Microsoft Games Strategy, Xbox, Game Pass, And More

Microsoft Games Strategy: Microsoft is making some significant changes, with Game Pass being one of them. Despite the dearth of recent conversation-stealing first-party exclusives, the Xbox Series X/S has remained relevant thanks to the subscription service, but it appears that Microsoft is now setting its sights on the mobile arena for its next big gaming push. Microsoft portrays Apple and Google as its actual competitors, while PS5 console warriors bicker over Call of Duty exclusivity.

Considering the severe antitrust scrutiny it faces as it tries to get its $69 billion merger of Activision Blizzard through regulators in the U.S. and overseas, that may just be a convenient pivot. However, it’s a compelling argument when you realize that Apple’s gaming revenue last year exceeded that of Microsoft and Nintendo combined, despite the fact that Apple doesn’t even produce games. The following nine insights, gleaned from recent earnings calls, regulatory filings, and interviews, help to paint a picture of Xbox’s current state and potential future.

PC Game Pass Is Expanding Rapidly

The PC side of Game Pass is gaining popularity, despite the fact that the service’s best catalog of titles remains on the console. According to Microsoft CEO Satya Nadella, PC Game Pass subscriptions increased by 159% year over year, as reported on the company’s most recent earnings call.

The PC version’s game library has been growing steadily over the past few months, and this is probably due in large part to the platform’s greater install base. Spencer stated at WSJ Tech Live, “We’re seeing great growth on PC which is basically where we’re focusing.”

The Console Version Of Game Pass Is About To Hit Its Storage Limit

In spite of the service’s success, with 25 million paying customers, Microsoft’s Game Pass has grown far more slowly than anticipated. According to Axios, the corporation only managed to grow by 28% in the year that ended in June 2022, despite having set a goal of 73%.

Spencer, on the other hand, appears to be quite certain that Game Pass on Xbox Series X/S will never account for more than 15% of Microsoft’s overall content and services income. Spencer declared at WSJ Tech Live, “I don’t think it gets bigger than that.” There comes a point where “everyone on the console who wants to subscribe has already been reached.”

It’s No Secret That Microsoft Needs A Major First-party Exclusivity Badly

One possible explanation for Game Pass’s console slowdown is a dearth of high-profile exclusives. In a recent interview, Spencer acknowledged that they had been noticeably absent from the company’s offerings as of late.

In an appearance on the Same Brain podcast, he remarked, “One thing we’ve heard loud and clear is that it’s been too long since we’ve delivered kind of what people would say is a large first-party game.” “We may blame covid and other factors, but ultimately I know people invest in our platform and they want to have excellent games,” he said.

However, he also hinted that, at least for Microsoft’s internal development teams, the days of game delays due to covid were numbered. Put another way, the major holiday slump of 2022 won’t carry over into 2023. The first half of 2019 will see the launches of Starfield and Redfall, but other important titles such as Fable, Forza Motorsport 8, Avowed, and others are still in development.

The TV-Streaming Device That Had Been In The Works Was Scrapped (Literally)

The original intention of Project Keystone was for it to be a TV dongle that would enable Game Pass streaming in the living room without the need for an Xbox. Spencer revealed it had been scrapped in favor of more limited alternatives through Smart TV manufacturers like Samsung, despite widespread speculation that it was just around the corner. Where did he get that Keystone model he keeps on his shelf? There will be no manufacture of this. At WSJ Tech Live, he asked, “Will we do a streaming device at some point?” I believe we eventually will, but it will be quite some time.

The Xbox Store Is Coming To Mobile Devices, The Firm Says

Earlier this year, Microsoft gave hints about its desire to enter the smartphone market, but a recent regulatory filing in the UK sets out the company’s intentions more explicitly. Microsoft stated in October that with Activision Blizzard’s content, the business will be better able to establish a “next-generation gaming store” that is compatible with several devices, including smartphones.

At WSJ Tech Live, Spencer reaffirmed this idea, calling out Apple and Google for taking a 30% cut of in-app purchases on their platforms and stating that the $69 billion acquisition is aimed at boosting mobile competition rather than gaining a monopoly in the console industry. Because “just two stores are available on the major [mobile] platforms,” he argued, “we have to shatter that duopoly.” It’s unclear how the firm intends to accomplish this, although it’s possible that other purchases may be made, perhaps in the mobile industry.

Xbox One And Xbox 360 Consoles Are Sold At A Significant Loss

It’s common knowledge that manufacturers take a hit on every console sale, especially in the early stages of a new generation’s release schedule, but we’ve never had a good estimate of just how big of a hit. Spencer recently admitted that Microsoft is losing between $100 and $200 per unit on the Xbox Series X and S.

That’s why, in spite of the fact that cellphones are sold at a profit, the business justifies charging the same 30 percent fees on Xbox as it does on mobile, where it criticizes Apple and Google. Simultaneously, it has contributed greatly to the popularity of the Xbox Series S. During the most recent earnings call, Microsoft revealed that 50% of Xbox One customers are new to the Xbox ecosystem.

Future Price Increases Are Inevitable

However, you shouldn’t bank on a discount of that magnitude forever. Though he didn’t give any hard details, Spencer did hint at upcoming price increases on WSJ Tech Live. The cost of the console, the games, and the subscription service have all remained the same, he added. That can’t go on forever, we’ll have to start charging more for some things.

Even though he didn’t specify, it is safe to assume that Game Passes and game costs will be affected. The $60 pricing point that Microsoft retained for Halo Infinite is no longer reflective of the rising expenses of production or the additional hours that many gamers receive out of modern games, as has been the case with most subscription services as of late, as Spencer pointed out.

Playstation Will Continue To Host Call Of Duty

Recently, Microsoft has made it abundantly apparent that there are no intentions to make Call of Duty an Xbox exclusive. Spencer stated at WSJ Tech Live, “It’s not a scheme of, well, we’re going to hook and switch somebody where they gotta play on the cloud or in two or three years we’re going to withdraw [Call of Duty].

For Same Brain, he stated, “Our objective is that we continue to ship Call of Duty on PlayStation as long as there is a PlayStation out there to ship on.” He compared it to the still-supported Minecraft on PlayStation and expressed interest in seeing Call of Duty comes to Switch.

Final Words

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