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[GI.Biz | Opinion] How long can Microsoft float on goodwill?

3liteDragon

Member
As a pandemic-distorted market starts to return to normality, the need for Xbox to impress with game exclusives has become urgent.
It's important to have realistic expectations about how financial reports from games industry companies are going to look in the coming year. We're already well into the realm of tough comparisons; the back half of 2022 saw the first reports coming out which really reflected the end of the pandemic period, and the accompanying drops in revenue that are the hangover to the massive boost video games saw during 2020 and 2021.

Consequently, we should all be wary of reading too much into relatively minor declines. It's actually going to be more informative to compare numbers to the 2019 baseline than to the intervening years, and we're all just going to have to get used to seeing the pandemic as a weird spike on a lot of graphs in the coming decade. This is a logic that applies pretty broadly across the industry, and it's worth bearing in mind especially when you look at the platform holders – whose pandemic era performance was rendered even more unusual by the accompanying supply chain issues. For the past few years, all of the platform holders have struggled to match skyrocketing demand to severely pressured supply. That has done some odd things to the market.

Empty store shelves have left consumers with the perception that high-end consoles like PS5 and Xbox Series X are all but non-existent, despite actually building installed bases at a breakneck pace, while Nintendo has seemingly opted to hold back on a hardware refresh entirely. Consequently, the easy availability of more mature hardware means that the previous generation's PS4 and generation-spanning devices like Switch and Xbox Series S have remained dominant forces, effectively extending out the transition period for several years.

This all results in a highly distorted competitive landscape – and in many regards, the primary beneficiary of that distortion has been Microsoft. The company entered this generation with a powerful amount of goodwill behind its offering. The Xbox Series X hardware was hugely impressive, the Series S made waves with a highly competitive price-point for a device which still had many of the key features of the new generation (although its less powerful specs might be setting up developer headaches down the line), and an acquisition spree that saw the company buying up a number of well-respected developers, topped off with picking up Zenimax/Bethesda in a multi-billion dollar deal, paved the way for the firm to become competitive with Sony on the software front.

While the pandemic was an odd time for everyone, in some regards it was a gift to Microsoft, whose Series S console filled in nicely as supply chain issues hobbled the PS5, and whose Game Pass offering looked immensely attractive during the months of lockdown and other restrictions that many consumers experienced. Yet as the pandemic has lifted, the extent to which Microsoft is still being kept afloat by that goodwill is getting harder and harder to ignore. The company's financial results this week showed pretty much what you'd expect, with the figures for Xbox being solid even if the comparisons with the pandemic years are a bit tough.

There's no real grounds to criticise the platform's performance there – and the Xbox hardware itself has also held up very well (notably, the Xbox controllers don't seem to suffer from the absolutely abysmal build quality and reliability problems that have plagued Nintendo and Sony in this generation). The Game Pass offering, too, continues to be very impressive and great value for money. The problems, however, lie in the software pipeline – which is where the consumer goodwill is going to start to wear thin eventually. After the huge spending spree Microsoft undertook in an attempt to build a software pipeline to rival the PlayStation studio system, the single biggest announcement on that front has been… another acquisition. Namely the planned purchase of Activision Blizzard, which will be the biggest deal in the industry's history if regulators allow it to happen.

Beyond that, Bethesda's Starfield is pretty much the only really huge new game in the pipeline that Microsoft has to show for the billions it has spent. An event earlier this week was meant to be a showcase of upcoming games for the year, but ended up showing off relatively little software. There's no doubting the talent Microsoft has amassed by opening its warchest and buying up studios and publishers, but the actual results of this strategy are yet to materialise.

In that context, it's not unreasonable to wonder just how far goodwill can carry Xbox in the absence of concrete information about system-selling exclusives, let alone the actual appearance of those exclusives themselves.

The one area of genuine concern in the latest financial results is the suggestion that Game Pass has hit a speed bump on consoles, with subscriber growth slowing significantly (though it remains solid on PC). This is certainly related to saturation of some segments of that market (you can't sell Game Pass to console owners who haven't been able to buy a console yet), but it's also partially down to the value proposition being a tougher sell when there aren't major first-party games on the service. At the end of 2021, Game Pass got the latest Halo game as a day one release. The end of 2022 saw nothing comparable, and there's arguably nothing comparable on the release pipeline until Starfield, and nothing we know about on the far side of Starfield.

Of course, in an ideal world, games shouldn't be rushed; they should be given exactly as much time in development as they need to be high quality when they are released. The charitable interpretation of what's happening with Microsoft is precisely this – that the company has a ton of games in the pipeline but it's holding back on even talking about them, let alone releasing them, until such time as they're really ready for prime time. That's giving Xbox a rough time right now, but it'll be able to come out swinging in the back half of the generation as all of those development processes come to fruition.

Is that really what's happening, though? It's not that Xbox doesn't have any games at all – this week's showcase included a new game from Tango Gameworks, Hi-Fi Rush, as well as updates about Forza, Minecraft, and Arkane Austin's Redfall, which looks interesting even if I'm still not entirely sure what it is. None of these are really system selling exclusives, though, and the need to pad out the showcase with an expansion pack for Elder Scrolls Online didn't really look great – ESO is fine and all, it's just that a relatively long-in-the-tooth MMORPG doesn't seem like the kind of next-gen Xbox experience that the company would like to be touting to people right now.

Still, there are clearly studios at work and products being turned out. Game Pass, too, isn't sitting still and will have a pretty strong opening few months of 2023 – but on both sides of this, we're still lacking the software that you can point to and say "here, this is why you should buy an Xbox."

The window for that software to make its appearance and make a genuine competitive impact on the generation is slowly but inexorably closing. As supply chain issues are resolved and mid-generation hardware refreshes start to roll out (expect Sony's first update, albeit relatively minor, towards the end of this year, with Nintendo also likely to finally launch its delayed update to the Switch this year), availability will stop being a key metric for success. Support for the previous generation will start to tail off, and that Sony studio system will have "true" PS5 exclusives to show the world in relatively short order. Microsoft needs a counter-argument, and "Starfield will launch sometime!" will not suffice – and will suffice even less if Starfield actually does launch, and there's nothing major to be seen in the pipeline behind it.

This need is made all the more urgent by the company's large round of layoffs this month, which we know impacted the gaming division too – including a reported cut of a quarter of the headcount at 343 Studios, which has to raise questions about the future direction of Halo, the Xbox's most iconic franchise. Many of us had hoped that 2023 would be the year in which Microsoft's software drought ended and the fruits of its acquisition spree fully ripened; it now seems pretty clear that this will not be the case, and Xbox will continue to be in a weird half-light of goodwill and expectation for the coming months. This must, however, be the year when the pipeline comes into focus.

If we leave 2023 with the same lack of clarity on what's on the Xbox software roadmap as we have right now, it's hard to imagine a situation where Sony doesn't straight-up eat Microsoft's lunch again, and no amount of goodwill for the Game Pass offering will offset the decades-old logic that exclusive software sells consoles in the long term.

The question of whether Microsoft is going to be able to buy Activision at all will loom large this year, but there's actually an even bigger question underlying that: if Microsoft can't demonstrate the ability to effectively utilise its existing acquisitions of studios and publishers to create a competitive, compelling game software pipeline for Xbox, isn't buying a bigger publisher just a case of throwing $70 billion of good money after bad?
 

DeepEnigma

Gold Member
Long time.
Gamers have gold fish memory. You give them something, and they will forget everything.
They just shadowdropped a GOTY candidate to Game Pass like 2 days ago, so I'm feeling a lot of goodwill towards them right about now.
0jHXa0b.gif
 

ProtoByte

Member
Going by the sales charts in their strongest territory, they're barely floating on any goodwill outside of console war forums and Twitter, and media outlets trying to feign neutrality.

Every year the same conversation of "Xbox needs to deliver", every year they fail to do it, and every year the standard drops.

I'm just going to say it: The fact that Hi-Fi Rush is currently the greatest triumph of the console says a lot. It might be a good enough game. But there's a segment of people acting like it's God's gift to gaming. Early 2000s nostalgia-bait isn't new and has been done better, cel-shading isn't new and has been done better, and basic 3d-platforming and early 2000s combat is not an innovation.

All it took was a bit of viral marketing, and all of the rest is forgotten.
 

EverydayBeast

thinks Halo Infinite is a new graphical benchmark
Microsoft is worth billions the series x is capable of making millions they’ll keep it around for a while another halo this gen is happening at some point.
 

Lasha

Member
Yoj

I'm just going to say it: The fact that Hi-Fi Rush is currently the greatest triumph of the console says a lot. It might be a good enough game. But there's a segment of people acting like it's God's gift to gaming. Early 2000s nostalgia-bait isn't new and has been done better, cel-shading isn't new and has been done better, and basic 3d-platforming and early 2000s combat is not an innovation.

All it took was a bit of viral marketing, and all of the rest is forgotten.

You could just say that you didn't play the game.
 

jm89

Member
They just shadowdropped a GOTY candidate to Game Pass like 2 days ago, so I'm feeling a lot of goodwill towards them right about now.
If you think HI-FI rush is changing the position xbox is in, i don't know what to tell you.

I'm not saying it's a bad game or alot of people can't enjoy it, but these type of games are not gonna be making the wider impact xbox need.
 
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Stuart360

Member
I think IF in the second half of the gen the game start flowing like fine wine, and pretty consistantly, gamers, especially Xbox gamers, will quickly forget the barren first half of the gen.
Remember 'Playstation has no games' memes from the first year or two of last gen?, same thing here.

Of course certain sections will try their best to not let peopel forget the barren first half of the gen, but when the games start flowing, most people wont care.
 
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analog_future

Resident Crybaby
If you think HI-FI rush is changing the position xbox is in, i don't know what to tell you.

I'm not saying it's a bad game or alot of people can't enjoy it, but these type of games are not gonna be making the wider impact xbox need.

Agreed. I'm just talking about my own personal goodwill towards the brand at the moment.

Starfield, Forza Motorsport, Avowed, Fable, Hellblade II, Perfect Dark, The Coalition's next game, Indiana Jones, etc.. etc.. will take care of the "wider impact" for everyone else.
 
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Kvally

Banned
Nah, they were already stressing at the revenue dip. They will snap back with that their shareholders hold them accountable for.
Nah, they were already expecting the dip ahead of time. They are ready for hitting $3 trillion in the next 2 years.
 

Heisenberg007

Gold Journalism
The question of whether Microsoft is going to be able to buy Activision at all will loom large this year, but there's actually an even bigger question underlying that: if Microsoft can't demonstrate the ability to effectively utilise its existing acquisitions of studios and publishers to create a competitive, compelling game software pipeline for Xbox, isn't buying a bigger publisher just a case of throwing $70 billion of good money after bad?
The Office Thank You GIF
 

Stuart360

Member
I think it’s silly to suggest that Starfield alone is not enough to be a system seller. It is. And there are other games coming this year too. He’d have a point if he made this article last year after Starfield got delayed.
Starfield will def sell systems. Gamepass will temper that a bit, but obviously you need hardware to use Gamepass anyway and i certainly couldnt imagine playing a game that long through streaming, although some will i'm sure.
 

The_Mike

I cry about SonyGaf from my chair in Redmond, WA
Microsoft is much less reliant on console sales compared to Nintendo and Sony.

You can play their library on pc. And you gamepass on both PC, mobike, and the Xbox one and one x for streaming next gen games.

But of course, if you're not first, then you are last.

I have a gaming pc, but still think about buying an Xbox down the line to use in my bedroom to continue the games I play on pc, and to be third party console games that's not on pc.
 
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Where did pentiment show up on peoples top ten lists?....Pretty damn high....I think higher than Horizon Forbidden West on almost all of them.

Now ask people to pay for it…it’s easy to have it rank high in peoples top 10 list when the few people that will go and play it are really into that type of game. Its why a lot of niche indie games rank high, they are catering to a very specific audience.

Horizon is going to be less favored because it cast a very wide net. The difference is people actually go out and buy it
 
Now ask people to pay for it…it’s easy to have it rank high in peoples top 10 list when the few people that will go and play it are really into that type of game. Its why a lot of niche indie games rank high, they are catering to a very specific audience.

Horizon is going to be less favored because it cast a very wide net. The difference is people actually go out and buy it
It was only $20. And if your argument is that their sub model makes people like games more than if they bought it, isn't that an argument for a sub model working?
 
Early 2000s nostalgia-bait isn't new and has been done better, cel-shading isn't new and has been done better, and basic 3d-platforming and early 2000s combat is not an innovation.
When has any of this been done better?

I agree people are being hyperbolic about it but this is a bit reductive
 

DenchDeckard

Moderated wildly
This is what happen when people starve.

Any good meal is mistaken for wagyu and caviar.

Or, this is what happens when people are fed meals that they are TOLD are wagyu and cavier but something feels bland and doesn't seem quite right but you're just accepting it because you're told that's what it is.....

Then someone turns up with the real deal and everyone remembers what real top quality food tasted like....

time travel animation GIF by Disney Pixar
 

Golgo 13

The Man With The Golden Dong
This topic is bound to bring out the system-wars fanboys, but it looks to me like Microsoft is making big strides towards providing quality exclusive content - even if it is in smaller steps than some would like. That being said, there needs to be better studio management at Microsoft - there’s constant rumblings of internal game development milestones being missed, mismanagement of contracted employees, disgruntled former employees speaking out - which seems to be an aspect of business that Nintendo and Sony have become very good at avoiding (for the most part). Once Microsoft figures those problems out (and/or their acquisitions begin compensating for them), the narrative will change.
 
They’re in third place and the narrative is that they need to step it up. Not sure how they are “floating by”.

Also, if we had to stomach nonsense about HFW being a GOTY contender and an RPG, a little bit of HiFi Rush praise seems ok.
 

Lyrical

Banned
They’re in third place and the narrative is that they need to step it up. Not sure how they are “floating by”.

Also, if we had to stomach nonsense about HFW being a GOTY contender and an RPG, a little bit of HiFi Rush praise seems ok.
I’ve been saying in the other thread, Hifi rush is a decent game but the amount of praise it’s getting is ridiculous. It’s pretty standard.
 

GHG

Gold Member
Or, this is what happens when people are fed meals that they are TOLD are wagyu and cavier but something feels bland and doesn't seem quite right but you're just accepting it because you're told that's what it is.....

Then someone turns up with the real deal and everyone remembers what real top quality food tasted like....

time travel animation GIF by Disney Pixar

Yeh but one problem, if it was actually "everyone" then that would be reflected in their quarterly results. What a shame.

It's funny that some of you want to suddenly act like you're some omniscient beings when it comes to gaming when in fact all you've done is back yourselves into the most limiting corner of the market. Please excuse me if I don't take the opinions of those who voted Halo Infinite as GOTY seriously.
 
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