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Opinion Clickbait Cringe Hypothetical: Could Amazon or Microsoft end the console industry?

Alright

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THIS IS NOT A CONSOLE WAR THREAD. THIS IS A HYPOTHETICAL OF HOW ULTRA-RICH COMPANIES COULD USE THEIR WAR CHEST TO BUY SUCCESS

In the thread discussing Amazon's struggles with the LOTR MMO, some posters suggested that Amazon could 'buy their way in to the market'. This wouldn't be an easy task, as Amazon would have to have hardware in the living room, would need to offer a unique draw that isn't offered by Nintendo, Sony or Microsoft and would need to build infrastructure for online gaming (Nintendo and EGS struggled here) and good 3rd party support (am I right, Sega?)

This would cost a lot of resources to pull this off and a timeline of 3-5 years if they hit they broke ground, today.

What if, Amazon or Microsoft used their huge war chest to force their products in to the living room? Imagine if Amazon made a Console for free, or if Microsoft let the XSS go, for free? What would the cost be? $50 billion? $100 billion? Still relative peanuts for the pay out.

Who wouldn't go and pick up a free XSS/XSX (or amazon equivalent)? Who wouldn't sign up to a month free gamepass with their free console? If 200 million people picked up a free console, that console company would own the living room.

How would they recoup their money? Simple; once that brand is in every house hold, you offer your first round of upgrades for cheap <£49, then slowly but surely ramp up the price. Yes, this may take three generations, but how much money have Nintendo (wii u), Sony (ps3) and Microsoft (Xbox/Xbox 360) lost in pursuit of dominance?

It may sound like some communist/hippy dream, but in reality, it would be an extremely successful - not to mention aggressive tactic of living room dominance. Both Amazon and Microsoft have the funds to do this, without negatively impacting the longevity of their companies.

The question is, Why haven't either company done it?
 

Clear

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They could severely de-stabilize the industry by making themselves a disproportionately important locus for publication, but kill it... highly unlikely.

At the end of the day an infinite war-chest only gets you so far, as demonstrated by how frequently the tech giants fail to establish new initiatives. With game-dev its even more variable as money can buy IP and resources to exploit that IP, but the creativity that drives everything belong in the minds of individuals with their own wills and aspirations.
 

Alright

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They could severely de-stabilize the industry by making themselves a disproportionately important locus for publication, but kill it... highly unlikely.

At the end of the day an infinite war-chest only gets you so far, as demonstrated by how frequently the tech giants fail to establish new initiatives. With game-dev its even more variable as money can buy IP and resources to exploit that IP, but the creativity that drives everything belong in the minds of individuals with their own wills and aspirations.
That makes it much more difficult for Amazon, as they would have to go mainly 3rd party.

What about for MS who have a throng of well known (and some dormant) IP's that could be used?

Could the warchest expand to shift the profits towards 3rd parties? I don't know what the split is, but say it's 50:50. Could Microsoft offer a split of 20:80, MS:3rd party, to incentivise more exclusivity in their ecosystem?
 

Kdad

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The future is recurring revenue streams and cutting out the friction of high cost hardware.
Your future is Stadia, Luna,Gamepass, PSNow etc etc *and Tencent...dont forget Tencent*
It might not be Google, but the future is someone dominating a streaming to anything model.

No company is going to invest 50 billion dollars into hardware when they can just make their service work everywhere and shift the burden of hardware to the consumer and other players....the profit isn't in the hardware.
 
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Bonfires Down

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Apple has 13% of the mobile market, but their users spend twice as much on the app store in total than Android users.

Edit: just to be clear, in this scenario Sony/Nintendo would be Apple and Amazon would be Android.
 
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Calverz

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I think gamepass is the big factor here. If gamepass subscribers continue to grow and grow and microsoft are able to show how much money it brings i think then it cant be ignored by the big players.
If gamepass fails, then they wont bother and it will continue to be sony and nintendo.
 

Old Empire.

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Since it was Sony last gen had more first party exclusives than Xbox, we can start there.

Sony on average has 10 million first party sales be it digital or retail. So that leaves 90 million PS4 customers who play third party games across the board.

Microsoft could if it wanted and they have the money hurt Sony even more by buying up more studios and publishers. The Bethesda deal hasn’t real kicked in yet. When Bethesda starts producing new exclusives for Xbox first party thats when the customer will take notice they can’t play this game on PS5.

MS bought Ubisoft just for argument here that two of the three big publishers coming over to the green side. Sony will start to panic in that scenario since casual gamers, the majority typically buys third party games.
 
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Bo_Hazem

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They simply can bleed money but they won't sustain or bring back money. So at best they can burn their money and shake the industry for a very short time until they close their gaming divisions out of severe debts. Those corporates are after profit not money bleeding with near impossible ROI.

This is gonna be a funny generation to watch.
 

cromofo

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The way into every living room is with a TV app, not a console. Spending $50 on a controller bundled with a subscription is more appealing than spending $400+ on a console.

MS will push this with Game Pass and XCloud. And no, just because you personally don't like streaming it doesn't mean there isn't a market for it. The same goes for Game Pass - the numbers speak for themselves.
 

Kokoloko85

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Yes. They will buy everything.
They are like those football/soccer teams that buy all the talent. “Manchester City“

Gamepass can sustain itself with MS’s money but eventually it will lead to MS dictating what AAA games cost and get made if Gamepass money is all what developers are getting.
MS will be in control what gets made or not. It will come to a head by the end of this generation
 
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Sander Cohen

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MS bought Ubisoft
You guys are really silly. You can’t just buy major foreign company, a pride of French industry. It doesn’t go that way. Bethesda was easy picking because it was most American of all big US publishers and Microsoft had previous relationship with them.

Why don’t they just buy Sony then and end this “war” in an instance? They certainly have money, right, that’s what everyone is saying, they have unlimited money etc etc (false of course).
 

Old Empire.

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Amazon and Google have chosen already to not make a gaming box for the home. There, starting with streaming. This is just waste of time for people who prefer a steady frame rates performance. Plus it also expensive if you have limited data broadband plan and don’t want to pay more for extra data.

Sony and MS are too far ahead of the curve for some else to come in and take over. Nintendo can if they wanted has the history to rival both companies, but the prefer to stick with want they have.

MS and Sony make a console so they do make money. Giving it away for free makes no sense since there not sure about the gaming habits of every customer. Plus you could have people selling the box to naive customers who don’t know it was free and logistically the demand would increase if something was free and burden would be on MS and Sony to pay the costs for the parts.
 
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GHG

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Apple has 13% of the mobile market, but their users spend twice as much on the app store in total than Android users.

Their users also talk twice as much about their phones and apple in comparison to other mobile phone users.

That's why a lot of people have the incorrect impression that apple have total dominance of the mobile phone market.

Cult brands are a special kind of beast.
 
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Old Empire.

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You guys are really silly. You can’t just buy major foreign company, a pride of French industry. It doesn’t go that way. Bethesda was easy picking because it was most American of all big US publishers and Microsoft had previous relationship with them.

Why don’t they just buy Sony then and end this “war” in an instance? They certainly have money, right, that’s what everyone is saying, they have unlimited money etc etc (false of course).
Be extreme shitstorm- MS bought Sony and well there really is no need. Plus believe or not- Xbox management is happy to have a rival partner that challenges them. If it was just Xbox it be exhausting and very boring threads. Xbox team cares about their customer and up to Sony to watch out for theres

Microsoft longterm and goals differ from Sony right now. MS may never solicit a bid for Ubisoft, but there likely to place money on the table for an arrangement to have UB exclusives on Gamepass. Either way getting rid of the retail paywall price is a game changer. You don’t have to buy full priced games all the time to play with friends.

Gamepass is going to balloon rapidly over the coming years and success will depend on content it provides.

Sony knows this and will have to join in, eventually or see a decline in revenue..This a discussion for another thread, MS spending money because they see a gain long-term so the chest is open.
 
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Orta

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Sony would do the same if it could you know....
 

Nhranaghacon

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The "Console" has forever been destined to eventually, some day.... fade away.

Either because we will have infinite molecular compute - which means eventually you simply wont need to buy a console for raw power needs.

Or because eventually streaming services will supplant the industry.

Either way, like the VCR and DVD player, Box Screen TV and Massive College Campus Computer Terminal - the traditional Console will eventually get swept to the wayside.
 

Orta

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Sony would do the same if it could you know....
 

Shelookdlvl18

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Their users also talk twice as much about their phones and apple in comparison to other mobile phone users.

That's why a lot of people have the incorrect impression that apple have total dominance of the mobile phone market.

Cult brands are a special kind of beast.
Yeah, I think everyone here is perfectly well aware of just how that phenomenon works.
 

Alright

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Since it was Sony last gen had more first party exclusives than Xbox, we can start there.

Sony on average has 10 million first party sales be it digital or retail. So that leaves 90 million PS4 customers who play third party games across the board.

Microsoft could if it wanted and they have the money hurt Sony even more by buying up more studios and publishers. The Bethesda deal hasn’t real kicked in yet. When Bethesda starts producing new exclusives for Xbox first party thats when the customer will take notice they can’t play this game on PS5.

MS bought Ubisoft just for argument here that two of the three big publishers coming over to the green side. Sony will start to panic in that scenario since casual gamers, the majority typically buys third party games.

Microsoft bought Zenimax for Microsoft, the games from Bethesda were a bonus for Xbox, but not the main reason for the purchase.
MS will push this with Game Pass and XCloud. And no, just because you personally don't like streaming it doesn't mean there isn't a market for it. The same goes for Game Pass - the numbers speak for themselves.
What I personally feel about business is irrelevant because this is business, not personal.

I don't believe there is a market for streaming, at all. I believe there's a big push to get people to believe that streaming is the future, as that benefits the industry more than the consumer. We saw this push with digital and look where we are.

The only way streaming could take hold is by fundamentally changing the design of the games in favour of touchscreen input devices, and the best implementation of that is Point and click adventures like Money Island, and turn based RPGs like Shining force. Ironically, those genres lean more towards the niche, than the casuals.
Yes. They will buy everything.
They are like those football/soccer teams that buy all the talent. “Manchester City“

Gamepass can sustain itself with MS’s money but eventually it will lead to MS dictating what AAA games cost and get made if Gamepass money is all what developers are getting.
MS will be in control what gets made or not. It will come to a head by the end of this generation
The Apple model and most economic models are based on the theory of 'a more expensive product has more value', so it's interesting to see how GP will stand the test of time when they are in effect making games 'worthless'.
Sony would do the same if it could you know....
This isn't about Sony. Its about ultra rich American companies using their money to further dominate and expand their sphere of influence.
 

Alright

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Apple and Vr

Could we see a company breaking in to the console market via the back door? Use VR as the lead platform, using a 'console' like device to power all VR games and then, over a generation, transition to offer both?
 

jroc74

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If they gave away free consoles....thats still a console.

It wouldnt end it, but things could look alot different.

There was a time when everyone and their grandmother launched a console. Check wikipedia for all the different consoles that launched over the years before finally settling on MS, Sony and Nintendo.

At one point I remember it was at least 4-6 different platforms out at one time. All home consoles. It was wild, lol.

Only Nintendo survived from the early days, Sony the next to survive. Thinking more about their history....I could say only Nintendo and Sony survived from the early days...

MS is basically the last company that effectively did 'buy their way into the market'.

And IMO I dont think it can handle more than 3. Just like how the smartphone market settled on 2 major OS platforms.

With the recent struggles of Amazon and Google when it comes to gaming...I dont really see either company as threats. Unless they offer a traditional console.

This is where Sony and MS have the upper hand.
 
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Woopah

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The huge amount of money required and the huge amount of time needed to see any pay back make it not a good idea. There are better investment opportunities for MS, Google and Apple
 

Nhranaghacon

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Oh and the notion that a company has "So much money they can give it away" doesn't become a reality until an entity hit's 8 trillion in value.

All other losses are seen as such.

Consoles will disappear due to sheer technological gains, no distributor will ever be crazy enough to give a 300 - 500 dollar piece of hardware away.
 

Old Empire.

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Microsoft bought Zenimax for Microsoft, the games from Bethesda were a bonus for Xbox, but not the main reason for the purchase.

The purchase was about buying the studios (assets), with the staff and gaining new game engines. Zenimax does not provide anything else that would benefit Microsoft plans elsewhere. It was essentially just for Xbox.
 
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Bernkastel

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They simply can bleed money but they won't sustain or bring back money. So at best they can burn their money and shake the industry for a very short time until they close their gaming divisions out of severe debts.
You guys have been saying they will close their gaming division since 2013, instead the Head of Xbox got a promotion and now directly reports to the CEO. They have been making games since 1979(for their own systems since Flight Simulator in 1982) and consoles since 2001.
Those corporates are after profit not money bleeding with near impossible ROI.
So every console manufacturer? Right now Nintendo is the only gaming company that makes consoles, not a "corporation that invested in gaming business".
This is gonna be a funny generation to watch.
So 9th generation is now your new hope for "they will finally close their gaming division".
 

Bo_Hazem

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You guys have been saying they will close their gaming division since 2013, instead the Head of Xbox got a promotion and now directly reports to the CEO. They have been making games since 1979(for their own systems since Flight Simulator in 1982) and consoles since 2001.

So every console manufacturer? Right now Nintendo is the only gaming company that makes consoles, not a "corporation that invested in gaming business".

So 9th generation is now your new hope for "they will finally close their gaming division".

Anticipation Popcorn GIF
 

Alright

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The purchase was about buying the studios (assets), with the staff and gaining new game engines. Zenimax does not provide anything else that would benefit Microsoft plans elsewhere. It was essentially just for Xbox.

This acquisition was proposed by Xbox and all Zenimax studios are now "Part of Xbox Family". Zenimax is a gaming company and there is no other reason to their existence that makes gaming a bonus.
I respectfully disagree. I believe there was an incentive for MS to purchase zenimax in order to further Microsofts aim as a corporate entity and that the game companies that come from Zenimax help the ROI by adding more content to GP
 

Bernkastel

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I respectfully disagree. I believe there was an incentive for MS to purchase zenimax in order to further Microsofts aim as a corporate entity and that the game companies that come from Zenimax help the ROI by adding more content to GP
Microsoft and Xbox do not operate based on a forum posters believes. The actual holding company "Zenimax" that manages the studios has been dissolved and all the studios have been made part of Team Xbox.
Also, Zenimax was looking to be bought and asked MS, and EA was also one of the bidders. If a bunch of corporates decide to buy a gaming company, Zenimax is not the thing that comes to their mind. But Minecraft was decided by Microsoft, and Phil supported that idea(Phil said it in Major Nelson podcast 645).
 

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Microsoft and Xbox do not operate based on a forum posters believes. The actual holding company "Zenimax" that manages the studios has been dissolved and all the studios have been made part of Team Xbox.
The bolded wasn't required.

Dissolved in to thin air, or do all of the IP's previously owned by Zenimax now become MS IP's (rhetorical question)

Also, Zenimax was looking to be bought and asked MS, and EA was also one of the bidders. If a bunch of corporates decide to buy a gaming company, Zenimax is not the thing that comes to their mind. But Minecraft was decided by Microsoft, and Phil supported that idea(Phil said it in Major Nelson podcast 645).
The Zenimax and Minecraft acquisitions were both rubber-stamped by Microsoft, because it benefits Microsoft.

Xbox don't do things based on forum posters beliefs and Microsoft (any big company) do things for the betterment of a department, if that department being better is in line with the direction of the parent company.

Minecraft pushed digital and allowed a huge userbase to migrate on to MS servers
Linked in and Skype pushed a user base on to MS servers and allowed them to bolster their corporate business model
Zenimax was purchased for their IP's.

Buying a company for its' IP's and then shutting it down or dissolving it, is the MO for MS, so much so that 25 years ago, the Simpsons created the "Buy 'em out boys" meme.

Corporate Microsoft wanted zenimax. The ROI comes through Xbox (often referred to as an R&D department for Microsoft) and the selling/leasing of games now owned by Microsoft, just like...Minecraft.

BUT

All of that is Off topic. The current state of Microsoft has very little to do with this hypothetical, outside of 'Microsoft are in a better position than Amazon from a gaming PoV. Nothing more needs to be said in regards to Microsoft, on this subject
 

DaGwaphics

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I don't see anyone in this space ever doing free hardware, the PS360 era was the last where the manufactures would lose massive amounts on hardware. Even the current gen, they may be taking some small losses in the short-term, but nothing like Sony did on the PS1, PS2, and PS3 or MS on the Xbox and 360. They've proven to themselves that they don't have to do it, so no point.

I can see maybe a free streaming stick if you signup for x months of service or something like that.
 
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reksveks

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Microsoft in almost sector is giving users options of a local sku and a cloud sku. Their 'free' console is going to be a xcloud app on the your TV.
 

hlm666

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They wouldn't need to build infrastructure for online, they have aws and you may have already played some games that run their servers on it.
 

FStubbs

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Tencent could do it but I don't think Amazon or Microsoft can. And even Tencent's strategy seems to be starving Steam of content through EGS and challenging existing walled gardens (Apple vs Epic), not creating their own hardware.
 
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Bernkastel

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Dissolved in to thin air, or do all of the IP's previously owned by Zenimax now become MS IP's (rhetorical question)
Buying a company for its' IP's and then shutting it down or dissolving it, is the MO for MS, so much so that 25 years ago, the Simpsons created the "Buy 'em out boys" meme.
The Zenimax board that manages the studios was dissolved, not the studios. I don't even know why they need to pay millions to a bunch of executive to "manage Bethesda studios", when Xbox division can do it themselves.
Zenimax was purchased for their IP's.
And who uses those IP's? Team Foundation?
Corporate Microsoft wanted zenimax. The ROI comes through Xbox (often referred to as an R&D department for Microsoft) and the selling/leasing of games now owned by Microsoft, just like...Minecraft.
Now one refers to them as a R&D department except for you.
 
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Goro Majima

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You guys are really silly. You can’t just buy major foreign company, a pride of French industry. It doesn’t go that way. Bethesda was easy picking because it was most American of all big US publishers and Microsoft had previous relationship with them.

Why don’t they just buy Sony then and end this “war” in an instance? They certainly have money, right, that’s what everyone is saying, they have unlimited money etc etc (false of course).

Yeah they’d need the Guillemots to sell and it’s notoriously difficult to purchase a foreign company since it gets political real quick.

Not enough people are worried about Microsoft scooping up Take Two though. I hardly ever see that one mentioned.
 

IDKFA

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Amazon or Microsoft used their huge war chest to force their products in to the living room? Imagine if Amazon made a Console for free, or if Microsoft let the XSS go, for free? What would the cost be? $50 billion? $100 billion? Still relative peanuts for the pay out.

Lol. 50-100 billion isn't small change at all. This is the sort of business decision that would cause shareholders to start committing seppuku!
 
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The future is recurring revenue streams and cutting out the friction of high cost hardware.
Your future is Stadia, Luna,Gamepass, PSNow etc etc *and Tencent...dont forget Tencent*
It might not be Google, but the future is someone dominating a streaming to anything model.

No company is going to invest 50 billion dollars into hardware when they can just make their service work everywhere and shift the burden of hardware to the consumer and other players....the profit isn't in the hardware.
This makes no sense. Video game consoles are not actually that expensive for their target audience: adult hobbyists. $500 over the six or seven years of a console's lifespan is a tiny expense for any first world adult with enough disposable income to have a television in the first place. The hardcore gaming audience is simply not that price sensitive. On the other hand, it's extremely performance sensitive - that's why the entire market drops $500 to upgrade to new, moderately more powerful hardware every six or seven years even though their old hardware works just fine and is even continuing to see game releases.

Streaming is always going to entail a performance penalty over playing on local hardware. That's just a matter of physics. There's no reason to believe that console gamers will be willing to tolerate that performance penalty. The reason they play games on console in the first place and not on their smartphone or laptop is that they're not willing to tolerate significant performance penalties.

Outside of the first world, of course, the vast majority of people would never be able to afford a $500 entertainment expense. But streaming won't take off in the third world because the internet infrastructure is so bad - people there will just continue going to arcades or playing on mobile phones instead.

There simply isn't a significant market for streaming. The console market is very performance conscious and not particularly price conscious, so they won't tolerate the performance drop. The mobile market is so price conscious that they're basically unwilling to pay for games at all, so there's no way you'll hook them on a monthly subscription.
 
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Heisenberg007

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That makes it much more difficult for Amazon, as they would have to go mainly 3rd party.

What about for MS who have a throng of well known (and some dormant) IP's that could be used?

Could the warchest expand to shift the profits towards 3rd parties? I don't know what the split is, but say it's 50:50. Could Microsoft offer a split of 20:80, MS:3rd party, to incentivise more exclusivity in their ecosystem?
MS has been trying to do the same thing in a slighty different way. Paying publishers for their potential sales upfront and getting those games on Gamepass day one.

The problem is that the Xbox division doesn't have infinite money. At some stage, they will have to stop and show some positive ROI and risk facing the axe. MS is banking on a very rapid growth of Gamepass subscribers. If they achieve it, they will continue disturbing the industry. If they fail, they would have incurred all that cost for nothing and will likely have to either shut down the division or scale back significantly.
 
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Bryank75

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I don't think it's possible.... Amazon have 84 billion cash on hand and 33 billion longterm debt (The accountants won't allow the reserves go below the debt marker out of prudence)
MSFT have 110 billion cash (Had 130 before Nuance) and have 55 billion debt (Again, accountants will demand at least 55 billion stays in the bank)

Gaming is neither of these companies main businesses and we are facing unsure times... China is on the rise and tech is changing faster than ever. They will need the cash for other things to keep their dominance over Chinese competitors IMO.

Xbox had their finance options for Series X and S and it really hasn't impacted how many units they've sold at all. It's more down to who can produce more and which is in the cultural zeitgeist.

PlayStation should have remained headquartered in Japan, it will be more beneficial in the future than being in the US.
 
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The Zenimax board that manages the studios was dissolved, not the studios. I don't even know why they need to pay millions to a bunch of executive to "manage Bethesda studios", when Xbox division can do it themselves.
I don't know what your point is there. Though I hope whoever manages these products takes a more hands on roll. We all saw what happened to infinite.


And who uses those IP's? Team Foundation?
This is what I'm trying to gently hint towards without slapping it around anyone's face.

Streaming + console + VR = living room covered.

Skype + VR + PC = office and board room covered. (it may not be a 'vr' headset for the office, more Google glasses with Smartboard UI and AR overlay for sharing details/designs/drawings.)



Now one refers to them as a R&D department except for you.
If I had the desire to sift through the shite that is the Internet, or knew how to, I could dig up a fair few articles that talk about how Xbox is seen as R&D for Microsoft. That's what Kinect was 🤷‍♂️
 
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MS has been trying to do the same thing in a slighty different way. Paying publishers for their potential sales upfront and getting those games on Gamepass day one.

The problem is that the Xbox division doesn't have infinite money. At some stage, they will have to stop and show some positive ROI and risk facing the axe. MS is banking on a very rapid growth of Gamepass subscribers. If they achieve it, they will continue disturbing the industry. If they fail, they would have incurred all that cost for nothing and will likely have to either shut down the division or scale back significantly.

I don't think it's possible.... Amazon have 84 billion cash on hand and 33 billion longterm debt (The accountants won't allow the reserves go below the debt marker out of prudence)
MSFT have 110 billion cash (Had 130 before Nuance) and have 55 billion debt (Again, accountants will demand at least 55 billion stays in the bank)

Gaming is neither of these companies main businesses and we are facing unsure times... China is on the rise and tech is changing faster than ever. They will need the cash for other things to keep their dominance over Chinese competitors IMO.

Xbox had their finance options for Series X and S and it really hasn't impacted how many units they've sold at all. It's more down to who can produce more and which is in the cultural zeitgeist.

PlayStation should have remained headquartered in Japan, it will be more beneficial in the future than being in the US.
I agree that the finances would take a huge hit short term and that would be a nigh on impossible sell.

You both touched on the subject, talking about Microsoft presence, longevity and popularity of the xbox brand. They're not making the market impact that the other companies have, and while there are many small contributing factors, I see one huge factor missing from Microsoft, that both Nintendo and Sony have faced like champions, and that's humility in the face of a defeat.

Have Microsoft showed one once of understanding as to why the Xbone got slapped down, or is it all excuses for why they didn't come number 1? Even when they reversed their DRM and kinect policies, they did through gritted teeth while spitting feathers. IIRC they even pointed at the market 'not being ready for xbone' rather than taking it on the chin.

Imo that mentality is holding them back.
 
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Heisenberg007

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I agree that the finances would take a huge hit short term and that would be a nigh on impossible sell.

You both touched on the subject, talking about Microsoft presence, longevity and popularity of the xbox brand. They're not making the market impact that the other companies have, and while there are many small contributing factors, I see one huge factor missing from Microsoft, that both Nintendo and Sony have faced like champions, and that's humility in the face of a defeat.

Have Microsoft showed one once of understanding as to why the Xbone got slapped down, or is it all excuses for why they didn't come number 1? Even when they reversed their DRM and kinect policies, they did through gritted teeth while spitting feathers. IIRC they even pointed at the market 'not being ready for xbone' rather than taking it on the chin.

Imo that mentality is holding them back.
I think those days are past Xbox, at least for now. They don't appear arrogant at the moment, so they have a better chance (compared to previous generation) to succeed this time. But my concern is with their strategy and how sustainable it is.

Of course we are not privy to the information and the promises that MS has made them. For example, if MS has given them free reigns for, say, the next 10 years, Xbox will most likely succeed (will probably still stay at #3, but they will be profitable). However, if MS is going to pull the plug in the next 3-4 years, we may see awful results for the Xbox division, considering their recent expenditures.

Their current strategy is to:
  • Sell hardware at loss (not extraordinary)
  • Put all their games on Gamepass day one (a subscription that doesn't make them profit)
  • Pay other developers to put their games on the same subscription that doesn't make turn profits
  • Buy tons of other studios and incur that acquisition costs (roughly $10B). For reference, PS recorded their highest operating profit at ~$3B last year. Even PS will require 3+ years to recover that acquisition costs at record profits. Xbox isn't anywhere near that in terms of profit.
  • Bear 3x extra cost of salaries and game development than before (because of acquisition).
  • Their studios are still mismanaged (e.g., Halo: Infinite + Forza missing usual time frame + still no games available from their first-party) which means additional development cost.
  • Hope that Gamepass will garner enough subscribers to make all this profitable.
In all these points, Xbox is incurring cost with no return in sight. Their only bet is to sell a lot of hardware very quickly, gain market share (PS is outselling them again!), and use that to exponentially grow Gamepass subscribers and make them profitable. But what if there is a change in leadership? Will it still get the same support that it is getting right now? Also, there are two more points that should be considered here:
  1. People say they don't need to sell Xbox hardware. They obviously do. Selling an Xbox (assuming the gamer has GP on that Xbox) minimizes the burden and the cost of maintaining servers, which xCloud would incur. This means -- without selling Xboxes -- with each incremental GP user, MS will incur incremental cost. This won't change their financial situation.
  2. As the number of GP users increase across Xbox and PC, the cost of getting those third-party deals will also likely increase. So the profit won't be as linear as we may think right now.
I know some will just discard this message in the name of FUD, but that's not really my intention. I'm genuinely curious about this new direction and the financially viability of it -- especially now that Xbox is the only following this strategy, and that Sony has publicly said that this is not a sustainable business model.

Interestingly, Xbox itself doesn't have a fool-proof plan. They are also sort of just doing things right now and seeing how this will all work for them, which further increases my doubts about the long-term sustainability of the Xbox division.
 
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