Starfield's Strategic Significance: Video Games Industry Memo, 07/09/2023

New Bethesda RPG releases at critical point for Microsoft's game strategy and could shape the future of the industry

Sep 07, 2023

VGIM in Brief

Starfield releases and poses big questions about Microsoft’s games strategy.
SAG-AFTRA authorises video game voice acting strike over AI.
The average wager on skin gambling site CSGO Empire was reportedly €1460.

The big read - Starfield’s strategic significance

This week, Starfield - the space adventuring RPG from the studio responsible for The Elder Scrolls and Fallout series - has left the dock and arrived on PC and Xbox.

It is, undoubtedly, one of the biggest game releases of the year. But Starfield’s release is also more than just a consumer event.

It is, of all the games released this year, arguably the most strategically significant and its success - or otherwise - will be important in shaping the outlook for the industry in the years ahead.

A starring role

To get a sense of the importance of Starfield to the wider industry, we have to roll back the years to March 2021 when ZeniMax Media, the company within which role-playing merchants Bethesda sit, was snapped up by Microsoft for $7.5bn.

The rationale for doing so was clear. Microsoft bought Bethesda to strengthen its arsenal of first party developers who create content first and foremost on its behalf.

By doing so, Microsoft intended for certain Bethesda games to exclusively release for Xbox to encourage players both to buy consoles and to subscribe to Game Pass - the company’s Netflix style subscription service.

Exclusive zone

Within this context, Starfield was meant to be a single but significant part of Microsoft’s strategy. However, fast-forwarding back to the present day, the game feels like a much bigger moment for both Xbox and the wider industry for a few important reasons.

One of the major reasons why Starfield’s release is important now is that the steady roll-out of the current console generation - slowed to some extent by the pandemic - has resulted in the emergence of two distinct visions for how the future of the industry is shaping up.

While Sony stuck to its guns and made the PlayStation 5 a refreshed version of a traditional high spec console letting people play great exclusives, cleaving to the traditional division between devices in the process, Microsoft has sought to stitch together through Game Pass subscriptions and cloud play a wider ecosystem of devices - of which its Series S and X consoles are one part of it - where flexible content access is as important as the library of games itself.

Underpower play

Unfortunately for Xbox, its vision has appeared undercooked. While Game Pass itself remains popular and the clear leader in subscription games, Microsoft’s attempt to maintain a unified backward compatible ecosystem versus Sony’s God of War: Ragnarok machine or Nintendo’s library of tailored Switch exclusives has held it back in the development of system selling exclusives.

This is particularly true in the case of the Series S, which has transformed in a couple of years from smart digital-only Game Pass ready console into an underpowered Series X - forcing developers to adjust their vision downwards to account for its limitations.

When added to delays and backlogs caused by Covid and fewer opportunities to tap into a back catalogue of historic Triple A titles to re-release or remaster, Microsoft’s lineup of games has helped it to fall behind its rivals in hardware sales to question whether Game Pass revenues bridge the gap.

And to make matters worse for Microsoft, their route for acquiring additional exclusives by expanding its first party studio roster is also closing due to scrutiny from competition authorities.

The challenges it has experienced acquiring Activision Blizzard is not, as regulators have recognised, about locking content to the platform. But the battle that has been fought over it and the ongoing efforts to clamp down on Big Tech’s market power makes Microsoft vulnerable to challenges on future purchases.

This leads to a potentially challenging future for Microsoft where its expansive vision for games instead leads to a dilution of its appeal - allowing Sony and Nintendo to continue to hoover up consumers with their limited, but clearer, distillations of what their vision of a games platform is.

Victory conditions

In this context, Starfield takes on genuine significance for Microsoft. As the major first party release of the year, it does need to be a commercial success by driving both sales of the game itself and subscriptions to Game Pass. So far, the signs look good.

But more than that, Starfield has the potential to be a turning point for Microsoft’s overall strategy. It could prove that occasional standalone Triple A titles can satisfy enough players who pay a low cost and low friction subscription to access games as they need them. Or, it could prove that platforms are only as good as their release slate and lead to Microsoft reconsidering how regularly it brings significant releases to market.

For what it’s worth, my sense is that Starfield may prompt a rebalancing of Microsoft’s approach back towards tent-pole releases. But we will have to wait and see whether that unfolds or if Bethesda’s space adventure allows Microsoft to continue boldly going towards a borderless - likely cloud-led - games ecosystem.

News in brief

SAG-AGGRO: The Screen Actors Guild has authorised its members to go on strike against major video games publishers in an effort to protect its members from losing out to AI in regards to performance capture. While authorising a strike doesn’t mean it’ll go ahead, it shows that games companies are at risk of being wrapped up in the kind of impasse that has seen the movie and TV biz grind to a halt in the US.

Skins in the game: Esports expert Ollie Ring has put together an excellent summary of the state of play in skin gambling, the practice of gambling skins earned in video games for cash. As well as explaining the current gaping holes in the regulatory landscape around it, the piece also reveals that the average value of a skin wager on site CSGO Empire is an eye-popping €1460.

The Generative Game: Epic Games supremo Tim Sweeney has said that he is open to the use of generative AI within games listed on its store. Sweeney’s position contrasts with Humble and, perhaps unusually given their general laissez-faire attitude to everything else, Valve who have each expressed concerns over the IP implications.

Through the Great Firewall: South China Morning Post has reported that 31 video games have been approved for release in China this month, including licenced releases related to Avatar, Lord of the Rings and One Piece. This takes the total number of games released in China up to 58 for the year.

Non-endemic nightmare?: Shawn Layden, formally big boss at PlayStation, has warned that non-endemic companies like Amazon and Google are the biggest threats to games. Worth reading for the points Layden makes about why projects like Stadia fell flat on its face.

Ins and outs

Sophie Vo has become the third major exec to leave PlayStation’s mobile team. She’s off to run her own games leadership consultancy called Rise and Play…User generated content agency Karta is looking for a Head of Virtual Merchandise and Fashion…Activision Blizzard is hunting for an Editorial Manager in Santa Monica…

Events and conferences

PG Connects, Helsinki - September 11th - September 12th
WASD, London - September 14th - September 16th
Tokyo Game Show, Tokyo - September 21st - September 24th
EGX, London - October 12th - October 15th

Games to watch this week (which aren’t called Starfield)

NBA 2K24 - 2K’s annual basket-ball-’em-up launches on Friday.
Baldur’s Gate 3 - the feel-good PC hit of the summer is now out on PS5.
TOSS! - likely vomit-inducing VR powered adventure play-ground game hits digital shelves.
Chants of Senaar - intriguing language decoding game based on the legend of Babel makes itself less interesting by adding compulsory stealth sections.

Before you go…

X account Can You Pet The Dog? broke the shocking news this week that labradors (and possibly all dogs) have become extinct in Starfield.

In space, nobody can hear you bark…

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