Xbox Business Update Podcast | Xbox Everywhere Direction Discussion

[Cyan]

afaik Nintendo has won more money in the last few years than Sony and MS together in the last 20 years. Sony sells a lot because they have the greatest prestige but the PS owners buy an average of 2,65 games a year. I am typing this from memory, the data is somewhere.

 

[QPlayer]

Maybe MS brings Steam to Xbox and gets 30% of the 30% of Steam sales.

It would be pretty cool to play some PC games on Xbox that weren't released for Xbox. Like .... Lord of the Rings Online, for instance. LOL

Btw, I believe that the reason the new Xbox might be called Xbox Prime is that it's because it is the Primal base next gen configuration. The official base model. Maybe $399 or something, though I'm hoping $599.

I still believe they can launch whenever the hardware stars align. They have the teams to do whatever they want, whenever they want.

Purpose of a new Xbox: GP delivery mechanism. The ideal Xbox for MS is one that causes existing GP users to buy it and stay with GP and maybe attract some new ones. They don't need to swing for the 100 million userbase fences like Sony does.

A GP subscriber Xbox owner is probably worth $200 per year for MS. So $1400 over 7 years. Sony has to sell 20 games to make that up for a PS user. Attach rates just aren't that high. My guess is that a GP subscribing Xbox owner is worth twice as much to MS as a PS user is to Sony. Thus, Sony has to sell twice as many units as MS for similar success. On top of that, as long as they make good games MS earns even more money by publishing everything on PC, PS, and Switch.

The Xbox Prime Directive: Be attractive enough to keep GP subscribing Xbox users in the ecosystem. Rake in the sub money and then make all the PS and Switch owners fund everything with 3rd party releases.

Btw, Phil isn't as dumb as you think he is.

Journalist: "Phil, everyone is playing free black hole games like Fortnite on their Xbox and not buying new AAA games"
Phil: "Do they have GP subscriptions?"
Journalist: "A third of them do"
Phil: "What's the problem then?"

Release a console that is one category more powerful than the current PS Pro console at a cheaper price, plus Day1 Gamepass for all their games, plus Steam games. Sell this console from your own online store so all the revenue is yours. This model could work with a November release this year.

 

[Charlietus]

A 184% increase on 6% margins makes that around 11%.
Edit: More accurately 13% from their financials, $138.8M operating income on $1071.5M revenue.

Well below Sony's best and well, well below Nintendo's average.

For MS to beat Sony at the gaming business in terms of profitability, they'd need to make $140M profits for the quarter. Best case scenario, maybe they could achieve that with just $160M revenue mostly from subs and crazy low overheads.

Basically, revenue isn't a great measure for company performance, but sadly that's all we have for MS!

Nintendo operating margins are an exception in the gaming industry, and still, right now they are half of playstation. At the end of the day, you could say that Nintendo is a less risky operation, but to an investor, playstation numbers remain the better investment.

Ps: Sony Q4 results are out in a few days, so we'll get the full year picture soon.

 

[RobertR1]

https://www.theverge.com/news/61046...its-getting-out-of-hololens-hardware-entirely Microsoft’s failure in the VR/AR is now fully complete. Good riddance. Their efforts on WMR straight up hurt uptake on PCVR.

 

[cheapchips]

https://www.theverge.com/news/61046...its-getting-out-of-hololens-hardware-entirely Microsoft’s failure in the VR/AR is now fully complete. Good riddance. Their efforts on WMR straight up hurt uptake on PCVR.

If they'd have produced their own VR HMD and controllers I think WMR would have been pretty good. All the third party HMDs were not great on some level.

Some sort of warning for Xbox hardware being third party only there! At least they're not backing away from their own hardware yet.

 

[Shifty Geezer]

Ps: Sony Q4 results are out in a few days, so we'll get the full year picture soon.

EG news:

Overall sales of games and consoles have increased by 16 percent year-on-year, with profits similarly increasing by 37 percent.

Sony aren't operating anywhere near Nintendo's level of profitability. This isn't about investors - Johnny Awesome was comparing MS's revenue from subs to Sony's revenue from game sales. My point is mostly that revenue isn't particularly informative. You can have two companies with the same revenue where one is raking it in and the other losing money. Johnny pointed out that Sony's profits aren't stellar relative to revenue, setting a lowish target for MS and the subscription business. I agreed.

 

[Charlietus]

EG news:



Sony aren't operating anywhere near Nintendo's level of profitability. This isn't about investors - Johnny Awesome was comparing MS's revenue from subs to Sony's revenue from game sales. My point is mostly that revenue isn't particularly informative. You can have two companies with the same revenue where one is raking it in and the other losing money. Johnny pointed out that Sony's profits aren't stellar relative to revenue, setting a lowish target for MS and the subscription business. I agreed.

The discussion is not easy to track, so I may have forgotten some things along the way .

But I would argue that revenue, even without high profit margins, is a pretty good place to be. You can take that install base of people using your services and have an outlook of better profitablity by executing a plan. This isn't in reference to any particular company, just some thoughts on revenue and profitablity.

 

[Johnny Awesome]

I think one of the ways MS is keeping costs down is by doing more 10 hour games like Hellblade 2 and South of Midnight. They know that 90% of people never play more than 10 hours of most games and just have to hold attention long enough to justify their subscription to GP. Some games like Starfield have to be 40+ hours with DLC, but a lot of games can do with less. Indiana Jones is the middle ground, I think. I'm guessing Avowed will be 30+ hours as well.

This is a solid lineup from late Oct to mid May (7 months):

CoD BO6
FS 2024
Indiana Jones
Ninja Gaiden Black 2 Remastered
Avowed
South of Midnight
Clair Obscur 33
Doom DA

 

[Scott_Arm]

I think one of the ways MS is keeping costs down is by doing more 10 hour games like Hellblade 2 and South of Midnight. They know that 90% of people never play more than 10 hours of most games and just have to hold attention long enough to justify their subscription to GP. Some games like Starfield have to be 40+ hours with DLC, but a lot of games can do with less. Indiana Jones is the middle ground, I think. I'm guessing Avowed will be 30+ hours as well.

It's honestly a good point. If you're going by the subscription model, you only need the game to be long enough that people will actually finish it. Rather than the $70 game where companies feel pressured to make their game have a boatload of filler to extend the play time and increase "value."

 

[Johnny Awesome]

The anti-AC approach. LOL

 

[QPlayer]

I think one of the ways MS is keeping costs down is by doing more 10 hour games like Hellblade 2 and South of Midnight. They know that 90% of people never play more than 10 hours of most games and just have to hold attention long enough to justify their subscription to GP. Some games like Starfield have to be 40+ hours with DLC, but a lot of games can do with less. Indiana Jones is the middle ground, I think. I'm guessing Avowed will be 30+ hours as well.

This is a solid lineup from late Oct to mid May (7 months):

CoD BO6
FS 2024
Indiana Jones
Ninja Gaiden Black 2 Remastered
Avowed
South of Midnight
Clair Obscur 33
Doom DA

+2. The Atomfall game is coming in a month and MechaBreak too, which will be an Xbox console exclusive for the time being.

Avowed is out, I think it's a awesome 9 point game, I'll write about it later.

 

[Charlietus]

I have no idea why Microsoft didn't get someone like Kevin butler to make some ads promoting the series s with Minecraft and Fortnite alongside gamepass, pushing it in all countries like playstation does.

In the years during the Activision trial they just... Kind of disappeared. And I don't understand why.

 

[QPlayer]

I have no idea why Microsoft didn't get someone like Kevin butler to make some ads promoting the series s with Minecraft and Fortnite alongside gamepass, pushing it in all countries like playstation does.

In the years during the Activision trial they just... Kind of disappeared. And I don't understand why.

Because they don't need outdated ads. Soon, as MS games come out, many people will realize that Game Pass is a great thing. MS's multiplatform strategy is absolutely brilliant, they release their games for $70 on other platforms, while you can get them all for much less on their subscription service. I wouldn't be surprised to see a significant increase in GP subscribers soon.

 

[Johnny Awesome]

Probably because MS doesn't want to sell a Fortnite box. They want to sell GamePass subscriptions.

In fact, it's safe to say that MS doesn't care about selling an Xbox to non-subscribers anymore.

 

[Charlietus]

Because they don't need outdated ads. Soon, as MS games come out, many people will realize that Game Pass is a great thing. MS's multiplatform strategy is absolutely brilliant, they release their games for $70 on other platforms, while you can get them all for much less on their subscription service. I wouldn't be surprised to see a significant increase in GP subscribers soon.

Oooooooh I could not disagree more.
First, ads aren't outdated. Not much else to say about that.
Second, it's not a strategy, it's a necessary turn to keep the operation sustainable.
Third, they just had COD on gamepass. COD, the nuclear option, and they pulled it. And it didn't really move the needle much. Gamepass isn't going to become the Netflix of games. The Netflix of games will not exist, because games aren't tv series.

 

[Charlietus]

Probably because MS doesn't want to sell a Fortnite box. They want to sell GamePass subscriptions.

In fact, it's safe to say that MS doesn't care about selling an Xbox to non-subscribers anymore.

Phil Spencer would disagree with you, as game pass has stagnated, he began to say that game pass is just one side of the business, and that they aren't going all in just on that. And if you are right, they made-are making a mistake.

 

[Johnny Awesome]

CoD on GP did move the needle. Maybe by as much as 20% even. I've heard that subs went from 30 million to 35+ million. That's moving the needle.

GamePass already is the Netflix of gaming. It's generating $5 billion in revenue +MTX right now, but it will be more limited in scope than Netflix in the end because people don't need as much variety in their gaming as they do in their TV watching.

That doesn't mean it won't end up eventually at 100 million users as they improve the interface on PC and the content on offer (35+ studios etc...).

Of course GamePass is only one side of the business. The other side is selling $70 games to PC, PS and Switch owners.

I think Phil realized that losing $100 per Xbox so that you can make up that money with $20 per game over 3 years before you're even in the black isn't exactly an amazing way to make money.

 

[QPlayer]

Oooooooh I could not disagree more.
First, ads aren't outdated. Not much else to say about that.
Second, it's not a strategy, it's a necessary turn to keep the operation sustainable.
Third, they just had COD on gamepass. COD, the nuclear option, and they pulled it. And it didn't really move the needle much. Gamepass isn't going to become the Netflix of games. The Netflix of games will not exist, because games aren't tv series.

Oh, wait just a little bit, they will have better and better games out in a couple of months.

A few weeks after its release, it was announced that COD had caused a significant increase in subscriber numbers. And that's just the beginning. Their strategy is deceptive. Just listen!

 

[Scott_Arm]

@Johnny Awesome I currently view the Xbox application in Windows as a computer virus. I'll considering getting a game pass subscription whenever it's not a total piece of ...

 

[Johnny Awesome]

That's fair from what I've heard and my limited experience with it, but they won't leave it like that forever. I'm not sure what the hold up is. They might be integrating everything.

I'll admit that if the lineup this year is:

Ninja Gaiden 2 Black Remastered
Avowed
South of Midnight
Doom DA
Clair Obscur 33
Oblivion Remaster
Ninja Gaiden 4
New CoD
Forza Horizon 6
Outerworlds 2

... and still GP doesn't take off, then I throw in the towel and admit that GP will never be a mega hit (though it'll likely make money and continue to exist).