Xbox Business Update Podcast | Xbox Everywhere Direction Discussion

[Charlietus]

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.

More than Sony following Microsoft I see industry wide problems that's hitting both in different ways.

On your first point, I see Microsoft going away from losses on hardware by selling less and not offering discounts anymore. Sony on the other hand is still losing on the base hardware while introducing the pro that's sold for a huge profit.

Second and third point, I agree mostly. And that's one thing where Microsoft was really ahead of Sony. The series s is a "shitbox" (non derogatory) that's perfect for children and low income households. But Microsoft failed to produce compelling marketing for it, and so it wasn't a game changer. Sony will make their low spec console next gen to try to regain the market share lost on adolescents and children, the console market has been about the hardcore for too long.

On the rest of the message, the answer lies in abandoning generations completely and, by offering hardware that suits both budget and lifestyle (low spec console and a portable). Developers need more people buying games, not to advance the hardware baseline to achieve more "advanced games". If in the future there is some breakthrough in lithography that permits huge perf/€ advancements, than they can think about a higher baseline, but right now, they should think about expanding the gaming population.

 

[mr magoo]

But when we are talking about the console platform (Xbox console, store, services, accessories) you can see why Microsoft is moving focus away from competing with other platforms to what they are doing now.

If console sales are down, game pass isn't meeting projections and the platform isn't growing what do you do? They needed to convince the CEO to wait a couple of years for the next console-next plan, but they couldn't. And so now Xbox has and will change completely.

June 1, 2017; 7 years ago

Xbox Game Pass - Wikipedia

en.wikipedia.org

So they keep service running for 7 years becouse? They are THE good guys for sure
All in all, i think its a good thing, we have choice here, you dont like xbox/GP fine sony or ninny or PC is for you, let them do their things let us play games. If in the end Xbox brand will crash and burn and there will be no more xbox consoles world will not end. But as @iroboto pointed out, we live in a diffrent reality now. Day is only 24h long and besides consoles and all the problems they have there is a lot that suck out our attention. Just becouse they are doing something that dosent fit to our traditional model of the world dosent mean is a failure.

Except we don't know how/if they are profiting! We only have revenue, not profits.

True

• Sony/PlayStation - $30.8 billion
• Microsoft/Xbox - $22.7 billion
• Nintendo - $8 billion

we have no clue its possible that Ninny makes most profits here.

 

[Charlietus]

June 1, 2017; 7 years ago

Xbox Game Pass - Wikipedia

en.wikipedia.org

So they keep service running for 7 years becouse? They are THE good guys for sure
All in all, i think its a good thing, we have choice here, you dont like xbox/GP fine sony or ninny or PC is for you, let them do their things let us play games. If in the end Xbox brand will crash and burn and there will be no more xbox consoles world will not end. But as @iroboto pointed out, we live in a diffrent reality now. Day is only 24h long and besides consoles and all the problems they have there is a lot that suck out our attention. Just becouse they are doing something that dosent fit to our traditional model of the world dosent mean is a failure.

True

• Sony/PlayStation - $30.8 billion
• Microsoft/Xbox - $22.7 billion
• Nintendo - $8 billion

we have no clue its possible that Ninny makes most profits here.

I don't like Xbox? Am I even talking about liking them or not? I like to talk about data, market trends and the industry.

I don't know why you are showing me a Wikipedia page for game pass. Go inform yourself on the game pass leaks during the Activision trials, and how they had expectations that they are missing by a landslide, or how Nadella removed game pass from the list of objective needed for him to get his bonuses.

And if they go towards not pushing the console platform, i don't see a path for them to keep the game pass user base and at the same time not losing the third party royalties from games.

What I see is not a long term strategy, but a way to make investors happy in the short term, which is something that's happening way too often recently.

 

[rntongo]

https://twitter.com/x/status/1889934489796878510

Based on data provided by each company, Sony commanded approximately 50% of the Big 3's combined revenues throughout calendar 2024.

• Sony/PlayStation - $30.8 billion
• Microsoft/Xbox - $22.7 billion
• Nintendo - $8 billion



And why would they do that? According to Phil Spencer they still make most money from console users as they spent most and play most. I heard about how Xbox is dead they are dropping consoles and becoming Sega etc etc. If we focus on only consoles unit sold Nintendo should be on the first place with more than 150 mln consoles sold. Seems like they are doing more than fine.

With them pushing their IPs onto every other platform, then they're going to end up becoming one(3rd party publisher). I remember just how seriously consumers took to playstation when Don Mattrick told them to eff off if they wanted gaming. People bought playstation 4s which barely had any titles. Every person and their grandma was playing Killzone on PS4. Now there's essentially no reason to own an Xbox since all their title are going to be available on Nintendo and Playstation almost immediately. Under Phil there has been a serious atrophying of the console install base compared to previous gens and a lot of new consumers are going onto Playstation or Nintendo. Thats the dilemma, the aim to move in multiple directions eventually leads to this.

 

[rntongo]

More than Sony following Microsoft I see industry wide problems that's hitting both in different ways.

On your first point, I see Microsoft going away from losses on hardware by selling less and not offering discounts anymore. Sony on the other hand is still losing on the base hardware while introducing the pro that's sold for a huge profit.

Second and third point, I agree mostly. And that's one thing where Microsoft was really ahead of Sony. The series s is a "shitbox" (non derogatory) that's perfect for children and low income households. But Microsoft failed to produce compelling marketing for it, and so it wasn't a game changer. Sony will make their low spec console next gen to try to regain the market share lost on adolescents and children, the console market has been about the hardcore for too long.

On the rest of the message, the answer lies in abandoning generations completely and, by offering hardware that suits both budget and lifestyle (low spec console and a portable). Developers need more people buying games, not to advance the hardware baseline to achieve more "advanced games". If in the future there is some breakthrough in lithography that permits huge perf/€ advancements, than they can think about a higher baseline, but right now, they should think about expanding the gaming population.

Sony will never make a Series S type device. Their focus is on a short time to triangle without any hiccups. They'll always release one piece of hw at a time. The low cost device is going to be the base PS5 which will be much cheaper to produce and buy for consumers during the cross gen period. Years after the PS6 is launched they can experiment with a mid gen refresh and or handheld device but not releasing two different pieces of hw at the same time that could jeopardize their time to triangle for games. Releasing two home devices at the same time in an age of increasing mobile computing devices and complex SDLC+ the usual strict console gaming requirements has to be one of the most baffling decisions I've ever seen.

 

[mr magoo]

I don't like Xbox? Am I even talking about liking them or not? I like to talk about data, market trends and the industry.

I am talking in general about consumer prefernces not directly about you.

"
What I see is not a long term strategy, but a way to make investors happy in the short term, which is something that's happening way too often recently.

"
And i see something completly diffrent, something that targets not current userbase but future. A diversification of incomes, eliminating SPOF (single point of failure).

"I don't know why you are showing me a Wikipedia page for game pass. Go inform yourself on the game pass leaks during the Activision trials, and how they had expectations that they are missing by a landslide, or how Nadella removed game pass from the list of objective needed for him to get his bonuses"

right, so why they are keeping this service alive for 7 years now. Charity?
During ABK case Sony said without COD they cannot survive, perhaps this was exageration on their part, but as far as i remeber correctly they said that 30% cut they make on COD microtransactions allows them to fund theirs AAA games.
We know that live services games are the most profitable (if successfull ofc) becouse of the constant cash flow. MSFT has many successfull iveservice games on all platfroms, some of them were most played games for PS in december 2024.
Sony has only one successful LS game Helldivers2.
"EA's live services makes up almost 75% of the company's revenues. Ultimate Team for Sports FC, Madden NFL and the other sports titles makes up roughly ~50% of live services revenues. The other ~30% comes from other extra content spend like Apex Legends and the Sims and ~20% from subscriptions."

So MSFT has secured cash flow from LS games and GP. On the other hand Sony has been hit by multiple cancelation of project that were in advanced stage

• Bend Studio's Unannounced Live-Service Game: Bend Studio was reportedly developing a third-person open-world military shooter. This project was canceled following a strategic review by Sony.
  
  
• Bluepoint Games' 'God of War' Live-Service Game: Bluepoint Games was working on a live-service title set in the 'God of War' universe. This project was also canceled as part of Sony's reassessment of its live-service game lineup.
• 'Concord' by Firewalk Studios: Released on August 23, 2024, 'Concord' was a multiplayer first-person hero shooter. Due to underperformance, Sony shut down the game just two weeks post-launch and subsequently closed Firewalk Studios.

Plus naugthy dog Last of us online something that got cancelled. Recent State of Play was not recived very good by players becouse lack of first party games. Sony seems to take startegy of doing safe remasters instead.
The point i am trying to make here is maybe we shouldnt be worried about MSFT future.

 

[Charlietus]

Sony will never make a Series S type device. Their focus is on a short time to triangle without any hiccups. They'll always release one piece of hw at a time. The low cost device is going to be the base PS5 which will be much cheaper to produce and buy for consumers during the cross gen period. Years after the PS6 is launched they can experiment with a mid gen refresh and or handheld device but not releasing two different pieces of hw at the same time that could jeopardize their time to triangle for games. Releasing two home devices at the same time in an age of increasing mobile computing devices and complex SDLC+ the usual strict console gaming requirements has to be one of the most baffling decisions I've ever seen.

Never is a pretty strong word. There are already leaks from kopite and the like that there are multiple chips being developed and one of them should be pretty cheap. It's probably happening in like 2 years or so. There is 0 possibility for me that they come out with a 600€$ console and just call it a day. It would be a commercial suicide.

 

[Shifty Geezer]

Plus naugthy dog Last of us online something that got cancelled. Recent State of Play was not recived very good by players becouse lack of first party games. Sony seems to take startegy of doing safe remasters instead.

Sony were put onto a path of GaaS by Ryan. They've terminated most of those, something like 7. They'll be back onto making major titles again but this'll take time to get up to speed; they aren't just giving up and doing 'safe remasters'.

Prior to GaaS, Sony's first party titles were nicely profitable, readily tripling their investment, so they aren't going to abandon that.

No-one should be worrying about any of the Big Three for the time being. They're all doing okay.

Never is a pretty strong word. There are already leaks from kopite and the like that there are multiple chips being developed and one of them should be pretty cheap. It's probably happening in like 2 years or so. There is 0 possibility for me that they come out with a 600€$ console and just call it a day. It would be a commercial suicide.

See, this thread is really getting whack! Why are we talking about the pricing and variety of SKUs of PlayStations?

 

[rntongo]

Never is a pretty strong word. There are already leaks from kopite and the like that there are multiple chips being developed and one of them should be pretty cheap. It's probably happening in like 2 years or so. There is 0 possibility for me that they come out with a 600€$ console and just call it a day. It would be a commercial suicide.

"Never" used within context isnt a strong word, to me at least. I vividly remember the same thing was said 2 years before the launch of the PS5, there were rumours Sony was developing two versions of the PS5 and were going to release two separate devices a strong one and a weaker one. Its really misinformation because Sony's focus is to work from the SDLC backwards towards the hw. If you're focus is this you're never going to release two separate hw devices at the same time(maybe a home device alongside a mobile device that has different requirements). Its even worse these days because of how complex and large AAA games have become. If MS for example tried releasing another set of two home consoles at the same time it would be another spectacular disaster. Why would Sony look at this failed strategy from MS and repeat it? Its almost guaranteed there will be a PS6, midgen PS6 and possibly a mobile device with completely different hw and sw requirements.

 

[Charlietus]

I am talking in general about consumer prefernces not directly about you.

"
What I see is not a long term strategy, but a way to make investors happy in the short term, which is something that's happening way too often recently.

"
And i see something completly diffrent, something that targets not current userbase but future. A diversification of incomes, eliminating SPOF (single point of failure).

"I don't know why you are showing me a Wikipedia page for game pass. Go inform yourself on the game pass leaks during the Activision trials, and how they had expectations that they are missing by a landslide, or how Nadella removed game pass from the list of objective needed for him to get his bonuses"

right, so why they are keeping this service alive for 7 years now. Charity?
During ABK case Sony said without COD they cannot survive, perhaps this was exageration on their part, but as far as i remeber correctly they said that 30% cut they make on COD microtransactions allows them to fund theirs AAA games.
We know that live services games are the most profitable (if successfull ofc) becouse of the constant cash flow. MSFT has many successfull iveservice games on all platfroms, some of them were most played games for PS in december 2024.
Sony has only one successful LS game Helldivers2.
"EA's live services makes up almost 75% of the company's revenues. Ultimate Team for Sports FC, Madden NFL and the other sports titles makes up roughly ~50% of live services revenues. The other ~30% comes from other extra content spend like Apex Legends and the Sims and ~20% from subscriptions."

So MSFT has secured cash flow from LS games and GP. On the other hand Sony has been hit by multiple cancelation of project that were in advanced stage

• Bend Studio's Unannounced Live-Service Game: Bend Studio was reportedly developing a third-person open-world military shooter. This project was canceled following a strategic review by Sony.
  
  
• Bluepoint Games' 'God of War' Live-Service Game: Bluepoint Games was working on a live-service title set in the 'God of War' universe. This project was also canceled as part of Sony's reassessment of its live-service game lineup.
• 'Concord' by Firewalk Studios: Released on August 23, 2024, 'Concord' was a multiplayer first-person hero shooter. Due to underperformance, Sony shut down the game just two weeks post-launch and subsequently closed Firewalk Studios.

Plus naugthy dog Last of us online something that got cancelled. Recent State of Play was not recived very good by players becouse lack of first party games. Sony seems to take startegy of doing safe remasters instead.
The point i am trying to make here is maybe we shouldnt be worried about MSFT future.

"I am talking in general about consumer prefernces not directly about you."

Oh okay.

"And i see something completly diffrent, something that targets not current userbase but future. A diversification of incomes, eliminating SPOF (single point of failure)."

I agree, it's just that the console gets sacrificed in the process.

Don't know what to do with the rest of the message.

 

[Shifty Geezer]

Why would Sony look at this failed strategy from MS and repeat it?

Because one failed attempt doesn't prove an idea is without merit, and maybe they can look at the failed strategy and learn from it to execute more effectively?

What precisely 'went wrong' with XBSS and is there a workaround? AFAICS the only real issue was RAM. Both MS and Sony could approach the idea of a low tier model with more insight now. Even moreso as both are now making multiplat titles to scale down on PC.

 

[Charlietus]

See, this thread is really getting whack! Why are we talking about the pricing and variety of SKUs of PlayStations?

It's kind of difficult to talk about what Microsoft is doing while competing with another player while not talking about said player

 

[rntongo]

Because one failed attempt doesn't prove an idea is without merit, and maybe they can look at the failed strategy and learn from it to execute more effectively?

Yes I think a mobile device with different requirements would be a good compliment. Definitely not two separate home console devices released at the same time with different hw configurations and the same exact strict requirements. If in the future say 2028, MS released a more portable version device comparable in power to the Series S with its own devkit and own software requirements.

What precisely 'went wrong' with XBSS and is there a workaround? AFAICS the only real issue was RAM. Both MS and Sony could approach the idea of a low tier model with more insight now. Even moreso as both are now making multiplat titles to scale down on PC.

For the hw it was definitely the RAM, that could have solved alot of issues but it would have been a prohibitively expensive device for the price point they were aiming for. So defacto it wasnt feasible to have two devices that are only separated by a GPU but you're selling the weaker one at $300. Despite MS having ungodly amounts of money, they would have had to work within budgetary constraints under the gaming division. Of course after 3+ years the cost of RAM was bound to go down but its hard to stomach such losses in the first 3 years. But even with the RAM deficiencies things wouldn't have been too bad in terms of delivering games. But what made it all terrible is that they went ahead and put strict feature parity requirements with the Series X version of titles, that was actually the worst thing they did imho. But considering other things like addressable market, the trend towards more mobile computing devices, it really baffles me that they went with such a strategy to launch two home console hw devices at the same time!! There was just so many things that could go wrong that actually did from a business, marketing, technical angle.

 

[Charlietus]

Series s wasn't a failure in any way. If Microsoft just got series x on the market, they would have been hit as hard as Sony during covid with shortages, while in reality they had the series s and it's smaller chip as an advantage. And in general, the series consoles would have sold much less if the series x was the only option.

 

[mr magoo]

"I am talking in general about consumer prefernces not directly about you."

Oh okay.

"And i see something completly diffrent, something that targets not current userbase but future. A diversification of incomes, eliminating SPOF (single point of failure)."

I agree, it's just that the console gets sacrificed in the process.

Don't know what to do with the rest of the message.

Is it thou? Seriously why would they stop making it?

Sales. The research firm Omdia reported that the Steam Deck sold 1.62 million units in 2022. Their report estimated that the Steam Deck would pass 3 million units sold since its launch sometime during 2023. Through 2022 and most of 2023, the Deck had been one of the most popular purchases on the Steam storefront.

And they still producing it, we dont know how the next xbox will look like. It seems like they are trying to create this play anywhere ecosystem build around GP, the question is how do you build HW that uses it in intresting way. Maybe they will not go toe with toe with Sony, but still i dont see the reason why they should stop making consoles. I think Alex rised good point on DF tech talk, msft should aim to produce unit without need to sell it at loss.
Nextbox fully compat with upgraded spec that can play all existsing GP games + all future ones would be enough reason for me to buy it.

 

[Charlietus]

Is it thou? Seriously why would they stop making it?

Sales. The research firm Omdia reported that the Steam Deck sold 1.62 million units in 2022. Their report estimated that the Steam Deck would pass 3 million units sold since its launch sometime during 2023. Through 2022 and most of 2023, the Deck had been one of the most popular purchases on the Steam storefront.

And they still producing it, we dont know how the next xbox will look like. It seems like they are trying to create this play anywhere ecosystem build around GP, the question is how do you build HW that uses it in intresting way. Maybe they will not go toe with toe with Sony, but still i dont see the reason why they should stop making consoles. I think Alex rised good point on DF tech talk, msft should aim to produce unit without need to sell it at loss.
Nextbox fully compat with upgraded spec that can play all existsing GP games + all future ones would be enough reason for me to buy it.

Well, not saying that they will not make something, just that this strategy hurts the console. Went from 87 million with the 360, to 60~ with the one, to maybe 35 million with series? What's next?

The deck is a side project for valve, a plus, while the series was the main actor for Microsoft up until some time ago. That's really different.

Like, they aren't shutting game pass down because it's not hitting targets, they aren't going to stop producing the series consoles because the sales keep getting worse, but that's still a problem for them.

 

[BRiT]

Sony were put onto a path of GaaS by Ryan. They've terminated most of those, something like 7. They'll be back onto making major titles again but this'll take time to get up to speed; they aren't just giving up and doing 'safe remasters'.

They are not going back to making single player games. They have cancelled some GaaS titles that will be replaced by work on other GaaS titles.

No-one should be worrying about any of the Big Three for the time being. They're all doing okay.

Absolutely. All three corporations make plenty of money to exist for all of eternity. It's not a matter of existing, but a matter of growth. That is what these mega-corps are chasing.

 

[see colon]

MS messaging has been a disaster for a while and whatever they say is hardly believed anyway.
It just reflects internal indecisiveness about the right course.

They've been very explicit about their support for competitors hardware since the ABK acquisition began. Anyone not seeing that part coming was putting blinders on.

 

[Johnny Awesome]

Nothing wrong with the S. It has 99% feature parity with the X. People find a few disgruntled dev comments on memory and lose all objectivity because they have an axe to grind.

Sony will never make a Series S type device. Their focus is on a short time to triangle without any hiccups.

Time to triangle. Lol

Obsidian is publishing their 4th game this gen on both X and S this year while Naughty Dog hasn't done anything but remasters in years.

The time to triangle on PS5 couldn't be longer than the time to Xbox X AND S.

 

[rntongo]

Nothing wrong with the S. It has 99% feature parity with the X. People find a few disgruntled dev comments on memory and lose all objectivity because they have an axe to grind.


Time to triangle. Lol

Obsidian is publishing their 4th game this gen on both X and S this year while Naughty Dog hasn't done anything but remasters in years.

The time to triangle on PS5 couldn't be longer than the time to Xbox X AND S.

Okay if that makes you happy. Unfortunately I cant play Black Myth Wukong on my Series X because of strict feature parity requirements. All Xbox had to do was let the game ship on the S in the state its in but nope, they want devs to spend extra time(without compensation) optimizing for a machine thats not really wanted by the market(Series S). Forcing certain studios that have resource constraints to work on a segmented machine. And they cant own up to it but instead get people like Jez Corden to propagate diversionary lies all while they flirt with ditching hw altogether.

You really wonder why MS paid extra for the Series X silicon really. But tbh they dont seem to care anymore since they could be thinking of leaving the hw business. I dont think I'll be having Xbox as my main console again tbh. Next gen it will be Sony for sure.