solid PC at those crazy PS5 Pro prices; really Sony is approaching the cost territory of pre built low to mid range gaming PCs, which do offer less power but come access to far more games and far far more value with lower prices of those games due to competing store fronts, free cloud saves, and free online). The vast majority of exclusives on PS have always been third party and many of those are moving to multiplatform day one (with many publicly saying Sony's exclusive deals aren't worth it anymore) and more continue to follow. At the same time on the user experience end Sony isn't offering more value (with the most additional value in a long time coming from the PS Plus (but they also pioneered raising prices for subscription services there). Sony led the charge for raising game prices and it's looking like they'll do the same for console prices. Sony's own first party game output has dropped off significantly this entire generation. At the same time they've repeatedly fumbled their live service plans and just burned money at this point. Sony's success in the console market is only in comparison to Xbox (which has always been the case). Otherwise they're doing... okay. Most growth from platform holders has just been in that users on average are more valuable due to increased spending (mostly because of Microtransactions). Otherwise hardware sales remain flat. Sony hoards exclusives (even dragging their heels on PC releases) and their big "W" is that they are seeing a slight increase in hardware sales trends (trends being the operative word; something could always still happen where for whatever reason PS and Xbox sales this gen just stop short of last gen) based on where PS4 sales were last gen after around 4 years on the market. Xbox does have to face the reality that they are slightly down compared to last gen (but again these are trends and whatever could happen before the generation ends), but Xbox also sees the reality that they were chasing limited success regardless. Sony and Microsoft really need to take a minute and reinvent the entire pitch of game consoles because new gamers haven't entered the space in significant numbers in a LONG time. All both consoles are mostly managing to do is upgrade existing customers. Exclusives are going away from more than just Xbox. Virtually every third party publishers have moved away from them even faster and Sony as a first party developer is struggling to support them. Nintendo is the only major one left with strength in exclusives and that's because they control costs. Yet there is also the reality that Nintendo earns the least in gaming revenue despite having what many would say the strongest position in the console market.

Why put your games on a superior console? A similar question can asked of why hoard your incredibly expensive to make games to one console when that has consistently not been leading to significantly more new consumers? For that matter one could point to how Xbox chooses to port some of their games to other platforms and dominates on those platforms, and how Sony is forced to watch as many many (and many more to come) of their exclusives jump ship to other platforms and Sony loses the prestige those third party games once gave it. Heck, Sony was made to make the first party developed and published MLB the Show multiplatform (AND support day one game pass for like 4 years (up until this year)). Sony is taking a weird middle ground between Nintendo and Microsoft, that even they realize isn't working. They aren't controlling costs and still chasing those blockbuster first party exclusives (unlike Nintendo), but also aren't bringing those exclusives to more platforms day one this offsetting cost increases with more customers spending more money for those games (unlike Microsoft). The end results is just less first party games. Sony isn't really innovating in the hardware space (I'd say the new Dualsense is their only real innovation), but rather chasing PC now, but without truly offering the value that market does. The price and hardware offerings of the PS5Pro is a joke. The value is further held back by the PS ecosystem overall just not having basic features like free cloud saves and consoles overall not having multiple storefronts (so more game sales due to competition) or free multiplayer across the board. As a result Playstation isn't able to grow their business any way other than transferring more costs onto consumers. They aren't even doing anything interesting with PS Plus despite PS Now having pioneered in the subscription library and game streaming space. They're just burning money on live service at this point (Helldivers 2 and Destiny 2 being their only real success stories).

At a time when PC gaming is introducing new form factors and major efforts to make gaming more accessible (with console like user experiences due to SteamOS), and even lowering the cost of entry, Sony chose to raise hardware prices to unprecedented degrees. At a time when games cost more than ever to make Sony holds strong to their exclusive policies that hasn't won them a huge influx of new PS customers and as a result are just not outputting many first party games (production has scaled back a lot). I'm worried that the console market on the whole will never grow again and be quickly overshadowed as PC gaming becomes easier and cheaper to access, mobile (smartphone) hardware becomes more powerful, and cloud gaming gains better infrastructure. However, I'm not worried for Xbox who is evolving to thrive in this landscape and I'm not hugely worried for Nintendo who doesn't need to chase infinite growth and is happy being modestly successful. I am worried for Sony who can't pick an lane and as a result are seeing an industry evolve past them while they've stuck their heads in the sand.

 

[GraniteStateColin]

I'd argue that there are NO true negatives with developers needing to optimize their games for the Series S. As stated it is more than doable and more important than that it gives all gamers in the industry (on all platforms) a better experience. This has been proven time and time again. In a time where games are selling at a higher price than ever (not counting for inflation) and yet giving us less stable products filled to the brim with technical issues, optimization for a lower end system is desperately needed. The series S has kept gaming accessible (not just on the S but lower end PCs and now handheld machines). In the Destin interview Phil Spencer made a comment about being proud that games made to run on the series S are already optimized for a more smooth experience for the PC handhelds rising up now. Not a perfect experience (they still need to optimize for that specific hardware), but one that is generally much more playable on these lower powered devices.

What is essentially being complained with the Series S is that developers aren't allowed to brute force their games on the more powerful systems, which is what has been happening far too much this generation. That the media and certain gamers try to spin the Series S as a detriment to the industry and failure of Xbox really just tells me how much of a hate boner is had for Xbox (and Microsoft). It's to the point where gamers are engaging in self sabotage. We are the CONSUMERS not the producers. We shouldn't want producers to be charging more while taking as many shortcuts as possible and putting the consequences of those shortcuts on us. No shade to the game's success, but Black Myth Wukong was a worrying development to watch unfold for me. Despite it's many technical issues, high minimum requirements, and unstable and inconsistent performance even on hardware that exceeded it's recommended requirements (I'm speaking of the game on both PC and PS5/PS5 Pro), BMW sold in droves and recieved numerous accolades. The developers themselves have stated the issue with bringing the game to the S isn't the hardware, but their inexperience with development and optimization and that's very very apparent. What I find difficult to cope with is how much we as gamers have enabled that behavior and shifted the blame to being on Microsoft for making developers actually optimize. Had the BMW developers bucked down and optimized for the Series S and delayed the release on ALL platforms then every gamer who bought the game would've spent their money on a much more stable and better product. Of course people are allowed to make their own decisions and compromises with their wallet, but the situation tells me that we as consumers have lowered our standards for what an acceptable product (game) is. And I think that's because the industry has delivered us products that have all these technical issues and poor to no optimization more and more. The even more depressing bit is forced series S development pushing back against this and hatred for Xbox (or console war nonsense or just media looking for headlines) have turned the net positive of this into something "holding back the entire gaming industry" . If this attitude wins out next hardware generation we are so ******. Even more powerful hardware with upscalers and AI tools will be abused the heck out of to once again brute force games.

Agree with much of this. Just a nuanced distinction: I do think there is an advantage to consumers in letting developers rely on hardware advances to make games. You're obviously correct that implies a game that's less optimized (or ray-traced, in the case of baked-in lighting, something I'm on a crusade should give way to path tracing by hardware), but those efforts take time away from other things.

In other words, if the games are "good enough" performance-wise (subjective, but, say run at 60+fps at 1440p on max settings on graphics cards used by 50%+ of gamers), then I'd rather the developers spend their time improving textures, creating additional quests/levels, or moving on to another game rather than continually tweaking to eke out better performance on low-end hardware.

I appreciate others may disagree with this, but I suspect we only disagree on where to draw that line. Maybe instead of 50+% of gamers running at 60fps at 1440p, you'd put it at 80% or 120fps, but at some point, clearly developers need to just move on from older hardware. E.g., should CDPR have spent another year or two trying to get Cyberpunk 2077's Phantom Liberty expansion to run on the older PS4 and Xbox One? Personally, I'm glad they did not and have moved their dev teams over to working on The Witcher 4 and the Orion Cyberpunk sequel.

But to be clear, I do agree that MS holding the line on Xbox Series S makes sense for now. Consoles, unlike PC's, have generations. That cleanliness is part of their appeal and something Series S customers should expect MS to do for them. If MS ditches the Series S mid-generation, that would be terrible and communicate to customers not to trust their future hardware (as they have already done with phones, music, and health devices, to list a few).

 

[GraniteStateColin]

The hardware differentiators spoken about are all from windows OEMs (and Valve).

Valve is a bigger threat to MS than Sony. I respect that Steam has a lot of great features and reasons for customers to like it. But strategically, Steam OS (not the Steam store or environment, just the Steam OS) is a HUGE THREAT to Microsoft. One of Windows' chief consumer facing advantage over Mac OS (other than price, which is not a feature) is support for games. Valve, by copying Microsoft's API's (unethical as far as I'm concerned, a barely legal form of piracy) gets a free ride on all the work MS did to build gaming support into a PC OS and then takes the customers away from Windows.

From the very start Microsoft has subjected Xbox to following behind Nintendo and Sony willingly because they chased and measured success in the traditional ways the console market had set. But none of those ways took advantage of the strengths Microsoft has as a software based company. I don't think exclusives were EVER the strategy for Microsoft. If nothing else leveraging PC and building a first party gaming empire and experience on both Xbox and Windows PCs using the Xbox brand should've been a day one thing. Not something only started in the Xbox One generation and even now still years behind where ti should be. Now we're at least seeing a unique Xbox taking advantage of their strengths with features like Xbox Play Anywhere and cloud service that while not the strongest are more widely available and promise a seamless expansion of your Xbox library.

For a strategic analysis on what makes sense for MS, it requires looking at MS strengths relative to the competition. I agree with leveraging PC and Windows (and MS should have done the same with Windows Phone at the time MS was dominant in mobile, blown opportunity, and an ongoing pain point and source of lost trust with former customers). But not to also leverage the fact that MS has studios that make beloved games to gain console market share is just wasting that as a competitive strength. That's bad strategy.

If a company can leverage a strength to gain market share, and if that gain in market share is a long-run win (it's not always -- gaining market share in a shrinking market/industry can still be a losing proposition), then that's a logical option for the company to consider pursuing based on how it compares to other options it could pursue. There is clearly a short-term win by making the games available on PS -- MS earns that additional revenue. But they earn it while also helping their competitor, PS, take "living room gamer" market (AKA Console Gamers, but the hardware is less important than what defines the market) share from them. That is a valuable sub-segment of the larger gaming market that MS could gather to itself with the large set of beloved studios and game franchises it now controls by making more of them exclusive.

If AFTER MS has the dominant marketing position among living-room/couch gamers, they want to increase monetization by rolling those games out to competing hardware, that's fine.

You are correct that a gaming company can focus on software and services, just like CDPR or EA or other publishers who are not tied to their own hardware do. That's a perfectly valid business model. But MS, along with Sony and Nintendo, also have direct access to the most hardcore, dedicated group of gamers -- those living-room/couch/console gamers. That's a gold mine marketing opportunity. Loyalty among the hardcore users is incredibly valuable. There are also higher margin game sales on Xbox because they don't have to pay Sony a % of each sale. Pissing that away when they could easily nurture it is foolish. It's poor strategy.

 

[Lurking_Lurker_Lurks]

If a company can leverage a strength to gain market share, and if that gain in market share is a long-run win (it's not always -- gaining market share in a shrinking market/industry can still be a losing proposition), then that's a logical option for the company to consider pursuing based on how it compares to other options it could pursue. There is clearly a short-term win by making the games available on PS -- MS earns that additional revenue. But they earn it while also helping their competitor, PS, take "living room gamer" market (AKA Console Gamers, but the hardware is less important than what defines the market) share from them. That is a valuable sub-segment of the larger gaming market that MS could gather to itself with the large set of beloved studios and game franchises it now controls by making more of them exclusive.

If AFTER MS has the dominant marketing position among living-room/couch gamers, they want to increase monetization by rolling those games out to competing hardware, that's fine.

You are correct that a gaming company can focus on software and services, just like CDPR or EA or other publishers who are not tied to their own hardware do. That's a perfectly valid business model. But MS, along with Sony and Nintendo, also have direct access to the most hardcore, dedicated group of gamers -- those living-room/couch/console gamers. That's a gold mine marketing opportunity. Loyalty among the hardcore users is incredibly valuable. There are also higher margin game sales on Xbox because they don't have to pay Sony a % of each sale. Pissing that away when they could easily nurture it is foolish. It's poor strategy.

The question to be had here is if exclusives are truly a viable strategy to gaining market share in the console market, and there's a second question to if a dominant position in the console market is at all needed in the current gaming industry. I think the answer to both of these is no and based on their actions I know that Microsoft thinks that regardless of what either of us say.

Historically, exclusives have only kinda worked for Playstation. To an extent, maybe Xbox too, but I'm gonna be honest and say I think the Xbox 360 only did as well as it did because the PS3 sold at SUCH an insanely high price (at $600 it was still more than the PS5 launch price and that's without inflation). The Xbox 360 was essentially the no brainer option for a lot of people and games had nothing to do with it. In fact the Xbox 360 was still missing out on a ton of titles due to third party Japanese games still just inconsistently supporting Xbox and Sony having more studios and deals and third party support. Nintendo which people would probably associate the most with the best most beloved exclusives, has never really sold hardware based on exclusives. The Wii and Nintendo Switch were successful because as you said they were major consumer hardware innovations. The same can be said of the DS and Gameboy which were also boosted by Nintendo being like the only handheld worth getting. However as far as home consoles go the GameCube and WiiU were absolute failures despite their exclusive lineup (the WiiU had a really good one). Even before that their NES, SNES, and N64 sold "okay" for their time periods but not insanely. Playstation has always consistently sold around 100M and they'd point to their exclusives, but I'd honestly think it has more to do with their marketing and general support for global markets (both things Xbox continues to struggle with).

Regardless of whether or not it is exclusives that build console market share... does it matter? The issue is that despite these games getting more expensive to make and hardware getting more expensive to make, the console market isn't seeing new consumers (as in first timers) that matches the cost growths. Nintendo is controlling their costs, but Sony and Microsoft can't afford to scale back as much. They exist in the AAA realm. So no console platform is really seeing new gamers but costs keep going up. At the same time there ARE new gamers, but they keep going to mobile or straight up PC. On the whole the console market starts to look like a small pie in a wider gaming industry desert buffet, and Xbox doesn't want a large piece of the small pie, they want to a huge share of the entire buffet. We'll have to see how both their and Sony's startegy (of same old same but) plays out in the long term. I mean we mention short term gain and long term loss, but if they don't port what's the long term gain? Decades have gone by and Console install bases haven't been growing much.

Valve is a bigger threat to MS than Sony. I respect that Steam has a lot of great features and reasons for customers to like it. But strategically, Steam OS (not the Steam store or environment, just the Steam OS) is a HUGE THREAT to Microsoft. One of Windows' chief consumer facing advantage over Mac OS (other than price, which is not a feature) is support for games. Valve, by copying Microsoft's API's (unethical as far as I'm concerned, a barely legal form of piracy) gets a free ride on all the work MS did to build gaming support into a PC OS and then takes the customers away from Windows.

Microsoft definitely sees the writing on the wall with the most popular gaming storefront on PC building a successful console like operating system that uses Linux and has really good emulation for games. More so when SteamOS based devices are entering the market with fairly low prices. Like Valve is selling SteamOS licenses for cheaper than Windows and as a result we're getting cheaper PC gaming handles that don't run windows (like the legion Go S). They'll have to do more than ever to compete in gaming with both Xbox and Windows.

 

[GraniteStateColin]

The question to be had here is if exclusives are truly a viable strategy to gaining market share in the console market, and there's a second question to if a dominant position in the console market is at all needed in the current gaming industry. I think the answer to both of these is no and based on their actions I know that Microsoft thinks that regardless of what either of us say.

I think that's generally correct on what matters. However, I would cast that differently: what matters is not purely a function of what the market wants. That's VERY important for sure, but strategic decisions must also factor a company's strengths and weaknesses relative to the competition, and then set a strategy that leverages how those strengths and weaknesses interact with what the market wants. The right strategy for Sony is not the same as the right strategy for MS, because they have different strengths and weaknesses.

I think what you're really arguing (not trying to put words in your mouth, but I think this is an accurate rephrasing, please correct me if you disagree): Microsoft makes most of its gaming money from software sales and is seeing growing sales from GamePass subscriptions, which sells more on Windows than Xbox. Therefore, locking exclusives just to help sell Xbox consoles is a wasted opportunity to sell to all the PS owners, which wouldn't really adversely affect their core sales and business model around gaming and subscriptions anyway. In fact, selling to PS exposes more users to their games and with gamers moving toward Windows/PC/other gaming, better to have that exposure than avoid PS just to help market-failing console as a shrinking userbase in a static-at-best overall console market.

I understand and appreciate that. However, what I believe that's missing is:

1. Microsoft now has a strong position with in-house studios that it never had before.
2. There is a market value (hard for me to quantify) in owning the family room/living room audience. This is a bit of an intangible, but think of it as the default communication system with hundreds of millions, perhaps billions of users. As long as people have TVs in their living room and spend notable time on that every week, owning the chief way they get content on that device is an incredibly powerful asset.
3. If Microsoft can leverage #1 to strengthen #2, this a good thing to do. It's smart strategy. This doesn't need to mean 100% of MS games are exclusive, just leverage it in a smart way to gain console market share. This is why they do their "Everything is an Xbox" campaign, which makes some sense, more than also releasing for PS.

To tie this into the Steam OS discussion, where it looks like you and I are on the same page: even if it grows profits in the short-run to cross release games on PS, sacrificing controlling access to the customers is how a company loses relevance in the long-run. Market dominance has significant advantages beyond the short-term profits. It lets the company in that position set the standards, which can in turn play to its other existing strengths (think Google's search dominance and their ability to set both how advertisers and consumers use search). It gives them greater negotiating leverage with suppliers and partners (think about BG3 not running on Series S -- that's a consequence of low market share).

Microsoft definitely sees the writing on the wall with the most popular gaming storefront on PC building a successful console like operating system that uses Linux and has really good emulation for games. More so when SteamOS based devices are entering the market with fairly low prices. Like Valve is selling SteamOS licenses for cheaper than Windows and as a result we're getting cheaper PC gaming handles that don't run windows (like the legion Go S). They'll have to do more than ever to compete in gaming with both Xbox and Windows.

I think their failure to respond to Steam OS is due to the same mindset as their releasing what could be exclusives on PS -- they don't appreciate the value of controlling a market. For a company with MS experience, I find this bizarre. My best guess is it is a consequence of the prior problems they faced 20-30 years ago when the government successfully attacked MS for monopolistic behavior. But these decisions by MS go way past that to just being bad, destructive strategy.

 

[Lurking_Lurker_Lurks]

I think what you're really arguing (not trying to put words in your mouth, but I think this is an accurate rephrasing, please correct me if you disagree): Microsoft makes most of its gaming money from software sales and is seeing growing sales from GamePass subscriptions, which sells more on Windows than Xbox. Therefore, locking exclusives just to help sell Xbox consoles is a wasted opportunity to sell to all the PS owners, which wouldn't really adversely affect their core sales and business model around gaming and subscriptions anyway. In fact, selling to PS exposes more users to their games and with gamers moving toward Windows/PC/other gaming, better to have that exposure than avoid PS just to help market-failing console as a shrinking userbase in a static-at-best overall console market.

So I'll sum up my response here, by just making my general argument clear because it's not like I really disagree with you. My stance is more like those points are kinda moot.

Very simply, what gamers would Microsoft even potentially be trying to attract with exclusives? The majority of their gaming business IS still coming from Xbox console users (on Xbox One and Xbox Series). That's where most software sales and most GP subs are. It'll be a long while before windows overtakes that. With exclusives, my thing is that after decades and decades, consoles have never succeeded in selling to significantly more new gamers with the early 2000s setting the peak. They've also not really succeeded in taking a significant amount of market share from each other. Like the Nintendo Switch is selling about as well as their handhelds (minus the 3DS) always had + the few tens of millions that consistently bought their home consoles (the Wii being a major exception (Nintendo was doing really well when they were selling both the Wii and DS)). Playstation started at 100 million and seems to have settled now around 120 million. Xbox started at about 30 million and has settled around 50 million (which the series is still on track for IF Xbox were to do a mid gen upgrade this year and didn't release next gen until 2028... which I feel has been all but confirmed they won't do, so if there's an early next gen they'll probably see lifetime sales for the series between 30 and 40 million). The most they managed to steal was during the PS3/Xbox 360 which I really think was more on the massive price difference between the similar spec consoles. Then Xbox made same mistake Sony did and lost about 30m of those Xbox 360 sales at the onset of digital and locked down libraries.

I will just outright say, I don't see consoles growing even within the console market anymore. I think Microsoft SHOULD try to grow console sales, but to do so they need to reach outward and pull people into their console and Xbox ecosystem. I don't think Microsoft is doing enough here to target non console gamers. They're actually failing a lot to reach new audiences. And so is every other console on the market. Based on what I see, I don't think exclusives work here. Speaking of leveraging strengths, how is it not a strength for Microsoft to leverage its now massive first party content lineup to fuel Xbox more through making these games more available. I'm really not saying anything specific regarding exclusives here other than that I don't think they matter going forward (as in Microsoft can keep doing some and only make a handful multiplatform; I just don't think exclusives are going to build up their market share in the console market or wider gaming industry). Microsoft shouldn't abandon trying to grow Xbox console sales, but they should revisit how they plan to do so. I think they could reach a lot more new gamers with a marketing strategy revolving around all the exclusive features Xbox consoles offer, their value, and most importantly reaching out to appeal to non current console gamers. Xbox as a brand and ecosystem and platform needs to do a LOT of growing in the console, PC, and Cloud markets.

You speak about the importance of controlling the family/living room space and I agree. But does any home console? Or do smart TVs and streaming boxes? Amazon not too long ago bragged about selling 200 million Fire TVs. The Xbox One had the right idea that they couldn't just compete in the console market (which is now entreached and stagnating), but the wider home entertainment market. Unfortunately the Xbox One had the worst pricing and messaging for this and seemingly traumatized the Xbox team from acknowledging that this generation. The Series S should've been much better positioned to appeal to families that wanted a home entertainment device for all their home entertainment needs. It's a big reason why I think they can't abandon the SKU or the keystone idea moving forward. Microsoft should try to grow their presence in families and homes as an entertainment platform they control (so they aren't under the whims of others like in Mobile), but again, I don't think that necessities exclusives. I don't think we really disagree on what Xbox should be trying to achieve. I think we just don't believe in the same how. Which granted Microsoft will do whatever they want (usually not enough) and reality will play out as it does.

I think their failure to respond to Steam OS is due to the same mindset as their releasing what could be exclusives on PS -- they don't appreciate the value of controlling a market. For a company with MS experience, I find this bizarre. My best guess is it is a consequence of the prior problems they faced 20-30 years ago when the government successfully attacked MS for monopolistic behavior. But these decisions by MS go way past that to just being bad, destructive strategy.

That one monopoly case is definitely still holding Microsoft back, and really because that's still their reputation all these years later. People hate and don't trust Microsoft to a level that doesn't really match public feelings of similar corporations who have even tighter control like Apple and Google. The ABK aquistion really showed this. Historically it'd have passed no problem, and for the most part it did. Microsoft did their rounds and appeased pretty much everyone. The roadblocks came from places that really just wanted to make a spectacle of blocking Microsoft from a big purchase. I remember even people who hated Xbox calling the FTC and CMA out for grasping at straws and mostly using stalling tactics or ignoring competitors. And harkoning back to the exclusives, again what I think about them doesn't matter. It's what Microsoft does, and there is clearly a shift before and after the ABK case at Xbox for how to handle exclusives. I don't think Microsoft is done growing in gaming and I do think they weren't expecting that much of a push back from government regulators based on exclusives, so now they're either afraid to push too hard with them or trying to diminish their importance in their business or maybe it did just line up with their analysts saying they aren't important and them wanting more money (or likely it's a combination of all of the above).

Regardless, Microsoft is clearly terrified of risking coming under fire from government regulators, and as a result they are the most careful to limit their control over their markets. Again it's interesting because companies of similar sizes exert more control and are on people's and regulators radar less. Apple and Google are only just now starting to get attacked and that's really slow moving. The thing is, Microsoft does NEED to be more aggressive in the markets they exist in to succeed. Again, I don't think they should give up on console hardware. I just don't think being aggressive in that market and success is based solely on exclusives (like they could try marketing for once). They need to be far, far more aggressive on PC and get their offerings up to snuff. They're moving incredibly slow on cloud and mobile they don't even have a platform foothold in because they weren't aggressive enough with the windows phone and now have to march to the whims of Apple and Google.