Microsoft to release previously Xbox-exclusive titles on rival consoles
Q: Why is Microsoft releasing some of its exclusive first-party games on rival consoles?
At its most basic, Microsoft’s games strategy is in place to grow its business and drive profitability. The key reason Microsoft has been pursuing a more progressive multi-platform strategy with its games content and services since early in the Xbox One cycle is because it was unable to build on the relative success of the Xbox 360 era and take market share from Sony (and latterly, Nintendo post-the launch of the Switch). Pre-pandemic, Microsoft also saw more growth opportunity in markets beyond the console, hence the focus to broaden its reach. Ampere estimates that Sony’s PS5 outsold Microsoft’s Xbox Series consoles globally by 3-to-1 in 2023.
So, there are two forces at play here shaping Microsoft’s games strategy: a need to maintain the existing business and grow it where possible on its own consoles; and a broader strategy to reach more people on other devices and platforms. This has prompted Microsoft to pursue a more aggressive strategy on PC and start work towards becoming more competitive on mobile devices.
Until now, first-party developed console exclusives were not in play, however, Microsoft faces tougher commercial choices now due to a collection of major factors: the escalating cost of creating games, the backdrop of slowing growth in the games market, the slow sales of Xbox Series consoles, the slowing growth of Xbox Game Pass and the expansionist acquisition strategy of the company, with its accompanying huge investments.
Mojang, ZeniMax, and Activision Blizzard are all multi-platform companies that derive most of their business from non-Xbox consoles and devices. Based on Ampere data, Microsoft together with Activision Blizzard is already the number three publishing group on PlayStation based on monthly active user share (December 2023). The foundation has been laid for more first-party content to go multi-platform by these expansions of the content portfolio. Layer on this the additional commercial preassures and it makes it clearer why Microsoft is making this more progressive move.
Q: Does this strategy benefit Sony and Nintendo more than Microsoft?
This move aids Microsoft in its ambition to grow its business and drive margin. It will also help its direct competitors to get access to more games, but such is the breadth of Microsoft’s portfolio now, there will be games that will remain exclusive and others that will benefit from going multi-platform. An older live-service title like Sea of Thieves, which is rumoured to be one of the titles, would benefit from having access to a broader audience so is a good candidate to be launched on other consoles. Microsoft could still make Xbox the best place to play first-party multi-platform titles through in-game perks or simply by making them available via Game Pass.
Q: What does this mean for the future of Microsoft’s console business?
Xbox consoles remain the most important part of Microsoft’s games business. Console-related business – first-party game sales, Xbox storefront sales and Game Pass subscriptions – is key to the company’s current commercial scale in games. Additionally, while it gets a lot of media coverage, the disruptive impact from cloud gaming has been small so far. Ampere does not expect Microsoft to exit the console platform business in the medium term as that would leave a gaping hole in its games-related revenues.
Indeed, the Xbox pipeline looks stronger for 2024 and has been significantly enhanced by the Activision acquisition, especially when those games start to go into Game Pass. That should help enhance Xbox sales, although we have to be realistic about the potential of its console business as a whole in a market dominated by Sony and Nintendo. To grow its business a lot, it needs to have an expansive strategy that embraces PC and mobile more actively and that reaches gamers across a lot of devices, including rival consoles.
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