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[ZywyPL]

If Microsoft can't beat Sony at game Consoles, how do you expect them to win at smartphones where Sony is already having the most profitable phone game in Japan for 2019?
Windows have plenty of gamers, but also plenty of cheap games. If you think Microsoft would somehow not have competition in the PC gaming space, you have a hell of a surprise coming.

Their plan is not to sell a single title but entire service. That's exactly the sales battle mentality I was talking about... Netflix, Spotify, Youtube etc. don't give a crap if you have an iPhone, Samsung Galaxy, Sony Xperia, tablet, laptop, PC or a TV app, they get the same cash either way, that's how the service-based model works.

But they do. If it didn't matter, they wouldn't release the console and spend millions on R&D and marketing for them ...all to sell their ecosystem. The more boxes sold, the more consumers available to sell their games and services, and collect the royalty cut.The box is the mover. You can spin like a top on this and you still will be wrong about it, no matter how you slice it. And no matter how much Microsoft hates the idea of going through the motions of selling the box, they'll be held to a standard by the competition and console gamers, and if they don't deliver, like they failed to do this generation, and like they're doing now as we move to next-gen... means they'll continue to bleed consumers from the X360 era and continue to damage the brand. Hell, they're slowly phasing out the brand in favor of Gamepass. Their last ditch effort at hitting gold for as low an effort as possible.

They cannot make a 180 degree spin overnight, no company can, that's simply impossible, I think that's obvious? So of course they still have to provide/rely on traditional console model, and will have for the next decade or two, it will take quite some time until old pricks like us step aside and the younger generations take over the gaming market, because that's the long-term plan, any by long-term isn't just the next mere 5 years or so, they have a plan for way past beyond just the upcoming generation of consoles, that's why they wan to completely shift their strategy, their business model. And they can always keep providing traditional digital/physical copies for those who prefer such way of distribution. It's called diversifying the source of income. That's the whole point, instead of having a single strategy that will either succeed or not, they have multiple options and every one of them brings revenue, and all combined together bring a big pile of cash, even if one works less than the others.

All those pie in the sky concepts are cool and all but they are just that, the power of the clouds.

No they're not, MS already showed the strategy brings them more money than ever despite hardware sales constantly dropping down, it's a fact, it's a public company and they cannot lie in their yearly/quarterly financial statements you know. It already works and they haven't even fully started to execute it.

 

[Kerotan]

He also believes Craig is their official mascot.

 

[Woo-Fu]

I don't know why they keep on trying to spin this one, the people who want exclusives for their console of choice aren't going to change their minds.

 

[vdopey]

No they don't, that's not even their long-term plan, quite the opposite. Consoles sales only matter for kids on the internet to drive their console wars, to brag about who "won", but there's no money in the consoles themselves. Because everything comes down to just Sony vs MS right? Because companies like EA, Ubi, Bethesda, Epic, Bungie, Riot etc. don't exist right? Companies that make billions of dollars on a yearly basis, sometimes even on just a single title, without owning any hardware at all, and even giving a chunk of their money to the platform holders. There are countless examples where it's crystal clear that selling consoles means absolutely nothing as far as revenue/profit goes, and that's the goal of all those gaming companies, and MS with declining hardware sales while having a record revenue as of recently is the very best proof, they don't need to sell a single Xbox console just because kids on the internet want them to, they can make billions without it. Not to mention they have billions of Windows devices out there already, and are planning to jump on another few billions of smartphones out there, those are the numbers that no gaming console will ever be able to achieve.

Ok so where do I start with this, the problem is you have to have games to sell your platform, what you are essentially listing is a bunch of third party publishers and Microsoft making billions selling their software in a subscription, do you really think this is going to work ?

Have you forgotten EA Access was introduced before Gamepass ? Do you think EA, Activision, Ubisoft, Bethesda etc etc are interested in giving their games and their IP to MS for pennies on the pound so that Microsoft can make billions ? What are you smoking ? It seems like its some good shit, let me know where you get it from, so I can get some as well.

I mean streaming services have fared so well so far haven't they ? The phone market is controlled by Android(Google) and iPhone(Apple), both of which dislike Microsoft. Google on top has Stadia its own streaming platform, which is tanking hard, but that is what Google will be selling hard for Android. Apple doesn't really give a shit about gaming, both of them will be screwing MS hard and taking their free 30% of all subscriptions played through their relevant app stores.

The only place they can leverage the GAAS platforms are on Windows PCs and on Game Consoles - if it is even remotely successful and they manage to produce a viable business platform where they make money from the service every third party publisher will pull their games from the MS service and introduce their own, remember what happened to Steam ? How many game / app stores are available on PC now, Steam, Epic Game Store, EA Origin, Ubiplay, etc etc.. Steam is still the dominant platform, also if Gamepass is successful what will happen to Steam ? Do you not think Valve has its own strategy planned ?

You are dealing with a bunch of money hungry sharks in that stratosphere of business, all of them looking to make as much money as possible, don't be so naive.

 

[DeltaPolarBear]

I don't know why they keep on trying to spin this one, the people who want exclusives for their console of choice aren't going to change their minds.

MS's goal is not to get NEW customers, it is about fighting to keep what they got left. Their PR is basically like the rubbish North Korea spews out with their news broadcasts; it is for local consumption, not for outsiders.

 

[killatopak]

This thread was a wild ride.

 

[Knitted Knight]

They cannot make a 180 degree spin overnight, no company can, that's simply impossible, I think that's obvious? So of course they still have to provide/rely on traditional console model, and will have for the next decade or two, it will take quite some time until old pricks like us step aside and the younger generations take over the gaming market, because that's the long-term plan, any by long-term isn't just the next mere 5 years or so, they have a plan for way past beyond just the upcoming generation of consoles, that's why they wan to completely shift their strategy, their business model. And they can always keep providing traditional digital/physical copies for those who prefer such way of distribution. It's called diversifying the source of income. That's the whole point, instead of having a single strategy that will either succeed or not, they have multiple options and every one of them brings revenue, and all combined together bring a big pile of cash, even if one works less than the others.

No they're not, MS already showed the strategy brings them more money than ever despite hardware sales constantly dropping down, it's a fact, it's a public company and they cannot lie in their yearly/quarterly financial statements you know. It already works and they haven't even fully started to execute it.

We don't know any of that. We're not old pricks, and we should leave gaming for future generations (by voting with our wallets) on business models that provide quality, value and move the industry forward as best it can. The traditional model does that. The execs bitching about AAA budgets getting bigger and "unsustainable" sure cry tears of pain as they look at their billions in profits every year wondering why oh why my profit margins can't increase tendfold. All this investor pressure what am I'm going to do? Why o why am I forced to constantly be on the edge competitive wise, technology wise? Why can't I stagnate and provide as little as possible and reap as much as possible off these peasants... why all this pressure, can't take it....mwaaahhh. Peasant pay more for games... no used games for you peasant... low quality, broken games in chunks as a service... expect less peasant... that's what you deserve peasant - be happy about it too peasant - that's the inevitable future you peasant, accept it... yeah that's right, bend over....yeahhhhh.

Also; "Please die out so Gamepass-like models are successful".... the hell? I know you don't mean it like that but oooffff...

Again typical Microsoft...

Microsoft's full-year gaming revenues nearly flat for fiscal 2020

Microsoft managed to eke out a slight increase in its overall gaming revenues year-over-year for fiscal 2020 thanks to strong Xbox content and services revenue, and unsurprisingly no real help from hardware sales.

Actual 10k during COVID (gaming boon)...

Gaming revenue increased $189 million or 2%, driven by an increase in Xbox content and services, offset in part by a decrease in Xbox hardware. Xbox content and services revenue increased $943 million or 11% on a strong prior year comparable, driven by growth in Minecraft, third-party titles, and subscriptions, accelerated by higher engagement during stay-at-home guidelines. Xbox hardware revenue declined 31%, primarily due to a decrease in volume and price of consoles sold.

In other words about $10 billion in gaming revenue. It's profitable says Nadella. How much of that is profit? What is punching above its weight to make the division profitable vs. what's providing a net loss or barely breaks even? What is profitable has always being the question.

There is the Minecraft cash-cow (insignificant upkeep expenses) - no doubt immensely profitable. Not tied to the box necessarily. Sold on many platforms.

Tied to to the box for success ventures (indirectly incurring cost of the hardware like manufacturing cost, R&D cost and marketing expenses):

-- The Xbox Live Gold cash-cow (+ server's expense, + free content expense) - absolutely no doubt immensely profitable.
--Third party games/services royalties (+ server/storefront expense) - immensely profitable.

-- Gamepass (loss-leader strategy with significant expense when tied to the box, slightly less outside the box aka PC) - profitable?????? Consider:

*Server upkeep/delivery cost
*Content cost (games library and rotating line up - varies by title notoriety)
*Sunk cost/opportunity cost of first party title sales foregoing the $60 tag. In effect development/marketing cost of first party studios and games.
*Marketing cost taking away budget from the hardware segment that ultimately pushes Xbox Live Gold, game royalties and the like (the real cash cows).
*Assuming the Gamepass push, and all it entails has no negative side-effect on hardware adoption by making it less attractive to adopt relative to the competition. MS doesn't live in a bubble without market pressure.

That's a big bet to forego so much and invest so much for such a venture. Its success is intrinsically tied to the box unless it's taking the PC market by storm (Steam sales charts for MS exclusive titles point otherwise).

So out of that $10 billion in revenue, after accounting for all the related expenses and costs, both sunk, opportunity and recurring, how profitable is the Xbox division without Minecraft? and within that, how profitable is the Gamepass venture? is the gamepass venture sustainable by itself as it currently stands without the box? Because again, you make it sound like you're certain it's a profitable venture when we don't have the numbers at all. MS touts 10 million subscribers but how much did it cost to get those 10 million? how many are active subscribers out of that 10 million? what is the average profit margin, if any, of the currently active? what is the average subscription length and at what profit margin? what is the growth, if any, month to month? What is the subscriber split between Xbox and PC? In essense; how many subscribers are dependent on the success of the hardware? What is the average profit margin, active subscribers count, and average subscriber length on PC? What is the cost to drive growth?
Is there positive or negative correlation to hardware adoption rates - i.e is it helping sell the box, or is it a net negative when competing forces (PS/Nintendo etc) are taken into account?

So many questions.

To me it sounds more like pie in the sky as MS other ventures that have gotten the axe. They always market the hell out of them, charging with the wallet ..... they flop, and get cut. And the gaming division has been on that threshold (being axed) many times from what has been reported. At least they've been smart about taking investor's eyes away from that division to avoid investor pressure by fudging the numbers and only providing what they want you to see.

 

[Kamina]

This thread was a wild ride.

This threads theme song:

 

[Kerotan]

MS's goal is not to get NEW customers, it is about fighting to keep what they got left. Their PR is basically like the rubbish North Korea spews out with their news broadcasts; it is for local consumption, not for outsiders.

Exactly. Their PR has lost all credibility and should be taken with a massive boat load of salt. They're in desperate mode.

 

[vdopey]

We don't know any of that. We're not old pricks, and we should leave gaming for future generations (by voting with our wallets) on business models that provide quality, value and move the industry forward as best it can. The traditional model does that. The execs bitching about AAA budgets getting bigger and "unsustainable" sure cry tears of pain as they look at their billions in profits every year wondering why oh why my profit margins can't increase tendfold. All this investor pressure what am I'm going to do? Why o why am I forced to constantly be on the edge competitive wise, technology wise? Why can't I stagnate and provide as little as possible and reap as much as possible off these peasants... why all this pressure, can't take it....mwaaahhh. Peasant pay more for games... no used games for you peasant... low quality, broken games in chunks as a service... expect less peasant... that's what you deserve peasant - be happy about it too peasant - that's the inevitable future you peasant, accept it... yeah that's right, bend over....yeahhhhh.

Also; "Please die out so Gamepass-like models are successful".... the hell? I know you don't mean it like that but oooffff...

OMFG I laughed hard, well put !! Much class, very Awesome !

 

[ZywyPL]

We don't know any of that. We're not old pricks, and we should leave gaming for future generations (by voting with our wallets) on business models that provide quality, value and move the industry forward as best it can. The traditional model does that. The execs bitching about AAA budgets getting bigger and "unsustainable" sure cry tears of pain as they look at their billions in profits every year wondering why oh why my profit margins can't increase tendfold. All this investor pressure what am I'm going to do? Why o why am I forced to constantly be on the edge competitive wise, technology wise? Why can't I stagnate and provide as little as possible and reap as much as possible off these peasants... why all this pressure, can't take it....mwaaahhh. Peasant pay more for games... no used games for you peasant... low quality, broken games in chunks as a service... expect less peasant... that's what you deserve peasant - be happy about it too peasant - that's the inevitable future you peasant, accept it... yeah that's right, bend over....yeahhhhh.

The average gamer's age is 30-40, always has been, that just doesn't change, so in the next 20 decades the most people who play games today will be 50-60yo, I think it's very safe to say barely anyone at this age will be interested in playing video games anymore, and even if, I know it's not convenient to think that you'll eventually get old and die some day, but that's a inevitable fact, you can't play video games forever, whether you like it or not you'll be eventually replaced, and today's 5,8, 10, 12yo kids, that's the future 30-40yo market, and they grow up in totally different environment then we have, starting all the way back in the analog era, those kids don't know the boundaries of different platforms, of physical discs and so on, they play Minecraft together no matter what console/PC/tablet/smartphone their parents bought them, when they grow up a bit they move onto Fortnite, same deal, then CoD, and so on, if you talk to those kids 20 years from now, that this particular copy of the game works only with this particular consoles, and you cannot play with your friends with different consoles/PC, they will simply burst out laughing straight in your face. And that's MS' (as well as Google, Amazon, Facebook etc. for the matter) long term targeted audience. I'll repeat yet once again - LONG term, not the next 5 years or so, because even if Sony dominates yet again, even their most die-hard fans will eventually die as well, and who's gonna replace them? Bottom line is, all those multi-billion/trillion companies are exactly that for a reason, because they can read the market, because they have all the data to do so, they actually even shape it whether someone likes it or not, you either accept it/adapt or you're left behind, we saw people bitghin about digital distribution, so what, it's the dominant way of distribution now, people bitched about DLCs, so what, they are what brings the most profit now, people bitched about MTX, so what, they are more popular and bring more money than DLCs ever had, that's just the reality, the majority of the market decides, the average Joes, no a tiny group of enthusiast on the internet like here on NeoGAF, that's the reality, sad yes, but reality nevertheless.

 

[Knitted Knight]

Nothing is too long term with Microsoft outside of Windows and Office. We've seen that time and again. To their credit, gaming has lasted quite a big longer than other ventures although they're clearly the weakest link right now out of the big 3 (coming off a disastrous gen - with crazy plans for next gen hoping they turn good). We'll see. I disagree with the premise of not selling the box however. No two ways about it in the present and for the foreseeable future. The box determines success - and that includes Gamepass. You could make the case they can keep being a lowly third and drag it out aka the infinite m$ war chest defense but that literally hangs at the mercy of MS leadership and investor tolerance. Nadella will one day depart.... or he may even pull the plug himself if this new generation turns out a sales disaster for the box. At the very least, Phil wouldn't be the head of Xbox in such scenario and the division completely unrecognizable - back to third party more or less is probable.

 

[Oppoi]

MS's goal is not to get NEW customers, it is about fighting to keep what they got left. Their PR is basically like the rubbish North Korea spews out with their news broadcasts; it is for local consumption, not for outsiders.

Wow that was painfully well put.

 

[vdopey]

Nothing is too long term with Microsoft outside of Windows and Office. We've seen that time and again. To their credit, gaming has lasted quite a big longer than other ventures although they're clearly the weakest link right now out of the big 3 (coming off a disastrous gen - with crazy plans for next gen hoping they turn good). We'll see. I disagree with the premise of not selling the box however. No two ways about it in the present and for the foreseeable future. The box determines success - and that includes Gamepass. You could make the case they can keep being a lowly third and drag it out aka the infinite m$ war chest defense but that literally hangs at the mercy of MS leadership and investor tolerance. Nadella will one day depart.... or he may even pull the plug himself if this new generation turns out a sales disaster for the box. At the very least, Phil wouldn't be the head of Xbox in such scenario and the division completely unrecognizable - back to third party more or less is probable.

You know this is what I think the strategy is from the upper management, or a possible way this whole gamepass has been sold.

1. Gamepass takes off - they achieve customer lock-in, your games are dependant on your subscription all is well and Microsoft corner another market segment.

2. Gamepass is shown as semi-successful - publishers see a potential market and approach MS to buy azure compute to produce their own cloud streaming service and leave xbox gamepass, but sign on to azure compute.

3. Gamepass fails but Microsoft shows intrinsic value in the service idea and use that to sell similar azure cloud compute for game streaming,

The issues I see is if this takes off aws offers this same sort of service - very easy for Amazon to add this as a service and they are the market leader.
Google stadia will probably fail within the next couple of years and google turns Stadia into a google compute service and sells that service to publishers, to provide their own cloud streaming service, both of these options will provide publishers with choices for producing their own competing cloud streaming service (It costs about a $1 Billion to create a data centre - prohibitively expensive for any game publisher to try and build everything from scratch, none of them have the funds to do this themselves)

Ultimately Nadella only cares about growing the cloud compute platform and presence, so I think this is more about boosting capabilities of azure and its possible future customer base. It is a very competitive landscape and a lot of the wins MS have had in this space has been achieved by providing the service at a very cut down rate to other companies and government agencies hoping to lock them in to the eco-system before charging them the full price. If you have terabytes or petabytes of data stored in MS DB servers it will take an inordinate amount of time to transfer that data across to another major cloud player and this takes time, has risks and potential downtime, which means loss of revenue - this is maybe what MS is banking on and what has kept AWS as the major market leader, as they were one of the first to offer cloud compute, but for smaller more agile companies they can switch and swap at will as long as they have a strong enough developer / devops teams to adapt across the various cloud platforms.

I am actually surprised that Apple has thus far turned its nose up at gaming, it allows it on iphones and ipads, but its consumer grade laptops / desktops all shy away from providing good gaming performance - I wonder if streaming would be something that would entice Apple to throw its hat in the ring. There is also Valve I am sure it is in talks with all 3 major cloud vendors discussing its own game streaming platform tied into Steam, none of them have so far taken off and there are far too many different platforms with a stake in this, if this even ever becomes a thing, I doubt it will within the next 10 years, after that it is entirely possible.