Xbox’s cross platform play - Video Games Industry Memo, 08/02/2024
More cross platform and less cross fans, please
Xbox exclusives leak sparks debate about platform’s long term future
Disney invests a cool $1.5bn into Epic Games to create “entertainment universe”
Foamstars, Helldivers 2 and Threes! are this week’s games to play
Hello, my fellow VGIM-ers.
We had another handy little swell to our ranks after last week’s Roblox review, which means this newsletter is now read by over 1100 people in 53 countries and 31 US states (Nebraska, New Mexico and Tennessee: I am coming for you).
While I continue to plan for my Beatles-like break into America at GDC next month, I’m heading down to the much more UK based Guildford, semi-jokingly referred to as the Hollywood for Video Games, for its Games Festival on Friday 16th February
If you’ve got someone fun you’d like to put up for an interview, or if you’d just like to say hello, get in touch with me via videogamesindustrymemo@substack.com and we’ll get something in the book.
For now, let’s turn our attention to some high profile tittle-tattle which is teasing a bit of a shift in the global games industry.
The big read - Xbox’s cross platform play
I made a terrible mistake on Sunday and opened up The Platform Formerly Known as Twitter (or X, as it insists on being called) in feverish pursuit of features about the relentlessly goal hungry Luton Town.
Within 30 seconds, I spotted that “Phil Spencer” was trending in the UK. Given that there was no mention of everyone’s second favourite British property show Location, Location, Location in the rest of the trending tags, it looked likely that something of note was happening to the senior leadership team at Xbox - rather than to one of the UK’s minor television personalities.
Lo and behold, it was. Social media’s worst were out in force to discuss reports that Microsoft was considering bringing Xbox exclusives such as Starfield, Hi-Fi Rush and the yet to be released Indiana Jones adventure to PlayStation 5 and Switch - betraying a generation of thin skinned ‘console war’ combatants in the process.
The furore eventually forced Spencer (the Xbox bigwig, not the balding property person remember) to announce that the company will be running an event about the future of the platform next week to provide clarity for its more dramatically challenged fans.
Despite my utter disdain for the whinging idiots fueling the debate, all of this chatter does come at an intriguing time for Microsoft. Its acquisition of Activision Blizzard King (ABK) for $69bn attracted such intense scrutiny and interest that an early year update on its future direction was always going to be necessary.
But rather than wait until next week to write a piece about the company’s strategy like any normal person would, I thought it’d be a great idea to ponder now whether Xbox’s opening up of its exclusives really are the first signs of the slow death of the brand or a sensible strategic decision that’s getting lost within the noise around leaks.
And as regular VGIM readers will have guessed, I believe it to be the latter. Based on what we’ve seen over the past few years, Xbox’s plan to bring exclusives onto other platforms is not a sign that it is waving a white flag.
It’s instead a logical extension of its efforts to become a truly cross platform, erm, platform in an effort to grab a greater share of the video games market.
Xboxing clever
To get a sense of where Xbox is going, we first need to take a step back and appreciate its newfound importance to the business it sits within.
As of last week, video games are now the third largest pillar of Microsoft’s $3 trillion dollar empire. The company’s Q2 2024 financial results saw game revenues leap to $7.11bn for the quarter - driven upwards by a whopping 61% increase in Xbox’s content and revenue line following the inclusion of ABK in its quarterly results for the first time since the acquisition.
This boost means that games now contribute more to Microsoft’s business than Windows does (which added $5.26bn in revenue in the same period), but leaves it in third place behind the company’s Office revenues ($13.47bn) and its server products and cloud services division ($23.93bn).
The obvious conclusion from this is that games, and by extension Xbox, is a core part of Microsoft’s business. It is very unlikely that it will suddenly be abandoned or shuttered in the way that the internet drama peddlers suggest it will be.
But given its increasing scale and importance to the company at large, games must effectively butter its own financial bread. And its problem in the immediate short term, as pretty much everyone working across the industry knows, is that this is a tough time for games to prove their worth.
The Verge reported that Amy Hood, Microsoft’s Chief Financial Officer, has forecast that games content revenue is expected to grow by 40% across this year - despite stating that the ABK merger will actually add 45 points to the same budget line. Fans of rudimentary mathematics will realise the implication behind this.
Xbox therefore needs to find a path forward that will both lead to healthier returns for the business and redefine a wider games market where, as reported in Politico of all places, PlayStation has a comfortable lead in many of the major console markets across the world.
So rather than pursue the same strategy as either Sony or Nintendo, in which exclusive software releases and console hardware support one another in a tightly defined virtuous circle, Xbox’s long term plan is instead to slowly and steadily push over the barriers between content verticals - becoming a platform serving players games wherever they choose to play.
Everyone loves a platformer
So, what’s the plan? While elements of Microsoft’s thinking remain a mystery due to boring corporate necessity, comments in interviews, the accidental leak of documents meant for Federal Trade Commission eyes only last September and testimony given by Microsoft execs during the company’s many days in court last year gives us a solid sense of what its thinking is.
First up, the company is attempting to create an accessible Xbox presence across console, PC and mobile to ensure players are seeing the brand and its associated content wherever they are.
Barring a remarkable turnaround, part of Microsoft’s thinking will remain focused on plonking Xbox consoles underneath TVs around the world.
The company’s leaked console roadmap shows that its Series S and Series X consoles are both receiving mid generation updates in the next two years, while the company has pegged 2028 as the date for its next console release - countering the more melodramatic nonsense touted by some ‘fans’ online that the company’s rumoured change in content strategy could spell doom for its hardware.
However, its thinking extends beyond consoles in a way that its rivals don’t. On PC, the company’s approach is less about providing players with devices to play on and more about making its content as widely available as possible - ensuring players can access games from its many in house studios on its own store and through third party stores like Steam.
And on mobile, the company has donned a velvet glove around its iron fist to try to punch its way to the top of the market.
Snapping up Candy Crush Saga maker and mobile mega giant King - the one part of the swallowed up ABK that was pretty much untouched by the 1900 layoffs made a fortnight ago - has given it a first party presence at the top of the current app stores.
It is also reportedly preparing to launch a direct rival to the current stores in the form of an Xbox mobile game platform to take advantage of regulatory changes that theoretically boost the prospects of alternative app stores across the world.
Second, and fundamental to the success of this platform breaking approach, the company is using its Game Pass subscription service to try to glue all these parts together for players with a single interlinked content offer.
For the most part, this involves building a rounded library of video games that makes a monthly subscription of a little over a tenner worthwhile to punters.
Game Pass on PC and console currently features the headline grabbing first party games from Xbox’s studios such as Starfield (and soon Call of Duty), which both provide a sense of Triple A luster but also feel “cheap” when snapped up as part of a subscription rather than a full price purchase.
It also benefits from tie-ups and partnerships with third party publishers like EA and Ubisoft to deepen the lineup, giving players access to high quality but usually slightly older titles (e.g. Jedi: Fallen Order) that Xbox’s partners are willing to make a little extra money on through long-tail subscription revenues.
And the cherry on top are the excellent independent games that provide colour to the catalogue, which are either plucked out by Xbox’s ID programme and funded to release on Game Pass from launch (such as bike ‘em up Descenders) or older titles seeking valuable plays long after release (I really do love you so much, Slay the Spire).
But while content is key to Game Pass’s value to Xbox, it’s also important because the subscription plugs players into the infrastructure underpinning the wider platform.
By ensuring that Game Pass is intermeshed with all of the supporting services provided by Xbox in a way that is accessible both on and off platform - such as the Xbox app that allows players to install Game Pass content on their home console via their phone remotely or its achievement system which now seamlessly sync across whichever platform a player is playing on - purchasing a subscription to Game Pass invites players into the whole ecosystem: exposing them to the whole of the Xbox offer on whatever device they access it from.
This leads to the third and final part of the plan, which remains more of aspiration than anything else: moving the Xbox platform onto rival devices and infrastructure.
Microsoft has already made some moves in this direction in regards to cloud streaming on PC. In its efforts to assuage concerns from the European Commission and the Competition and Markets Authority, it made what was to it a low cost concession to divest the rights for its cloud gaming service to Ubisoft to ensure its games are released across as many cloud platforms as possible (something it already wanted to do and which it has now been paid a good chunk of change to keep doing).
But beyond the cloud gaming niche, its overall vision - as stated, again, within those handily leaked documents and emails - is to transform Xbox into an “immersive game and app platform” where the combination of Game Pass, apps and even an Xbox controller act as turnkeys for play across PC, console and mobile.
And in an ideal world, that platform could theoretically also live comfortably within PlayStation or Nintendo’s platforms - severing Xbox’s link to specific devices, becoming a true ‘Netflix for games’ in the process and lining it up perfectly with Microsoft’s wider cloud-led strategic vision.
Real time strategies
In many ways, Xbox has a utopian vision for a more open way to play games. The challenge is that the reality of console market dynamics means that it can’t realistically expect to arrive on either of its major rivals without a helping hand.
Nintendo is comparatively agnostic in this discussion, forging a good enough relationship with Xbox to cut one of the industry’s tighter Gordian knots to secure the release of Goldeneye on both platforms.
It was, however, allegedly unimpressed by internal Microsoft emails speculating over a possible bid for it and remains keen to retain its autonomy to pursue its unique vision of what video games are.
Sony, meanwhile, is actively hostile towards Microsoft. Fearing that it could be outgunned by the ABK acquisition, it embarked on a mostly behind closed doors campaign to lobby against the merger across a range of international jurisdictions that led to rancour between the businesses. The chance of it willingly opening up to Game Pass on its platform is vanishingly thin.
And while Microsoft has a free run of things on PC, the mobile app store situation is getting complicated.
Alternative app stores like a proposed Xbox mobile game store seemed like they were about to become much more viable as a result of regulation such as the Digital Markets Act in the EU, which was meant to begin to crack open App Stores from 6th March (a true birthday treat for me).
But Apple’s decision to apply a punitive “Core Technology Fee” on alternative store providers is being seen - in my opinion correctly - as a hefty middle finger in the direction of the likes of Xbox and its cross platform strategy.
So instead of storming into the market by attempting, say, an aggressive acquisition - something that Microsoft likely doesn’t have the appetite for right now given the costly fight it had the last time round - the weekend leaks showed something else: an attempt to continue the spirit of its strategy in the face of the reality of the industry.
Bringing exclusives to PlayStation and Switch does, to some extent, weaken the proposition behind Game Pass and Xbox as a standalone platform if we’re thinking of it as a traditional console play.
But if we think of it as an effort to bring more people into the Xbox universe - and to get them asking why they have to pay north of £60 for games they could access through a wider library for just a quarter of that every month - it could be a clever way to open up extra commercial value while supporting its overall strategic goal.
This is particularly true if the conversation about digital storefronts expands beyond the app stores. If game storefronts were to be subjected to the kind of scrutiny and action that app stores have been exposed to - a reasonable enough hypothesis in the circumstances - Microsoft’s openness regarding its content library would mean it is very well placed to wedge Game Pass into any gaps that may emerge.
And while the company waits to see whether the tide turns in its favour on these fronts, it will continue to plough on with the strategy outlined because it represents a solid $25bn+ per year opportunity for the company and its openness gives little reason for competition regulators to prod it further for now (or in the future if it returns to acquiring businesses to further grow its empire).
Because despite the fire and fury of social media discourse over the past week, the issue Microsoft and Xbox is facing here is less a question of whether the strategy is worth pursuing and more a question of how to manage the fallout of damaging leaks that wrenched the narrative out of the company’s hands.
Despite the latest news cycle being out of its control, the company has undoubtedly fallen behind the story and lost trust amongst its community. This is serious and will take time and effort to fix, which is likely why it brought its announcement event about its future plans forward to next week.
But whatever happens next week, Microsoft’s games business isn’t just an enormous part of the success of a games company; it’s a key strategic pillar for one of the biggest of the Big Tech players.
And whether it proves a success or otherwise, its moves towards a cross platform strategy - including its efforts to dilute the importance of ‘exclusives’ to the market - will play a major role in defining where the sector goes for the remainder of this decade at least.
News in brief
Disney’s not nuts: The big breaking news from yesterday is that Disney has announced that it is putting $1.5bn into Epic Games to create an “entertainment universe” centred around games and its impressively expansive range of intellectual property. Note that the word “metaverse” is nowhere to be found in the press release.
Rotten Apple: In further “aren’t Apple rotters” news, Thierry Breton, the EU’s Commissioner for the Internal Market, has said that it could face “strong action” if its changes to its App Store aren’t in line with the rules set by the bloc’s Digital Markets Act. I won’t make a prediction about whether or not its new rules are compliant but I will happily wager that a number of lawyers are about to make a lot of money arguing for and against it in the years ahead.
China’s joy: New research from Gizmochina suggests that half of the value in the global games industry last year was generated by Chinese video games businesses. Despite generating an impressive $85bn worldwide, the report suggested that the country’s tricky domestic environment and international competition held companies back from making even more across the world.
The Highland Video Games: The Scottish Government has confirmed that it is backing the creation of a national video game strategy to support a domestic sector contributing £188m a year to the national economy. A great piece of news and a valuable reminder that we should probably have one for the wider UK games economy too…
Elden Ring ring, ring ring: Tencent is reportedly working on porting Elden Ring to mobile devices, according to the consumer games press. It’s great news for mobile game fans and even better news for writers who like puns.
On the move
Douglas Marin is stepping down as CEO of Devolver Digital and is being replaced by Harry Miller…Pete Samuels and Joe Samuels are retiring from Supermassive Games with Robert Henrysson replacing Pete as CEO…Ben Oliver has become the new Creative Director for games tinged production and creative agency Attention Seekers…Rosalind Schaub is in as Supercell’s new Director of Platform Partnerships…and Joe Burridge is the new Head of Talent at Play Ventures…
Jobs, jobs, jobs
Epic Games is recruiting for a Head of Trust and Safety in the US for anyone who fancies a fascinating job change…The Games Rating Authority is looking for a Communications Officer and a Games Examiner to support the team in Stevenage...IndieBi is hunting for a Junior Analyst (and this one is remote)...King wants to hire someone to become a Senior Product Manager for its machine learning platform…and The Pokemon Company has a dream Manager, Public Relations role going for anyone who wants to catch ‘em all (professional experiences, that is)...And CCP Games is looking for a Community Developer to build the Project Awakening community…
Events and conferences
DICE Summit, Las Vegas- 13th-15th February
Guildford Games Festival, Guildford - 16th February
Game Developers Conference, San Francisco - 18th - 22nd March
London Games Festival, London - 9th-25th April
London Developer Conference, London - 11th April
Games of the week
Foamstars - Square Enix’s 4 vs 4 PVP party shooter arrives with a description designed to baffle anyone with only a passing interest in the medium.
Helldivers 2 - The video game equivalent of Starship Troopers (satire included) returns for another round of bloody extra-terrestrial battling.
Threes! - My favourite mobile game of all time comes to PC this week to remind you all that a) it’s brilliant and b) that 2048 was a miserably poor clone that took the glory it deserved.
Before you go…
Spec Ops: The Line (aka Heart of Darkness/Apocalypse Now: The Video Game) has been yanked from digital storefronts due to licensing issues.
So do your duty and watch the latest video on Game Maker’s Toolkit, which explains how Spec Ops became one of the most subversive games ever released (and why it needs to be preserved).