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[ResilientBanana]

This is something I've been throwing around in my own words, but it's nice to see the big man himself explain it.

Also, I didn't see if this was already posted, please lock it if it's old news.

Xbox boss Phil Spencer on the future of gaming: “The business isn’t how many consoles you sell”

A deeper look at xCloud and Project Scarlett.

www.theverge.com

Do you think you can release these too quickly? If the Xbox One X is the most powerful console, and then, two years later, there’s a new more powerful console, doesn’t that diminish what that means?


What I want you to think about in this is the players, not the specific version of a console they have. I think the question there is, “Is there a customer for the highest performing console, and are there enough customers where that makes sense?” If somebody bought an Xbox One X yesterday, I want them to feel completely that they can have a great experience for years and years. I also want to be as transparent as I can with them about the road map. So if somebody is sitting on the original Xbox One now, and they’re thinking about an X, they can make their own decision about what platform they want to have.


I don’t need to sell any specific version of the console in order for us to reach our business goals. The business isn’t how many consoles you sell. The business is how many players are playing the games that they buy, how they play. So if somebody bought an original Xbox One from us on launch day, and they’re buying and playing games, I don’t need to sell them an S. I don’t need to sell them an X. If they want to stay on the Xbox One they have and stay as a great member of our community or subscribe to Game Pass, that’s a great business for us.


I think it’s easy from the outside to judge the health of our business around how many consoles any company sells. In the end, how many subscribers you have to something like Game Pass, how many games people are buying, those are much better metrics on the health of the business.

 

[EviLore]

 

[Texas Pride]

This is exactly what I would expect someone to say if they couldn't outsell their competitors. Pick the industry it wouldn't matter.

 

[Shakka43]

That's third place talk, Phil.

 

[DunDunDunpachi]

I believe you Phil. Microsoft has no history of barging into markets, attaining a position of (relative) credibility, and then making spurious declarations about THE FUTURE of said market in a way that frames it to their own advantage.

Nope. This is just not something the company has been known to do.

Spoiler

 

[meanspartan]

There is a greater than zero chance Microsoft games will be on Ps5 by the end of next gen.

Not likely, but I would not be surprised.

 

[WouldYouKindly]

Says the guy in SECOND PLACE

 

[Bolivar687]

That first post nuclear strike from the boss.

 

[Deleted member 752119]

I mean he's right. The huge profits are in sales of service subscriptions and software.

He's not saying console sales don't matter--they do as they start making a profit on each unit sold as generations wind on (or from the start for Nintendo) and each sale is someone presumably buying their games and services. But it's not the end all be all as they still make tons of profit from sales of their games on PC, Gamepass subscriptions on PC, Xcloud subscriptions and game purchases down the road etc.

The point is to get as many people as possible to have the ability to buy your games and software. Selling people consoles is just one way. But that's not going to reach people like me who already have a PS4, Switch and gaming PC and can't justify another platform for the few exclusives of theirs that appeal to me. But I've bought Gears Ultimate, Gears 4 and Forza Horizon 3 on PC this gen and that's sales they wouldn't have gotten from me if they were only on Xbox One. I'll definitely subscribe to Gamepass here and there as well to play their exclusives and other games that interest me that are on the service. That's more money they get from me that they otherwise wouldn't.

 

[EGOMON]

At least you tried

 

[Mista]

I mean as a consumer I really don't give a shit how much a company sells. I care about the games Phil, the games. Because I bought the console for them

 

[ResilientBanana]

I mean he's right. The huge profits are in sales of service subscriptions and software.

He's not saying console sales don't matter--they do as they start making a profit on each unit sold as generations wind on (or from the start for Nintendo) and each sale is someone presumably buying their games and services. But it's not the end all be all as they still make tons of profit from sales of their games on PC, Gamepass subscriptions on PC, Xcloud subscriptions and game purchases down the road etc.

The point is to get as many people as possible to have the ability to buy your games and software. Selling people consoles is just one way. But that's not going to reach people like me who already have a PS4, Switch and gaming PC and can't justify another platform for the few exclusives of theirs that appeal to me. But I've bought Gears Ultimate, Gears 4 and Forza Horizon 3 on PC this gen and that's sales they wouldn't have gotten from me if they were only on Xbox One. I'll definitely subscribe to Gamepass here and there as well to play their exclusives and other games that interest me that are on the service. That's more money they get from me that they otherwise wouldn't.

Same here. I owned an Xbox One at the beginning of the generation until it died. After that I bought a PS4 Pro. But I also have a gaming PC and do most of my gaming there, I currently subscribe to Gamepass as it has games that I want to play and they just keep adding games that I can't get on my playstation. To be fair, playstation does have some great games, but I like to play on both sides of the fence.

The only people that see that benefit, however, are those that can afford a proper PC and a console.

 

[Nikana]

He's not wrong but more consoles definitely don't hurt.

 

[Insane Metal]

 

[T-Cake]

I wonder if anyone's asked Phil if he's going to launch in Japan with Scarlett or just promote xCloud there? I think they have some of the best internet/mobile networks which is perfect for streaming.

 

[mckmas8808]

He's not wrong but more consoles definitely don't hurt.

He is wrong. If the first place console sells 130 million consoles, but the last place console sells 50 million consoles, there's enough history to tell us that's most of the gamers are buying games on the first console more than the last place one. It's been that way for decades. No reason to think it's changed now.

 

[DanielsM]

We know Phil, subscriptions.

 

[StormCell]

The business is how many players are playing the games that they buy, how they play.

I don't know about others, but I played the hell out of Spider-Man on PS4 until I finished the story. Then I put it down and never looked back. No regrets.

For a week or two, I WAS Spider-Man. I don't think it's really about how many players are playing the games they buy. Games get played and then they get collected, traded, or sold. Not everything in gaming is about active player base. Just the online ones, and not everything needs to be an online co-op or competitive thing.

This also just happens to be the thing Xbox is weak at: single-player experiences. Go figure.

 

[ZeroGravity]

He is wrong. If the first place console sells 130 million consoles, but the last place console sells 50 million consoles, there's enough history to tell us that's most of the gamers are buying games on the first console more than the last place one. It's been that way for decades. No reason to think it's changed now.

But it is changing, slowly but surely. The way we play, consume, and buy games is much different than 20 years ago, and will be much different 20 years from now. Selling consoles used to be the only metric of success because the only way to make money was to get people to buy games on that console. That's not entirely the case anymore, and probably won't be the case at all in the future. Companies that are slow to adapt to this are going to struggle, and I think Microsoft is positioning themselves well to be successful in that regard.

Yeah, that may have come out of realizing that they might never get their market leader status back as console sellers, but better to be ahead of the curve than behind it, regardless of how you got there.

 

[Nikana]

He is wrong. If the first place console sells 130 million consoles, but the last place console sells 50 million consoles, there's enough history to tell us that's most of the gamers are buying games on the first console more than the last place one. It's been that way for decades. No reason to think it's changed now.

Clearly this went way over your head.

 

[SlashBringingHasher]

but phil. we wanna talk about console gaming. not gaming in general. if you don't want to support console gaming the most then get out

 

[spawn]

It's not the number of consoles or games you sell. It's the subscriptions (sarcasm)

 

[theHFIC]

the line is already starting to form for the 9th generation of video game consoles

 

[DanielsM]

But it is changing, slowly but surely. The way we play, consume, and buy games is much different than 20 years ago, and will be much different 20 years from now. Selling consoles used to be the only metric of success because the only way to make money was to get people to buy games on that console. That's not entirely the case anymore, and probably won't be the case at all in the future. Companies that are slow to adapt to this are going to struggle, and I think Microsoft is positioning themselves well to be successful in that regard.

Yeah, that may have come out of realizing that they might never get their market leader status back as console sellers, but better to be ahead of the curve than behind it, regardless of how you got there.

They are trying to position themselves as a middleman where no middleman is really needed or wanted, imo. The money is in two places.... digital storefronts and services, generally speaking.
Basically, they continue to blow up their digital storefronts, first with Games for Window Live, and now the Microsoft Store. They can't compete in an open environment in the digital storefront on PCs.

As far as services, there is no equivalent of office, exchange, sharepoint, yammer, teams, skype for business, project, etc. to sell consumers. So, that basically leaves virtualized Windows and Xbox andor streaming. There just isn't many reasons for the big publishers to consider Microsoft going forward, generally speaking in this way. (but we shall see) as they have their own digital storefronts and in many cases already have their own rental programs.

 

[Dabaus]

Between this and Matt Booty not definitively saying "no" point blank about Halo showing up on PlayStation at some point, it really seems to me like the writing is on the wall. Yeah theyll give scarlet or whatever all the pomp that is due a next gen launch but if you think they are returning to the glory days of the early 360 days with money hats and hot new AAA ips like gears of war well, good luck.

Edit: I mean i guess money hats could still happen. If this years E3 was them "going big" as they claimed they were, then they either dont under stand the games industry like we think they do or xbox just isnt that big a priority despite all the rhetoric coming from them. In my opinion of course.

 

[Leonidas]

He's right.

Xbox is on Console and PC with Xbox Game Pass. Game Pass already has millions and millions of subscribers and with Game Pass for PC that number is going to grow.

PlayStation is virtually console only.

 

[Honey Bunny]

Why go to all that trouble selling them then

 

[DanielsM]

He's right.

Xbox is on Console and PC with Xbox Game Pass. Game Pass already has millions and millions of subscribers and with Game Pass for PC that number is going to grow.

PlayStation is virtually console only.

Can I see the receipts on that? I mean that is the "dream". But Sony has their own rental/streaming program in one, it costs less and they only have 700,000 subscribers max last quarter.

I do agree that is the "dream", not sure that is the "reality" though at the present moment.

 

[SpinningBirdKick]

The ultimate goal is to be the Netflix of gaming.

This means doing away with all those troublesome consoles and just selling you regular drops of gaming content - ideally in a monthly subscription that you pay for whether you use it or not on third party devices. Like netflix.

The only problem with this master plan is that the first party content available isn't strong enough for a significant number of people to want to play it outside of the original platform.

So while you're desperate to get out of the hardware business you can't because your offerings aren't strong enough. If they were your platform would be more popular.

I've got to admire the ambition of the plan but the execution is sadly lacking for now.

 

[mejin]

Go multi all the way, bring the games to playstation and be happy.

 

[JustP_Gaming]

He is wrong. If the first place console sells 130 million consoles, but the last place console sells 50 million consoles, there's enough history to tell us that's most of the gamers are buying games on the first console more than the last place one. It's been that way for decades. No reason to think it's changed now.

Thats your problem you might be using old pre digital pre subscription data. Things are rapidly changing not saying hes right or wrong but he most definitely has a point. for example what if Sony sells 100million consoles next gen and MS sells 75million but on top of that have 25million subs through Gamepass increasing revenue to themselves and game creators/publishers. Who really "wins" then

 

[EviLore]

Go multi all the way, bring the games to playstation and be happy.

For the time being they have more leverage as a platform holder. If they solidify their position on PC and continue to grow Game Pass and their internal studios, that might be the correct move a gen from now depending on how things play out.

 

[demigod]

When first to 10 million fails.

 

[Jigsaah]

The fact of the matter is that Phil is objectively correct to a point. Console makers make a majority of their money from the games and, more recently, services they sell. If they can make the services and games available to people without necessarily selling the console, that a customer they've served regardless. That's why they are moving to this platform basis. It's convenient that they are in 2nd place while he says this, Microsoft has been talking like this since roughly 2014 when they stopped revealing console sales and instead talking about Active Users/subscribers.

I don't think he's saying the business has nothing to do with consoles. It does, but it's priority is tertiary to games and services in terms of priority.

 

[DanielsM]

Thats your problem you might be using old pre digital pre subscription data. Things are rapidly changing not saying hes right or wrong but he most definitely has a point. for example what if Sony sells 100million consoles next gen and MS sells 75million but on top of that have 25million subs through Gamepass increasing revenue to themselves and game creators/publishers. Who really "wins" then

Its not that he is wrong or right.... its that you are making assumptions that people will subscribe at the numbers needed. Than that number has to be subtracted from the sales you will be losing if you put the product up for sale instead of a rental. Best case, this takes 5-10 years of growing their library, but the problem is.... the costs just keep coming see Netflix.

They are going to have to double or triple what they have now, and drastically increase their quality and output to even have a chance and even than they'll probably be running into the red worse than Netflix.

 

[mckmas8808]

Clearly this went way over your head.

No it didn't. I notice the PR speak when I see it. Why sell consoles if it doesn't matter how many you sell? Of course that matters. If it really didn't matter how many consoles they sold, you'd see MS releasing those numbers quarterly but not caring about the number so much. But they don't. They refuse to give us the console sold numbers.

Thats your problem you might be using old pre digital pre subscription data. Things are rapidly changing not saying hes right or wrong but he most definitely has a point. for example what if Sony sells 100million consoles next gen and MS sells 75million but on top of that have 25million subs through Gamepass increasing revenue to themselves and game creators/publishers. Who really "wins" then

Like someone said earlier, "Not everything in gaming is about active player base". It's ok to sell a game and then maybe that gamer doesn't come back to the game a year later. Some games are good for that. Does a game like Horizon Zero Dawn need an "active player base"?

Maybe Phil should have said console sold means less than it did 10 years ago. But to act like it doesn't matter at all is foolish talk.

 

[JustP_Gaming]

Its not that he is wrong or right.... its that you are making assumptions that people will subscribe at the numbers needed. Than that number has to be subtracted from the sales you will be losing if you put the product up for sale instead of a rental. Best case, this takes 5-10 years of growing their library, but the problem is.... the costs just keep coming see Netflix.

They are going to have to double or triple what they have now, and drastically increase their quality and output to even have a chance and even than they'll probably be running into the red worse than Netflix.

Im really not assuming I was simply providing an example of a scenario where consoles sales alone wont determine the so called winner of a generation.

 

[Gamernyc78]

This shit so ass backwards lol especially since how many consoles you sell for the most part boosts your mau. They are all connected. It's same shit thy pr talk about getting ppl into the eco system, hardware sakes is just another way but now it's being flipped bcus you know they sold nowhere near the competition. All we have to do is look at each companies revenue and profit margins to see the impact of those console sales and Sony had more of both. Of course console sales aren't the only factor to growth and software sales, streaming as well as subscriptions a I so bring in money.

 

[DanielsM]

Im really not assuming I was simply providing an example of a scenario where consoles sales alone wont determine the so called winner of a generation.

I actually agree, I mean Valve probably makes billions and billions in revenue a year and they don't need console sales to do it, matter of fact, they stopped making games almost completely now.

He is trying to make Microsoft a middleman where no real middleman is needed, at least with the big publishers, generally speaking.

 

[JustP_Gaming]

This shit so ass backwards lol especially since how many consoles you sell for the most part boosts your mau. They are all connected. It's same shit thy pr talk about getting ppl into the eco system, hardware sakes is just another way but now it's being flipped bcus you know they sold shit.

Your not getting it. In the MS future MAU wont be soley determind by consoles sales. What if and this is a big what if Game Pass appears on all Samsung and LG tV's by default. Think about it.

 

[mckmas8808]

This shit so ass backwards lol especially since how many consoles you sell for the most part boosts your mau. They are all connected. It's same shit thy pr talk about getting ppl into the eco system, hardware sakes is just another way but now it's being flipped bcus you know they sold shit.

THANK YOU!!!!! Guys read the bolded here from Gamernyc78

Your not getting it. In the MS future MAU wont be soley determind by consoles sales. What if and this is a big what if Game Pass appears on all Samsung and LG tV's by default. Think about it.

Hold on......TVs are supposed to have the computational power of PCs some time in the near future?

 

[DanielsM]

Your not getting it. In the MS future MAU wont be soley determind by consoles sales. What if and this is a big what if Game Pass appears on all Samsung and LG tV's by default. Think about it.

MAU is not calculated on consoles, its whether you log in to XBL from any devices. Also, if you're like me, you can have multiple XBL accounts, if you login in the quarter.... you're counted as a MAU.

 

[Gamernyc78]

Your not getting it. In the MS future MAU wont be soley determind by consoles sales. What if and this is a big what if Game Pass appears on all Samsung and LG tV's by default. Think about it.

I'm not getting it? Are you serious? Of course I get it if you read my comment I included "subscription" in my comment. You don't need to be an analyst to understand this buisness Obviously thy go on about maus and of course it's relevant especially since steaming and subscription based gaming will take off. Psnow in its inception was on smart tvs and surely will be once again. But console sales open the door to more maus smh what don't u get?

Console sales are just as relevant as single player games and I love that Sony keeps proving the industry and big mouth pr heads wrong. Again console sales bring ppl into your eco system thus more maus lol not hard to understand.

 

[JustP_Gaming]

MAU is not calculated on consoles, its whether you log in to XBL from any devices.

And with the upcoming XCloud service or as I like to call it "Xbox Game Cloud" They can potentially quadruple their MAU, users, Players engagements how ever you wanna spin it.

 

[Vawn]

Says the guy in SECOND PLACE

Microsoft wishes they had the second most popular console.

 

[JustP_Gaming]

2021's revenue report will determine just how correct Phil is with his statements.

 

[DanielsM]

And with the upcoming XCloud service or as I like to call "Xbox Game Cloud" They can potentially quadruple their MAU, users, Players engagements how ever you wanna spin it.

This is where I get lost. Everyone's business starts out with, "all we have to do is service 1% of the 7 billion people walking on the planet and we're rich".

I want to sell used toilet bowl water for $10,000 gallon, all I need is a few 1,000 buyers and I'm in the money.

Streaming isn't a product anyone really wants, maybe one day that will change.

 

[JustP_Gaming]

This is where I get lost. Everyone business starts out with, "all we have to do is service 1% of the 7 billion people walking on the planet and we're rich".

I want to sell used toilet bowl water for $10,000 gallon, all I need is a few 1,000 buyers and I'm in the money.

Streaming isn't a product anyone really wants.

You cannot speak to what everyone wants. I can bet money there are more people then you think that want a service like this, that really works. If it doesnt work as promised, well thats a different story.

 

[DanielsM]

You cannot speak to what everyone wants. I can bet money there are more people then you think that want a service like this, that really works. If it doesnt work as promised, well thats a different story.

Where are the customers? You made this big assumption they increase users by four fold.

I'll tell you where they could have gotten a billion users.... Games for Windows Live and the Microsoft Store.... but they fail and fail again.

If they can't compete with digital stores on their own OS, they have a uphill battle everywhere else.... nobody needs them for streaming.

 

[mckmas8808]

2021's revenue report will determine just how correct Phil is with his statements.

It sure will. And the Xbox NEXT console will be the biggest display of what those revenues will look like for the gaming division.