Tech

How Microsoft Abandons Video Game Console War

Mid 2014 Just become Microsoft CEODirected the head of the company’s gaming division to the office on the 5th floor in Redmond, Washington.

Executives wanted Mr. Nadella to write $ 2.5 billion check to buy Mojang, A Swedish company that produced a block-shaped pixelated game called Minecraft. Nadella asked why Microsoft, which had been consistently betrayed by Sony in its console business, should continue to invest in video games. How did it fit into his vision of a company with a more friendly face that appeals to more consumers, he said.

Later, Phil Spencer, the new head of Xbox, told Nadella: The vast world of Minecraft It’s a place where millions of people can interact and encourage teenagers to learn math and science skills. According to Spencer, the deal will be the first step in a “pretty bold vision” of turning Microsoft’s gaming business into a business that focuses on a wider audience than just console gamers.

Nadella agreed and made the deal a reality. What followed was a change over the years, according to interviews with more than 20 Microsoft executives, game developers, industry analysts, and gamers. Instead of primarily competing with Sony to sell more consoles, Microsoft bought 15 other game studios and invested in new technologies such as Netflix-style game subscription services and mobile tools called cloud gaming. Did.

Now, as Microsoft prepares to unveil its new product at this weekend’s annual gaming convention E3, its video gaming business looks very different. The company is still known for the Xbox, and its new version was released in November. Still, it is diversifying beyond box hardware and offering a new set of services.

“Their strategy is quite different from the traditional console approach,” said Piers Harding-Rolls, a game researcher at analysis firm Ampere Analysis.

Microsoft is confident that this change will make the future of the game a post-hardware world where people may not want to spend hundreds of dollars on consoles, executives and analysts said. Eventually, they said, people would no longer be tied to a particular device to play games, and instead became more interested in software and services.

The Xbox console is still profitable enough, but in January Microsoft Report $ 5 Billion in Quarterly Game Revenue For the first time, enhanced by the release of Xbox series X — The company stopped disclosing console sales in 2014. Most of the game’s revenue comes from content and services, not Xbox hardware sales, said Tim Stuart, chief financial officer of Xbox.

The company’s gaming business still faces hurdles, including shaking the perception among gamers that they don’t really have their best interests.That disgust is due to Microsoft’s 2013 messaging failure. New Xbox One console As an entertainment device that people can use to stream music and movies. In response, gamers rebelled.

According to analysts, the Xbox One still sold 50 million units.But it was much better Sony PlayStation 4Was launched in 2013 and sold 116 million units.

“We lost the step of what gamers wanted,” Stuart said.

After the backlash, Microsoft shifted gear. Nadella had just taken over and wanted the company to move from a software focus to cloud computing and subscription services.

Spencer confirmed that the evolution of the gaming sector reflects those goals. He persuaded Nadella to buy Mojan in September 2014. This was the first acquisition of the new CEO.

“Games play a far more important role than history,” Nadella said in an interview last week.

In 2017, Microsoft released the Xbox Game Pass. For $ 10 or $ 15 per month, subscribers can play a particular game set as long as they continue to serve. This overturned the traditional model of people paying $ 60 for games like Call of Duty and owning them forever.

To convince game publishers to title their game passes, Xbox executives traveled around the world, meeting developers and spreading the vision of an industry where video games are cheap and easily accessible.

Initially, developers were worried that they would lose money on services, said Sarabond, vice president of Microsoft, who heads the gaming ecosystem.

So she decided to study how the Game Pass affects gamer behavior. Microsoft said Thursday that it found that people using the service were spending 50% more money on the entire game and playing 40% more games than non-subscribers.

Mike Blank, senior vice president of Electronic Arts, who introduced games such as the Madden NFL and FIFA soccer franchise into the game pass in 2020, said the subscription service was initially “uneasy.” However, the company is happy with the results, “players are reacting positively,” he said.

Microsoft has also spent a lot of money on game development to expand its game pass offerings, ZeniMax Media Acquisition of $ 7.5 Billion Hundreds of games will be added to the service in September.this year too Consider purchasing the messaging app Discord, Used by gamers to chat during play.

Diversification continued in late 2019 when Microsoft released its cloud gaming service. With this service, games are hosted in the company’s data center and broadcast to devices. This service, Xbox Cloud Gaming, or xCloud means people don’t have to install games or use expensive hardware.

The idea of ​​a cloud gaming service was embodied for Spencer, who was connected to Wi-Fi on a bus in Nairobi, Kenya that year. He discovered that he could stream games from Microsoft’s data center in London to his mobile phone.

“It was literally the same saved game I was sitting in Redmond, Washington,” he said. “It really only drives a way to make the game truly global.”

Microsoft said Thursday that it is working with TV makers to put games on the TV without the need for an Xbox. He added that cloud streaming will soon be available to the console.

For now, cloud gaming is still plagued by glitchy gameplay and requires a strong internet connection. Xbox Cloud Gaming is still in trial and Apple has banned apps from the iPhone because it contains a catalog of games. Apple requires a separate app for each game as part of the app review process.

At the same time, the Xbox continues to chase Sony PlayStation.Sony announced new sales of 7.8 million units in April Playstation 5s Between November and March, analysts estimated that Microsoft sold more than 4 million new Xboxes over the same period. Sony declined to comment.

Some gamers said Microsoft couldn’t win them because Microsoft was still lagging behind Sony in its exclusive, high-quality games.

“I’ve always had the impression that the PlayStation is better,” said Natalia Mogoron, known as a gamer. Arinity, Streaming her gameplay to 1.3 million followers on the site Twitch.

However, when Microsoft gets exclusive content, it can backfire. When game publisher Square Enix released the first popular game on the Xbox in 2015, gamers were angry with Microsoft restricting access to titles. The reaction was similar when considering buying Discord and last month when it was reported that the next ZeniMax game would be exclusive to the Xbox.

“It may seem like big companies are ruining their favorite game developers,” said video game consultant Rod Breslau.

As Microsoft moved away from the console war, Spencer’s own tone softened.so Interview with the 2014 New York Times, He signaled Sony not to retreat. “I’m here to win,” he said.

In an interview last month, he took a different approach. “We haven’t seen Nintendo and Sony, and we say the company must lose in order to win,” he said.

How Microsoft Abandons Video Game Console War

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