Xbox Business Update Podcast | Xbox Everywhere Direction Discussion

[Johnny Awesome]

1) why would Valve give MS any % of profits. They can and are putting out their own steam os product.

We'll see how that pans out. Valve might also see value in being everywhere in the xCloud too. On the firesticks and in Samsung TVs etc... everywhere Xbox will be.

2) How many of them are new to the xbox ecosystem ? I don't actually know anyone in my circle that has bought a series console that didn't have a one

Who cares who's new? The point is that there are 30 million GP subscribers that want new hardware. The cloud doesn't really work YET.

3)they will end up loosing xbox hardware sales and third party sales on xbox. THe market is already showing the future of xbox

Of course they will. The question is how much? MS believes the revenue from Gears, Forza, Halo, Bethesda games etc... on PS and Switch is more than what they'll lose from 3rd party platform revenues from those who leave the Xbox platform.

4) xbox as a hardware platform is a dead man walking at this point. I believe they will find out that people don't want game pass once the xbox console hardware is dead. . We are already seeing the decline in hardware sales when no other console has it. At the end of the day I believe even game pass will die because nintendo and sony wont want it on their platforms to eat up sales of their third party games and it wont sustain itself on windows and streaming.

I don't agree with your causal analysis. Just because PS gamers didn't want to abandon the Sony ecosystem for Xbox just to get GP, that existing GP Xbox ecosystem users won't buy new Xbox hardware to keep GP.

As I said earlier, if the hardware is good, I believe MS will keep most of their existing console fanbase because of GP. You think everyone is still going to jump ship. I'm ok that we don't agree on this.

 

[rntongo]

There are a ton of assumptions here for this to happen. At the end of the day price king. You can always compete on price. They share the majority of the library with Sony.

They can most definitely continue to compete. In a world where tariffs are being bordered up everywhere, MS has the advantage of deploying to multiple configurations to meet the price points that countries expect. The next generation Xbox could be intel for all we know, and intel chips are manufactured in the US and globally. This isn’t something Nintendo or Sony can do.

If US is the main market, once these tariffs go into place, whatever remaining stock there is, expect a massive increase in price very soon. And we know the price will go up, Sony has some of the smallest margins there are despite having the most revenue.

Xbox is already in the negative, so they don’t really care to sell more hardware, even more so now Until they can get costs under control.

I think whats missing from your analysis is the technical and UX. Consumers who like consoles dont want anything remotely similar to a PC, they want a small form factor console and a game store where they buy games to play that just work with 0 driver issues, shader precompilation issues, etc. I just dont see an Xbox branded PC as a suitable alternative to that. And how are developers going to support such a machine? What are the requirements for how games should run with multiple configurations of hw? It just seems like something where consumers will either opt to buy a real console like a PS6

 

[QPlayer]

At the end of the day, price king. Very true, and it’s why Game Pass will win in the long run. Gamers will buy fewer games due to rising prices, and more will likely subscribe to the cheaper subscription service. Microsoft knows this.

Game Pass’ current track record is no indication of what it will achieve on new Xbox-centric hardwares with Xbox OS in the years to come.

 

[iroboto]

I think whats missing from your analysis is the technical and UX. Consumers who like consoles dont want anything remotely similar to a PC, they want a small form factor console and a game store where they buy games to play that just work with 0 driver issues, shader precompilation issues, etc. I just dont see an Xbox branded PC as a suitable alternative to that. And how are developers going to support such a machine? What are the requirements for how games should run with multiple configurations of hw? It just seems like something where consumers will either opt to buy a real console like a PS6

They’ll figure it out. You can figure out technical challenges, but if you can’t bring the price down, people will not buy. There’s an army of people banging on NSW2 pricing and that’s before tariffs.

By next month we will see the state of the console market after any remaining supply in the US is stripped.

But more importantly in the numerous discussions that have come up on Xbox versus PlayStation it has always been about library. Your entire argument is about this. UI/UX has never been brought up as being the main reason to purchase a PS5 over Xbox. It won’t suddenly be if there is a large price differential

 

[Johnny Awesome]

Yeah. Costs are rising. MS was even more right than they realized years ago. People might only be able to afford a Series S. LOL

 

[rntongo]

They’ll figure it out. You can figure out technical challenges, but if you can’t bring the price down, people will not buy. There’s an army of people banging on NSW2 pricing and that’s before tariffs.

By next month we will see the state of the console market after any remaining supply in the US is stripped.

But more importantly in the numerous discussions that have come up on Xbox versus PlayStation it has always been about library. Your entire argument is about this. UI/UX has never been brought up as being the main reason to purchase a PS5 over Xbox. It won’t suddenly be if there is a large price differential

I meant user experience, just like switching on the console and starting to play. Most of those consumers will go look for the most seamsless console experience they can get which will be the PS6, some will stay others will go to PC.

 

[iroboto]

I meant user experience, just like switching on the console and starting to play. Most of those consumers will go look for the most seamsless console experience they can get which will be the PS6, some will stay others will go to PC.

There will be another Xbox. But tariffs have a way of sticking around for a long time. And often tariffs that are put on never come off.

MS will still offer a console. They have every reason to continue to cater to this user base especially if they can find ways to keep their price down compared to their competition.

The last time there were massive trade barriers between countries, like Korea and Japan. Korea ended up going fully PC because they didn’t have much of a console scene.

If the tariffs play out as we understand them today with no exemptions to consoles, it’s not going to be pretty for console land in the US. The business model looks ripe for streaming though.
There are no tariffs on that.

 

[rntongo]

There will be another Xbox. But tariffs have a way of sticking around for a long time. And often tariffs that are put on never come off.

MS will still offer a console. They have every reason to continue to cater to this user base especially if they can find ways to keep their price down compared to their competition.

The last time there were massive trade barriers between countries, like Korea and Japan. Korea ended up going fully PC because they didn’t have much of a console scene.

If the tariffs play out as we understand them today with no exemptions to consoles, it’s not going to be pretty for console land in the US.

why do you think tariffs only affect consoles? Thats 1, another thing is what kind of console will this be, a traditional closed system or an Xbox branded PC being called a console?

 

[iroboto]

why do you think tariffs only affect consoles? Thats 1, another thing is what kind of console will this be, a traditional closed system or an Xbox branded PC being called a console?

tariffs affect all imported goods entering into the US as of April 10. There are some exemptions, today, but those exemptions are few and unfortunately not for gaming consoles.

The console can be anything that makes sense for the market. MS has the tech stack to switch vendors if required. Intel has 75% of their fab capacity in the US. All they need to do is prove that they can manufacture a 5nm SoC and you have the next Xbox if you’re looking for something super traditional.

 

[arandomguy]

There will be another Xbox. But tariffs have a way of sticking around for a long time. And often tariffs that are put on never come off.

MS will still offer a console. They have every reason to continue to cater to this user base especially if they can find ways to keep their price down compared to their competition.

The last time there were massive trade barriers between countries, like Korea and Japan. Korea ended up going fully PC because they didn’t have much of a console scene.

If the tariffs play out as we understand them today with no exemptions to consoles, it’s not going to be pretty for console land in the US. The business model looks ripe for streaming though.
There are no tariffs on that.

The tariffs are broad and would affect PC and datacenter components as well. So I don't think going PC would avoid the price impact of tariffs.

While streaming services themselves would avoid tariffs if they want datacenters in the US then their infrastructure is going to cost more on the backend to setup.

Not to mention I believe there's more discussions by various governments (this isn't US specific) on regulating, taxing, and etc. cross border digital trade.

 

[iroboto]

The tariffs are broad and would affect PC and datacenter components as well. So I don't think going PC would avoid the price impact of tariffs.

While streaming services themselves would avoid tariffs if they want datacenters in the US then their infrastructure is going to cost more on the backend to setup.

Not to mention I believe there's more discussions by various governments (this isn't US specific) on regulating, taxing, and etc. cross border digital trade.

absolutely, but that's something that microsoft can afford because cloud services are designed to be oversubscribed. If we anticipate the worst of this trade war, very few people would be willing to pay a 40% premium for a gaming console.
PC won't be able to avoid the tariffs either. But in a discussion of whether moving the xbox platform to multi-platform versus locking into a singular console, I think spreading across multiple platforms, like cloud, like PC, and console, and third party mobile devices, is more resilient to market fluctuations over the traditional model.

 

[rntongo]

tariffs affect all imported goods entering into the US as of April 10. There are some exemptions, today, but those exemptions are few and unfortunately not for gaming consoles.

Exactly it affects all imported goods, as well it affects US manufacturing and exports in the event of rising input costs due to imported inflation as well as retaliatory tariffs.

The console can be anything that makes sense for the market. MS has the tech stack to switch vendors if required. Intel has 75% of their fab capacity in the US. All they need to do is prove that they can manufacture a 5nm SoC and you have the next Xbox if you’re looking for something super traditional.

Okay since current rumours point to an Xbox branded PC manufactured by different OEMs, it doesnt matter how strong MS's software teams are, they are going to face serious challenges that Sony doesnt even have to worry about to provide the same seamless experience as a single spec PS6. On top of that Steam store on the Xbox branded PC takes away more sales and internal resources to facilitate a seamless experience of having multiple stores. Unless MS is just going to make it an Xbox branded Windows PC with a loader for Xbox OS.

 

[iroboto]

Exactly it affects all imported goods, as well it affects US manufacturing and exports in the event of rising input costs due to imported inflation as well as retaliatory tariffs.

Being able to pull from multiple audiences should be more resilient than a single pool. It cloud gaming can still be significantly cheaper because the capital costa are
Divided among many more players.

Okay since current rumours point to an Xbox branded PC manufactured by different OEMs, it doesnt matter how strong MS's software teams are, they are going to face serious challenges that Sony doesnt even have to worry about to provide the same seamless experience as a single spec PS6. On top of that Steam store on the Xbox branded PC takes away more sales and internal resources to facilitate a seamless experience of having multiple stores. Unless MS is just going to make it an Xbox branded Windows PC with a loader for Xbox OS.

Unfortunately these are Rumors and speculations. What their plans are and how they achieve them is ultimately up to them.

My goal in writing is to explain the business perspective of things. i want to break the major assumptions around affordability, around accessibility, around availability all being equal.

The landscape has changed.

 

[rntongo]

Being able to pull from multiple audiences should be more resilient than a single pool. It cloud gaming can still be significantly cheaper because the capital costa are
Divided among many more players.

Hmm, I understand MS has Azure to fall back on for cloud gaming and the Series X APU is server grade but they'd still have capital costs to scale up cloud computing infrastructure.

Unfortunately these are Rumors and speculations. What their plans are and how they achieve them is ultimately up to them.

Yes but we know for a fact as things stand today they are moving to publish as much as they can on rival platforms, are working on Xbox branded hw from OEMs, as well as integrating rival stores onto their Xbox branded HW from OEMs. Also they're pushing the narrative that any device than can play games made by Xbox is an Xbox. I think that as of today its pretty clear where things are heading

My goal in writing is to explain the business perspective of things. i want to break the major assumptions around affordability, around accessibility, around availability all being equal.

Yeah and good job, just dont think tariffs are going to be any easier for MS Gaming to navigate than say Sony and Nintendo.

The landscape has changed.

Yes and all the different companies are adapting to the changes.

 

[see colon]

Yeah and good job, just dont think tariffs are going to be any easier for MS Gaming to navigate than say Sony and Nintendo.

For consoles, yes. But for cloud? That sort of depends on their current cloud capacity, or if they have datacenters in nearby countries with fast enough latency. Sony provides cloud streaming as a value add to their hardware (you need a PS5 to stream PS5 games), but Xbox has it as a full blown feature that you can experience without any Xbox hardware. There wouldn't be US tariffs on building a Canadian cloud server, so it is conceivable that Microsoft just builds any future servers just over the border in Canada or Mexico as long as they can keep the QOS high enough.

 

[Shifty Geezer]

MS has Azure datacentres everywhere, inside and outside the US, including two in Canada already. Tariffs wouldn't come into their game streaming business (unless GP streaming is some weird situation!)

 

[see colon]

MS has Azure datacentres everywhere, inside and outside the US, including two in Canada already. Tariffs wouldn't come into their game streaming business (unless GP streaming is some weird situation!)

I'm talking about them building new data centers to either increase their capacity, or to build a next generation streaming platform.

 

[eastmen]

We'll see how that pans out. Valve might also see value in being everywhere in the xCloud too. On the firesticks and in Samsung TVs etc... everywhere Xbox will be.

Valve can already be everywhere they want. They already offer video streaming on steam and they can implement cloud gaming streaming also.

There is no need to give up profits to microsoft

Who cares who's new? The point is that there are 30 million GP subscribers that want new hardware. The cloud doesn't really work YET.

IF you aren't growing as a business you are dying. I'm a Game pass subscriber and I don't want new hardware. There isn't a reason for me to waste money on a new piece of hardware where all those game will work on my tv without hardware. This is a sentiment echoed to me from lots of current xbox series owners.

There were what 80-90m xbox 360 owners who wanted new hardware and 20-30m just vanished. Now from the one to the series it seems like more are disappearing.

Of course they will. The question is how much? MS believes the revenue from Gears, Forza, Halo, Bethesda games etc... on PS and Switch is more than what they'll lose from 3rd party platform revenues from those who leave the Xbox platform.

I haven't seen any assertion from Microsoft that they believe they will make more money from those games on ps and switch than they will from all 3rd party platform revenue on xbox. Do you have a link to an interview stating that ? Maybe what they mean is that by the time they are done driving away the user base there wont be any money to be made on the 10-20m consoles they might be able to sell next generation?

IF so then you are just proving my point that xbox hardware is a dead man walking.

I don't agree with your causal analysis. Just because PS gamers didn't want to abandon the Sony ecosystem for Xbox just to get GP, that existing GP Xbox ecosystem users won't buy new Xbox hardware to keep GP.

I'm an existing xbox owner with gp and I am telling you I wont be buying a new xbox to keep game pass. I've owned all the xboxs and the next one I wont be buying. If I want game pass I don't need an xbox to use game pass.

As I said earlier, if the hardware is good, I believe MS will keep most of their existing console fanbase because of GP. You think everyone is still going to jump ship. I'm ok that we don't agree on this.

We already see xbox users jumping ship during this generation. Xbox series hardware is now behind xbox one hardware which was behind xbox 360 hardware

Xbox console sales continue to crater with massive 42% revenue drop

Xbox Series X/S sales seem to have peaked early in 2022.

arstechnica.com

https://www.tweaktown.com/news/102881/xbox-hardware-revenue-down-to-second-lowest-point-in-the-last-10-years/index.html

 

[rntongo]

For consoles, yes. But for cloud? That sort of depends on their current cloud capacity, or if they have datacenters in nearby countries with fast enough latency. Sony provides cloud streaming as a value add to their hardware (you need a PS5 to stream PS5 games), but Xbox has it as a full blown feature that you can experience without any Xbox hardware. There wouldn't be US tariffs on building a Canadian cloud server, so it is conceivable that Microsoft just builds any future servers just over the border in Canada or Mexico as long as they can keep the QOS high enough.

Valid points but what about general increase in prices for commodities, semi-conductors, brought about by the tariffs. I dont think the Cloud computing market is immune to tariffs in this regard to be honest. Building a datacenter requires a lot of inputs that are going to be directly affected by tariffs as well. I could be wrong though. Unless as you said MS has more than enough capacity already built up

 

[see colon]

Valid points but what about general increase in prices for commodities, semi-conductors, brought about by the tariffs. I dont think the Cloud computing market is immune to tariffs in this regard to be honest. Building a datacenter requires a lot of inputs that are going to be directly affected by tariffs as well. I could be wrong though. Unless as you said MS has more than enough capacity already built up

The tariffs are mostly US related, though. You can build a data center in Canada or Mexico to serve the US market and completely avoid the tariffs.