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Microsoft Is “Well-Positioned” in What Is Going to Be a Much Larger Gaming Market According to CEO

Mista

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During Microsoft’s quarterly financial conference call for investors and analysts, Chief Executive Officer Satya Nadella and Chief Financial Officer Amy Hood talked about the company’s gaming business.

Nadella talked about Project xCloud, and boasted the fact that Xbox Live now counts the highest number of PC and mobile users to date.

He also mentioned that the studio acquisitions aim to deliver differentiated content for subscription services like Xbox Game Pass.
“We’re investing to empower the world’s two billion gamers to play the games they want with anyone, anywhere, on any device with our new game streaming service, Project xCloud which will enter public trials this fall.

Xbox Live monthly active users increased to a record 65 million with the highest number of mobile and PC users to date

We’re bringing one of the the world’s most popular video games to a new generation of mobile gamers with Minecraft Earth and mixed reality, and we nearly doubled our first-party studios this year to deliver differentiate content for our fast-growing subscription services like Xbox Game Pass, now available both on consoles and PC.”

Later in the call, Nadella was asked to elaborate on Microsoft’s position in gaming.
“First, I’ll say we are in gaming because of what we believe are going to be the secular changes in the gaming addressable market for us. We’ve always had a gaming position with console as well as the PC, but going forward we think that any end point can in fact be a great end point for high-end games, which is where our structural position is, and we now have a business model with Game Pass as well as all the supporting mechanisms for game pass like game streaming, we have a social network in Xbox Live that is the best in the business.

So I feel we’re well-positioned to what is going to be a much larger market than what was traditionally gaming in spite of all the success we’ve had over the years in gaming.

The second point is that it builds on the rest of the cloud investment, so if you think about what we’re doing with xCloud it’s a workload on top of Azure. If you think about capital allocation, what’s happening in the cloud, what’s happening in the edge, how we build the network, how we optimize with streaming… The same infrastructure for example is what Sony has decided to use as well and be on Azure as well as user AI capabilities.

So you’ll see significant synergies in terms of the architecture of platform underneath gaming, Microsoft 365, Dynamics 365, and Linkedin all being the same.”

Chief Financial Officer Amy Hood admitted that the performance of the gaming business in the past quarter was “lower than expected.”

She also talked about the outlook for the current quarter, which ends on September 30.
“In gaming, we expect gaming to decline year over year in similar rate to Q4, as we move through the end of this console generation and a changing Xbox services and software comparable from a third-party title in the previous year.”
Lastly, she explained the outlook for the full fiscal year ending on March 31, 2029, mentioning that the company expects a stronger second half of the year compared to the first half.
“We expect revenue in our gaming business to be down slightly year over year as double-digit growth in Xbox software and services will be offset by decline in console sales. We do expect a stronger H2 than H1 in gaming, as we work through our third-party title comparison.”
Beautiful piece, thank you @Abriael_GN
 
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Mista

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Would a company ever say anything otherwise?
They wouldn't say anything at all I guess. I find it weird him saying this especially after revealing the hardware decline yesterday
 

Vawn

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They wouldn't say anything at all I guess. I find it weird him saying this especially after revealing the hardware decline yesterday
No, they'd still need to show confidence. People won't buy unless you can convince them you have the best product to buy.

This is all very standard PR talk. And Xbox has had some of the hardest working PR mouths in the industry. I just need to see the games now - not the promise of games.
 

mejin

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They wouldn't say anything at all I guess. I find it weird him saying this especially after revealing the hardware decline yesterday
MS silent is really rare. They usually bark louder when they have bad news.
 
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DanielsM

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Good luck.

He basically killed Xbox as a Hardware, and he is doubling down on the whole "platform" thing where very few publishers/developers have interest as they have their own distribution channels, services, etc. on PC. I expect that we have seen a top in gaming revenue and it will be slow drip downward as nobody needs or even wants them to be involved as a middleman, generally speaking.

Also, MAU is a horrible metric to base anything on, MAU might slightly go up and revenue could easily continue to fall as people still have an account.

(I wonder how long he continues to throw money down the toilet of game marketing, its got to be equivalent of half the GDP a small nation by now)
 
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xStoyax

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And Phil said this last E3 would be one of Xbox's best. You can always take Microsoft's claims to the bank

If you read between the lines, he's telling you the only reason XBL is up is due to mobile/pc.
 
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DanielsM

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"We’ve always had a gaming position with console as well as the PC"

Yet, they don't even support half the install base for their own OSs and the other half is still UWP support. No, Satya you're not well positioned at all as it pertains to the PC market, nothing has changed.

The amount of work/support/resources needed will have to be in the many billions, and even than the chances of you being relevant in PC gaming is slim.



Microsoft is an enterprise/business cloud company, everything else (not dual usage business/consumer) is basically in a mess or has been abandoned especially on the consumer side.
 
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McCheese

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Last place is technically still a position I suppose.

They will hemorrhage money for quite a few finance calls until their new studio acquisitions release their titles, the assumption that they can win the gaming market via their services route may not pay off if folks decide to stick to physical console and game ownership.
 

PSlayer

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If cloud gamming adoption skyrocket this gen, sure. Otherwise, i don't see them winning market share unless Sony fucks up 2006 style. They don't have proper japanese support, their first party support is mediocre and mostly shared with PC anyway. The only advantage they may have is better looking third parties IF their hardware is better.
 
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DanielsM

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If cloud gamming adoption skyrocket this gen, sure. Otherwise, i don't see them winning market share unless Sony fucks up 2006 style. They don't have proper japanese support, their first party support is mediocre and mostly shared with PC anyway. The only advantage they may have is better looking third parties IF their hardware is better.
If cloud gaming took off all the big publishers/developers will put there stuff on their own streaming platforms, just like they have digital PC distribution storefronts today. The issue is, there is no reason for other parties to use Microsoft as a middleman, generally speaking. Its a zero end game to me, Microsoft has to compete in an open arena.... that usually hasn't worked out for them. Decade+ behind in digital PC storefront market and a decade+ behind in the streaming front, with more competition coming online.

I could see them selling games in 3-5 years if they heavily invest and distribute to other devices/storefronts, but its hard to envision a situation were PC gamers come to them, imo.
 
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