What the heck is going on with the Xbox division of Microsoft?
It feels like you can’t go a week without hearing something incredibly depressing about Microsoft lately. Their business divisions seem to be doing fine. Well, fine enough so that they can continue to flush billions of dollars down the AI hole without it affecting their profitability. So, the giant hulking mass continues to trudge forward. But, if you’re inside of the gaming bubble and keep an eye on the news, you’ve no doubt seen all of the changes, cancellations, questionable business and pricing decisions going on with the company. It seems as though they spent $69 Billion to then do a complete about-face and then attempt to sink their entire Xbox division. I guess, we need to go back and start from the beginning to really make any sense out of all of this.
Changing the Landscape: Buying Activision Blizzard
In January of 2022, Microsoft announced plans to make a mega acquisition with the purchase of Activision Blizzard. At the time the largest single purchase agreement ever in the technology space. The Xbox Series X and S both launched in November of 2020 and due to the relative scarcity of the PS5 at the time, the Xbox systems appeared to be faring competitively than the Xbox One generation did. The Xbox ecosystem also was earning strong praise from current and potential customers due to their quality backwards compatibility program and their Xbox Game Pass subscription program that brought Day One releases to users at an inexpensive price on Xbox and the PC.
The sale of Activision to Microsoft followed a flurry of acquisitions in the previous few years, with Microsoft acquiring smaller developers like Double Fine and Compulsion games, but also acquiring a major publisher in Zenimax Studios which brought Bethesda, the developers of Fallout and Elder Scrolls under their umbrella but also the venerable first person shooter developer id Software and their suite of engine technology. So, in many ways the failures of the first party development that Microsoft endured for much of the Xbox One generation was seemingly being corrected by just gobbling up creative houses and putting them to work with creating games for Xbox and PC.
After a rather long legal battle, Microsoft was forced to bring Call of Duty to all platforms after the acquisition of Activision. It started to feel like much of the wind had been sucked out of the sails of the deal. But, Microsoft was in for a penny and in for a pound so the deal closed in October of 2023. Perhaps it didn’t help that the deal closed right before one of the worst Call of Duty launches of all time. Also, in the intervening years since the announcement of the deal, the Xbox had started dramatically falling behind the PS5 in terms of sales.
The Sony Comeback with PS5 Exclusives
Sony hasn’t been the most consistent source of exciting new games. But, throughout the course of this generation they have soldiered forth with many of their most successful series with sequels, expansions, and remasters. If you were going to be shopping for a new game console and didn’t necessarily have any brand affinity, the decision to get a PS5 over an Xbox S or X seems pretty clear. They are roughly the same power. They play most of the same games. But, the PS5 has some exclusives that you just can’t really get anywhere else, outside of some more recent releases which eventually make their way to PC.
For the first few years of this generation it made a lot of sense to own a PS5 and a gaming PC or even an Xbox Series S with Gamepass. That would allow you to experience a whole bunch of day one Xbox releases and lots of indies and other back catalog games from many publishers for a pretty inexpensive price. The Price of Gamepass at the start of the generation was around $15/month and considering on console you needed some form of Xbox Live subscription to play online, spending an extra $5-$8/month to upgrade to a tier of Gamepass just made a lot of sense. But, considering how expensive Gamepass has gotten in the intervening years and even the Xbox hardware has increased in price to the point where that argument doesn’t make near as much sense anymore, especially for the most price conscious of players.
A Strange Generation of Gaming
So, here we are. We are nearly 6 years into the strangest generation of video game consoles and releases that we have ever experienced. The COVID era definitely had a major affect on game development. That era when compounded with the massive amount of consolidation and selling of game studios and layoffs, studio closures, and just poor management has lead to this strange situation where we have some of the most technically impressive game consoles and what feels like less games than ever coming out to play on them. The saga that unfolded with the Embracer Group really sunk a huge middle portion of the industry and their gobbling up of smaller developers and them crumbling as a company has left a huge void in release calendars. Remember back in the mid-00s when we had mid-tier publishers like Midway and THQ putting out a litany of good-to-great games all the time to keep you entertained between major releases. I mean, would it kill someone to make a new Red Faction or The Suffering game?
The upcoming generation might sew the fate of the Xbox brand as a hardware company. The rumors and conjecture that the next Xbox will come as a box and a handheld and feature a fully featured version of Windows and allow you to use whatever marketplace you want (ie Steam, Epic Games Store, etc). That makes it pretty guaranteed that they will not subsidize the console anymore because they won’t be able to guarantee that you will be buying their accessories or games from their online stores anymore. When you start adding all of these factors together, along with the creeping realization that the Xbox brand name has never meant less than it does right now and I just don’t think that people are going to flock to physical or digital stores to line up for whatever that new Xbox experience is going to be. I would be sad to see the end of Microsoft in the console industry. At times they have had some of the most interesting ideas in the space. At other times they have been let down by unreliable hardware and some poor choices with advertising, etc. But, they always felt like they brought a kind of competition to the console space that kept Sony competitive and agile. Nintendo isn’t direct competition to Sony anymore and the PC space isn’t really either. The thing that scares me about a reality where Xbox isn’t making hardware anymore is a Sony that is too aggressive with their pricing and it forces people to lose interest in games because it just isn’t the affordable hobby that it was for so many years. A healthy video game industry isn’t going to be built on a foundation of incredibly expensive hardware and free to play games with microtransactions. I just don’t see that being the way forward. Well, at least not for people of my generation. Maybe the kids will be into it. But, I guess only time will tell. In the wake of all the change and upheaval in Microsoft the next 5 years are going to be incredibly interesting to see.
Stay tuned and maybe this will all come to pass or just as likely you can throw this article in my face and tell me what a fool I was.
