Going down 40% year over year for multiple consecutive years on consoles sold with no end in sight isn't doing fine.
I can assure you that Microsoft would love to have their lucrative walled garden. To me and many others it doesn't make sense for Microsoft to abandon the concept of loss leading consoles when it's the majority of their revenue, but that's what's happening right now.
No more consoles sold at a loss=half of the consoles that they are selling right now, probably even worse. Numbers so low that if it doesn't support PC exe's developers would struggle to justify a port.
Is being the biggest publisher on earth more lucrative than being the third biggest console? Probably. It's just not very exciting, and it's a capitulation on all fronts.
I wouldn't say any of this would be necessarily 100% true. There are greater challenges here happening for the console industry above and beyond competition. There are some major challenges that the console market faces today that frankly despite the fact that Sony is the leader by far, they continue to follow in the footsteps of MS. And would go directly against your axiom here.
The first major challenge for console platforms is the hardware can no longer be sold for a loss. Typically they would sell hardware at a loss because the attach rate for software was high enough to make up for the loss in selling hardware. Today with F2P games, and with no requirement on for subscription to play free to play games, all you need is the console, and you can play games forever. And if the platform holder is taking a loss on hardware, well that's just going put you into the hole.
Second major challenge, the cost of consoles is going up, and this is largely due to the hitting the wall of progress, to continue to have more and more computation cost power, transistors, clock speed, memory amount, bandwidth, these are all things that in order for us to drive consumers to leave their existing hardware and move to next generation, it has to do these things better, unfortunately this continues to increase the price point beyond what the console market can afford, and now this compounds with the first point, more expensive hardware could have been subsidized, but it is no longer an answer.
Third major challenge, the vast majority of console owners are older males with lots of disposable income. They cited 45% of the population buying consoles were over 45 years of age. Unfortunately, let's be real, you're going to age out. They may have the money to spend on games, but they're also the most likely to stop playing. They need to get the audience of kids that when they originally built consoles, the vast majority of their users were actually between 12-24. Today those kids are on mobile devices and PCs.
So if you were Sony or MS, how are you going to realistically keep growing your business? Your 50% of your walled garden is attached to an aging population, the youth has grown up playing games on their mobile devices, they've grown up playing MTX titles and Roblox, Minecraft, Fortnite (UEFN) and all sorts of user generated content titles, effectively all F2P titles. The price of console hardware is going up. Free to play games has basically destroyed your software attached rate.
It's easy to criticize MS on what they're doing, but what exactly is Sony doing here, to address the upcoming challenges? Can they really just sit around and hope people will keep buying into their walled garden generation after generation? Is there some sort of revolution in silicon that's coming along that will double or triple the power while keeping the price point the same or lower? Do they have an answer against F2P titles?
When the PS6 generation comes, what will cause people to move over to PS6, when the current generation of consoles are perfectly useful at playing every single F2P title today? Who cares about hardware revenue numbers if no one is buying software. And that's what this is coming down to for MS. They are losing money on every single console they sell. MS aren't a hardware company, they don't want to enter a business of selling hardware for profit. They are a software company, they want to make money selling software. That's very different from Sony who is a hardware company, and they are very comfortable making money selling hardware..
By putting everything on PS, MS don't take a loss on hardware, they get 70% profit, and their games get much more exposure because most people were ignoring xbox titles because it wasn't coming to playstation.
I guess I question is, do you really believe that MS is behaving this way because they're losing? Or because the industry is charting towards a path of unsustainability and drastic changes are required in the platform strategy? The fact that Sony continues to follow in the footsteps of MS, should tell you despite it being somewhere in the middle of that spectrum, it's likely weighted in the latter.
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