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Xbox + Microsoft FY25 Q2 Results: Total -7% ($6.581B), Content and Services +2% (Due to Game Pass), Hardware -29% (Unit decline) (PC Game Pass +30%)

Shrug. seems like decently positive results to me.

It has occurred to me recently and a poster stated it here, I think it's likely Satya ordered Xbox not to take hardware losses this holiday. It definitely wouldn't have been Phil's call to say that. Phil would want to maximize his division and it isn't his money.

I'm not really sure the long term thinking there. We can try to understand.

It's become clear for a while, Microsoft is going to be a REALLY big publisher even while Xbox hardware is struggling. I dont necessarily know what their strat is. Perhaps a windows protection play?

It should be obvious that being multiplatform offers a sustainable level of software success that even one core console+PC cant match (while thats the second best option)

Phil is very right that all the most played games are multiplat (or as he called it I believe "on any screen"). I've been saying it for years. But how this all ties into Xbox hardware, which is clearly going forward next gen as has been confirmed multiple times, is a bit unclear.

It will be extremely interesting if Xbox sales begin to recover while all their games are multiplat. It would validate a lot of things I've said for years. However, it will be difficult to find hardware success this gen due to (IMO) Series S and apparently, a lack of subsidizing hardware going forward.

I havent had trust in Phil in a while now, but his most recent comments I found very sophisticated and I could see myself drinking the Phil kool aid to some extent again soon. I just dont think he ever understood how damaging the Series S was, but tbf almost noone does. Combine all that with a big slate of good games hitting GP right and left recently and in 2025. Even as I'm on record not believing in the GP model for gaming.
Nobody has made a decision not to buy an Xbox because of the existence of Series S. They've not bought Xbox because:

1) their market presence outside of the Anglosphere is very poor and Xbox have made no attempts to mitigate that (for 2 consecutive generations). Playstation's improved performance in the Anglosphere (caused in part by the group of high profile American studios now driving PS) is therefore clawing away MS' one competitive region
2) their 1st party software production has been disastrous from day 1 (Halo Infinite delay on the eve of a hardware launch, Forza Motorsport and Redfall's abysmal launches, Starfield's underperformance)
3) Their digital services offering was their one unique selling point and both PS/Switch have now established services offerings of their own, and Steam now completely owns the "enthusiast services" featureset while offering Xbox' own games. Meanwhile they've offered 1 new unique product (gamepass) and abandoned its unique selling point to reduce it to an Xbox-branded version of PS+ tiers

As long as Microsoft's leadership refuses to allow hardware investment on the level of Xbox/Xbox360 again, Xbox definitionally cannot compete on the level of PS/Switch. The last 2 generations have completely wiped out any gains made by X360 and they're arguably in a worse position than the end of the original Xbox generation. Bowing out of hardware is a situation Microsoft's leadership is causing to happen as long as they're in this penny-pinching mode following the Activision purchase. I personally think it's incredibly wasteful because there is certainly a gap in the console market that someone is going to step into and absorb those 30% royalties (probably Sony/Nintendo/Valve between them rather than anyone new) - and establishing a position in the console market is incredibly difficult to achieve.
 
So this focus on hardware sales as being a measure of success for a modern day gaming platform is really outdated.
I'm not saying you're an Xbox fanboy, but this talk of console sales being outdated is a narrative created in Xbox fan circles as damage control.
Obviously this doesn't make sense.
Sony shouldn't be at all sad about the 30% of everything spent on CoD in its ecosystem. Ecosystem that was built selling consoles.
 
Sharing my personal experience here:
Renewed my PC Gamepass for the COD beta and thought I will be playing COD a lot (on paper, it was a good COD content-wise). The MP and Warzone are in a very bad position right now and all my friends (a group of 9-10 people) just stopped playing COD. If you check community, COD is not in a very good place right now...
Then came Indiana Jones and it is one of my favourite games of all times. I am taking my time complete it 100%. And then when I started thinking about ending my subscription, Ninja Gaiden 2 Black dropped out of nowhere...

What I am getting at is that Microsoft really has the potential to get people hooked to GP if they play their cards well.

Microsoft really need to give the Xbox division some time in order to get their studios aligned and output games they way Nintendo does it: constantly and with quality. With the number of Studios they have, they can pull a game/month.
 
Your numbers seem reasonable and line up with Omdias sell-through estimate:
Sell-through: ~32.6m
Shipped: ~33.7m
Leaves 1.1m 'in the channel', which is about the amount what retailers can sell within the next 3-4 months.
I think 40M lifetime is probable now, I don't think it has a chance of reaching 50M or even 45M.
 
Sharing my personal experience here:
Renewed my PC Gamepass for the COD beta and thought I will be playing COD a lot...
Then came Indiana Jones and it is one of my favourite games of all times. I am taking my time complete it 100%. And then when I started thinking about ending my subscription, Ninja Gaiden 2 Black dropped out of nowhere...

What I am getting at is that Microsoft really has the potential to get people hooked to GP if they play their cards well.
You're not wrong, of course Microsoft has the potential to get people "hooked" to GP. But you've also only paid for a few months of Gamepass and in that span you would have spent 60-70 dollars each for Call of Duty and Indiana Jones, and 50 dollars for Ninja Gaiden 2 Black.

The Game Pass math never seemed to work out in my head, and I'll admit I still don't understand it. You'd need an absolutely massive number of subscriptions to make up for the revenue loss from people not purchasing the full-priced games at release, and I'm just not sure that's feasible right now.
 
Cloud not taking off as much as they expected is also one of the reasons the growth stalled. I think their shift in strategy include both hardware and Game Pass, ambitions on these fronts will be scaled down in the coming years in favor of profitability.
At the same time, it feels they barely tried with Cloud. The deals with Samsung and LG are a good step, but not enough to move the needle. It also seemed like Cloud was held in a state of stasis between 2022 and 2023 as the service barely saw improvements at all. The fact Cloud is tied to an expensive GamePass Ultimate subscription is also another roadblock.

If they want to push Cloud Gaming and Gamepass subs, they need:

- A cheaper (Or/and Ad based), Cloud only, Gamepass sub tier
- Allow Xbox accounts tied to Cloud Gaming to be able to buy and stream games from the Xbox Store without being tied solely to GamePass.
- Scale up the infrastructure in more countries


Also, this is more something I personally want to see, but:

- Streaming Stick or Microconsole to reach users with older TV models/TV brands that aren't LG or Samsung, older laptops, occasional interest in gaming and families with low-income.
- Ideally, the Streaming Stick/Microconsole will have an Ethernet port, Wi-Fi 6E/7 and comes with a Direct to Cloud Xbox Controller. All for $99 and one free month of GP Cloud.
 
Subs are down, Satya mention growth in PC Gamepass, there was growth in Gamepass revenue however no mention of overall growth which is telling.
Them not mentioning overall sub numbers doesn't mean subs are down. We don't know that.
Doesn’t the OP show that the first 2 quarters of this year, Contents and Services is +24%? Seems a lot of handwringing about declines despite this.

They have never been more profitable than they are now. They have never had as much revenue with any previous gen as they have now. They’ve never had a wider reach for their games than they do now.

But the suggesting here is that their current models are wrong?? They need to rethink everything they are doing? lol I don’t get it.

Just because subs are plateauing currently and not hitting a certain number? That’s irrelevant to the results. They are better off with game pass than without.

Activision acquisition? They were increasing their revenues and profits before that. It’s just another positive, not a reason. Minecraft is a Microsoft game. 10 years from now, no one will blink at COD being called a Microsoft game.

Their decision makings the last 10 years or so in how they approach the Xbox gaming division have proven to be the correct ones.

Even Sony is admitting it’s unsustainable for them to subsidize their hardware as much as they do. So this focus on hardware sales as being a measure of success for a modern day gaming platform is really outdated.
Hardware sales will become outdated for Microsoft like they became outdated for Segs. Their failure at being a platform holder means they pivot to being a third party publisher.

Their decision to make this pivot is precisely because the last 10 years haven't gone well for them. It's proven their decisions/strategy to be incorrect.
 
Some strong, if hyperbolic takes in here. Overall results were not that bad if you see it through what the market is telling us:

1.) Results for all companies have been weak, because the gaming market itself is having difficulties. In relation to other companies, the results were not that bad.
2.) Hardware is obliviously not a focus for now (if ever), so concentrating on those numbers as a legacy analysis will lead you to the wrong conclusions. Going by their own comments and investors questions, these low hardware numbers don't appear to concern them (and as others stated, probably upped their margins a good amount).
3.) Understanding how well Game Pass is and is not working from the outside is going to be near impossible. The only thing we can look at from a business model perspective is the other companies providing similar services. Two of those companies have reported some disastrous sales numbers (EA and Ubisoft), yet they haven't touched their subscription services yet. From a market perspective, that is telling me that they are still seeing added value even with reduced unit sales.
4.) Microsoft future is probably less of of a legacy first party platform holder versus a transition to a services provider, where they most likely will still provide hardware but mainly to provide an avenue for Game Pass subscriptions, and less for legacy unit sales. I expect the margins on these boxes to be higher then previous generations as the loss-leading strategy of yesterday does not seem to be the future.
 
If they're porting Forza Horizon, which is their strongest franchise at the moment, then I guess that's it. Anything can get ported, and I assume that everything that is at least somewhat popular will get ported.
 
Sales will be big.

Forza Motorsport doesn't have much appeal on Playstation anyway because of Gran Turismo.

Actually, The Crew Motorfest is actually a good game. And it has bunch of star ratings on PSN. Since it is a Ubisoft games, it is cheap now. And has bunch of DLC and MTX of course.
 

Forza Horizon 5 is coming to PS5.

Good choice to skip the mess that is Forza Motorsport 2023.

Surely this would have been much better announced at a State of Play. I don't get Microsoft's game here, "We want to sell XGS on your platform, but not too much." There's a rumored State of Play next month, an announcement there would have had much more fanfare.

I wonder if they're somewhat ashamed that it's come to this, and thus are making these huge announcements via tweets rather than the deserving fanfare.
 
Surely this would have been much better announced at a State of Play. I don't get Microsoft's game here, "We want to sell XGS on your platform, but not too much." There's a rumored State of Play next month, an announcement there would have had much more fanfare.

I wonder if they're somewhat ashamed that it's come to this, and thus are making these huge announcements via tweets rather than the deserving fanfare.
They don't need to. Forza Horizon is already a very big franchise, and the internet will be flooded with information.
 
At the same time, it feels they barely tried with Cloud. The deals with Samsung and LG are a good step, but not enough to move the needle. It also seemed like Cloud was held in a state of stasis between 2022 and 2023 as the service barely saw improvements at all. The fact Cloud is tied to an expensive GamePass Ultimate subscription is also another roadblock.

If they want to push Cloud Gaming and Gamepass subs, they need:

- A cheaper (Or/and Ad based), Cloud only, Gamepass sub tier
- Allow Xbox accounts tied to Cloud Gaming to be able to buy and stream games from the Xbox Store without being tied solely to GamePass.
- Scale up the infrastructure in more countries


Also, this is more something I personally want to see, but:

- Streaming Stick or Microconsole to reach users with older TV models/TV brands that aren't LG or Samsung, older laptops, occasional interest in gaming and families with low-income.
- Ideally, the Streaming Stick/Microconsole will have an Ethernet port, Wi-Fi 6E/7 and comes with a Direct to Cloud Xbox Controller. All for $99 and one free month of GP Cloud.


back when i messed with cloud a little more xbox cloud had notably inferior streaming quality/bitrate to other services stadia/geforce now. i'm pretty sure they were always claiming to be planning to fix it but never did. it's quiet sad.

of course granted i believe geforce now is fairly expensive. and "too be fair" stadia went out of business lol.

it's a lot like their continued failure to do anything about the sorry state of windows on handheld pc's vs steam os. despite always talking about doing something... this is a company with more money than they know what to do with mind you.

a lot of bureaucracy and red tape at western mega corps i guess.

i also found the recent implementation a little confusing. it was through a web browser pointed at a url. why not an app like everything else today?
 
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back when i messed with cloud a little more xbox cloud had notably inferior streaming quality/bitrate to other services stadia/geforce now. i'm pretty sure they were always claiming to be planning to fix it but never did. it's quiet sad.
They improved it late last year.
it's a lot like their continued failure to do anything about the sorry state of windows on handheld pc's vs steam os. despite always talking about doing something... this is a company with more money than they know what to do with mind you.
True. It seemed like xCloud was held in stasis during and after the ABK FTC trial. Took them long enough to bring improvements to the table.
i also found the recent implementation a little confusing. it was through a web browser pointed at a url. why not an app like everything else today?
If I'm not mistaken, the Xbox PC app is integrated with xCloud if you have GP Ultimate. The web browser version was a workaround for Mobile (Due to Apple and Google policies) and also to reach users on others OS (Linux, Mac) without dedicating effort into an App for those platforms.
 
Surely this would have been much better announced at a State of Play. I don't get Microsoft's game here, "We want to sell XGS on your platform, but not too much." There's a rumored State of Play next month, an announcement there would have had much more fanfare.

I wonder if they're somewhat ashamed that it's come to this, and thus are making these huge announcements via tweets rather than the deserving fanfare.
I agree with your premise, sales on PS5 would be maximized with a SoP reveal.

Still, it worked out really well with Sea od Thieves so it might not be a huge deal overall.
 
You're not wrong, of course Microsoft has the potential to get people "hooked" to GP. But you've also only paid for a few months of Gamepass and in that span you would have spent 60-70 dollars each for Call of Duty and Indiana Jones, and 50 dollars for Ninja Gaiden 2 Black.

The Game Pass math never seemed to work out in my head, and I'll admit I still don't understand it. You'd need an absolutely massive number of subscriptions to make up for the revenue loss from people not purchasing the full-priced games at release, and I'm just not sure that's feasible right now.

There is also the problem that there just isn't enough Genre and playstile depth in GamePass to make it more in line with PC audience expectations.
I have 650 games in my Steam account. There are 450 games on PC GP. There is SOME overlap, mostly because of Bethesda games. But other than that, 90+% of what is on Gamepass doesn't interest me.
I am not interested in just blindly and brainless playing SOMETHING.

I am mostly a forevergamer. I play hundreds and thousands of hours of 5-20 year old games. And add a few new games every year.
I can't fathom to just have a subscription going, pop into GP, look at the games and play something. Games that are possibly leaving the service at any time while I am not finished with them, or that I would like to play for years.
The reality is: If I find a new game to be excited about, it is 98% NOT on Gamepass at all, or not on Gamepass when I want to play it. (either not yet added or already booted out)
 
There is also the problem that there just isn't enough Genre and playstile depth in GamePass to make it more in line with PC audience expectations.
I have 650 games in my Steam account. There are 450 games on PC GP. There is SOME overlap, mostly because of Bethesda games. But other than that, 90+% of what is on Gamepass doesn't interest me.
I am not interested in just blindly and brainless playing SOMETHING.

I am mostly a forevergamer. I play hundreds and thousands of hours of 5-20 year old games. And add a few new games every year.
I can't fathom to just have a subscription going, pop into GP, look at the games and play something. Games that are possibly leaving the service at any time while I am not finished with them, or that I would like to play for years.
The reality is: If I find a new game to be excited about, it is 98% NOT on Gamepass at all, or not on Gamepass when I want to play it. (either not yet added or already booted out)
This is my hunch based on experience too (and part of why I keep saying the 3rd party content is of little value and should be dropped). I don't want to play an 70hr+ Atlus JRPG/Yakuza game on gamepass with an arbitrary time limit before it leaves the service, because I routinely pick up and drop long games throughout the year while playing other new releases or the "forever games". If I can't make time for a Yakuza game at release(because most likely I'm still working through a backlog of Yakuza titles bought at discount!) I'll just make the purchase at 40%+ discount within 6-8 months. Likewise, the "savings" of the sub aren't that tangible or valuable because major 3rd parties routinely offer substantial discounts within mere months of release.

IMO gamepass should offer:

1) All Xbox 1st party content day one, no 3rd party content, single pricepoint
2) Subscribers should receive some benefit in the "forever games" (COD, Forza, Sea of Thieves, future Halo/Gears of War titles, Diablo etc) such that it's a no-brainer to subscribe even if you only play 1-3 of these titles regularly. That could mean faster battlepass progression rates, exclusive drops attached to the service or some kind of premium progression track for subscribers, etc.

Honestly think a permanent progression rate boost in COD on gamepass would do more for user acquisition and retention alone than paying for and dumping indie/smaller 3rd party games onto the service, or a years-late port of FF7Remake.
 
This is my hunch based on experience too (and part of why I keep saying the 3rd party content is of little value and should be dropped). I don't want to play an 70hr+ Atlus JRPG/Yakuza game on gamepass with an arbitrary time limit before it leaves the service, because I routinely pick up and drop long games throughout the year while playing other new releases or the "forever games". If I can't make time for a Yakuza game at release(because most likely I'm still working through a backlog of Yakuza titles bought at discount!) I'll just make the purchase at 40%+ discount within 6-8 months. Likewise, the "savings" of the sub aren't that tangible or valuable because major 3rd parties routinely offer substantial discounts within mere months of release.

IMO gamepass should offer:

1) All Xbox 1st party content day one, no 3rd party content, single pricepoint
2) Subscribers should receive some benefit in the "forever games" (COD, Forza, Sea of Thieves, future Halo/Gears of War titles, Diablo etc) such that it's a no-brainer to subscribe even if you only play 1-3 of these titles regularly. That could mean faster battlepass progression rates, exclusive drops attached to the service or some kind of premium progression track for subscribers, etc.

Honestly think a permanent progression rate boost in COD on gamepass would do more for user acquisition and retention alone than paying for and dumping indie/smaller 3rd party games onto the service, or a years-late port of FF7Remake.

GamePass NEEDS an integration with 1st party or 3rd party GaaS games.

You have GP Ultimate?
- you automatically have a subscription to World of Warcraft
- you automatically have a battle pass for Diablo 4
- you automatically have a battle pass for CoD
- any monthly goodies for GaaS games from 3rd party devs (payout between MS and 3rd party based on hours/spend of the users through Gamepass)

I wouldn't pay for GamePass as is.
And I sporadically sub to WoW.
I probably would pay the full year for GP Ultimate if I had a WoW subscription within it.
 
I wonder if they're somewhat ashamed that it's come to this, and thus are making these huge announcements via tweets rather than the deserving fanfare.
I bet Microsoft games will be shown in the Switch 2 presentation event in early April so I don't think shame is part of the reasoning.
Microsoft is a third-party publisher by all the purposes now.
 
Zune, Windows phone, Surface devices and Hololens also made them Billions.

Even more so, revenue is pointless to the MSFT of now if it does not show major growth/marketshare improvement or if it does not bring in high margin profits.

No point in having a $15B Xbox business if the margin is <5% (Phil's testimony) or even less.
Same with growth. Xbox $15B business is declining and ATVI's growth has stalled. FY expectations have growth at 15%, while last quarter it was 2%.

HoloLens has been axed, I think Surface is next. They will try this OEM thing, looks like they have already decided to give it a go, but I can't see it ending well.
 
Even more so, revenue is pointless to the MSFT of now if it does not show major growth/marketshare improvement or if it does not bring in high margin profits.

No point in having a $15B Xbox business if the margin is <5% (Phil's testimony) or even less.
Same with growth. Xbox $15B business is declining and ATVI's growth has stalled. FY expectations have growth at 15%, while last quarter it was 2%.

HoloLens has been axed, I think Surface is next. They will try this OEM thing, looks like they have already decided to give it a go, but I can't see it ending well.
Isn't revenue the main metric? People have always argued that Sony dominate video game console business because they always dominated when it came to revenue, when most years they made less profits than Nintendo from video game console business. So revenue has always been the main metric when it comes to which company is the market leader, not profits or profit margins.
 
Isn't revenue the main metric? People have always argued that Sony dominate video game console business because they always dominated when it came to revenue, when most years they made less profits than Nintendo from video game console business. So revenue has always been the main metric when it comes to which company is the market leader, not profits or profit margins.

It would be if you were growing quickly or taking marketshare. Is Xbox/GP growing quickly?

If you are not growing much (Xbox) then revenue may be put aside over short term profitability, especially in a company like MSFT that is obsessed about high margins. Their leading businesses have net margins of 40-50%.

Board and shareholders will question what are we doing in a business with only 5% net margin. Why did we spend $80B in a industry with 5% net margin and low profits when we could have bought a social media company or a SaaS company etc?

I cannot emphasize a lot of this is because it is MSFT. They are a Big Tech company that expects and only invests in industries with high margin.
Nintendo, Capcom, don't even think Tencent or Sony even with their dominance expect such things.
 
I cannot emphasize a lot of this is because it is MSFT. They are a Big Tech company that expects and only invests in industries with high margin.
Nintendo, Capcom, don't even think Tencent or Sony even with their dominance expect such things.
Nintendo's earnings have been around 40% of revenue the past several years? It's not unheard of in this industry.
 
Even more so, revenue is pointless to the MSFT of now if it does not show major growth/marketshare improvement or if it does not bring in high margin profits.

No point in having a $15B Xbox business if the margin is <5% (Phil's testimony) or even less.
Same with growth. Xbox $15B business is declining and ATVI's growth has stalled. FY expectations have growth at 15%, while last quarter it was 2%.

HoloLens has been axed, I think Surface is next. They will try this OEM thing, looks like they have already decided to give it a go, but I can't see it ending well.
Only because this is from the perspective of Microsoft. Any other company in the world would kill for their business models and take on the lower performing Microsoft bets.

If you're #1, or top 3 at worst, on this planet when it comes to financial metrics the pressure is immense as you can only do worse from there.

And you cannot not bet on new and lower performing stuff. At some point you have to compete for and find the next thing.
 
The other factor is that increasing digital ratio a can increase your reported revenue a lot, even if you're not actually making that much more money.
 
Phil Spencer had a interview with Xboxera recently, some interesting comments about the future from Spencer:

Jon: I've seen a lot of people repeating something that you said back during the whole Activision Blizzard drama with the FTC. It was about how Sony used the 30% that they make on Xbox published games on their platform to kind of 'reduce your standing in the market'. But I saw a great point from Sam Tolbert on Windows Central. He's like, well, what about the 70% that they make? It's funding more games for all of us to play. Can't we focus on that?
Phil: It's maybe not what I was going to say on stand at the time. But yeah, I would love to make all of the money for all of the games that we ship right, like obviously we make more on our own platform. It's one of the reasons that investing in our own platform is important. But there are people, whether it's their libraries on a PlayStation or Nintendo, whether it's they like the controller better, they just like the games that are there.

And I don't want to then look at that and say, well, there's no way that we should be able to build a business there, find fans of our franchises there. I'm not trying to move them all over to Xbox anymore. People were all so invested in where our games are. Let's just allow more people to play and yes, the 70% that we make on games on other platforms is helpful to us being able to build great portfolios like we showed at the Dev Direct and I hope this will continue to show through the rest of the year.

The point he makes that he isnt ''trying to move them all over to Xbox anymore'' could be an indication that the next Xbox hardware won't be subsidized and will be considerably more expensive than say the Switch 2, which means it won't be a mass market competitor.

I think the next Xbox hardware is basically only about selling their hardware to diehard Xbox users who won't want to move to any other console and PC, and get good profits from every sold console.
 
Phil Spencer had a interview with Xboxera recently, some interesting comments about the future from Spencer:



The point he makes that he isnt ''trying to move them all over to Xbox anymore'' could be an indication that the next Xbox hardware won't be subsidized and will be considerably more expensive than say the Switch 2, which means it won't be a mass market competitor.

I think the next Xbox hardware is basically only about selling their hardware to diehard Xbox users who won't want to move to any other console and PC, and get good profits from every sold console.
It'll be this but also trying to carve out a market for mid range desktop buyers. Younger people are buying PC over consoles and Xbox has been pivoting to target Gen Alpha with the push to PC. Having a box that can compete with a mid range build (~$700-800) and run Steam games (plus maybe better integration of gaming specific apps like streaming capabilities), could position the box to a different market while still being "viable" for regular console users as next gen will be more much more expensive to start than this one did. They don't want to only sell to what will be a capped and eventual shrinking userbase.

The handheld will be more mass market friendly in a bid for cloud gaming adoption and Xbox's eventual (Soon™) mobile store. Device powerful enough to native play Series S games, cloud access, and the mobile store.

Sell both at slight or big profit and Microsoft would not care where a consumer interacts with Xbox. PS5/6 and Switch 2? They can now buy Xbox games and MS gets 70% of the sale. Buy an Xbox? Now Microsoft gets some money selling the console plus 100% of first party sales, subs, and 30% of any game or MTX bought on their platform.
 
Microsoft Gaming profits possible are up since they don't have hardware deals anymore, those bleed a lot money.
 
It'll be this but also trying to carve out a market for mid range desktop buyers. Younger people are buying PC over consoles and Xbox has been pivoting to target Gen Alpha with the push to PC. Having a box that can compete with a mid range build (~$700-800) and run Steam games (plus maybe better integration of gaming specific apps like streaming capabilities), could position the box to a different market while still being "viable" for regular console users as next gen will be more much more expensive to start than this one did. They don't want to only sell to what will be a capped and eventual shrinking userbase.

The handheld will be more mass market friendly in a bid for cloud gaming adoption and Xbox's eventual (Soon™) mobile store. Device powerful enough to native play Series S games, cloud access, and the mobile store.

Sell both at slight or big profit and Microsoft would not care where a consumer interacts with Xbox. PS5/6 and Switch 2? They can now buy Xbox games and MS gets 70% of the sale. Buy an Xbox? Now Microsoft gets some money selling the console plus 100% of first party sales, subs, and 30% of any game or MTX bought on their platform.
Why would devs waste time on a bespoke Xbox SKU, when a Steam version will play on this hypothetical box?
 
Why would devs waste time on a bespoke Xbox SKU, when a Steam version will play on this hypothetical box?
The idea is that Microsoft gets the Xbox GDK to where if a developer makes a PC game, they have to do very little if anything for it to be an Xbox game.

Microsoft's PC store already misses a ton of third party games that have a Steam and Xbox version, so simplifying the process would bolster their PC store instantly. If the console is basically a PC, combining the console and PC stores would be a necessity.
 
Why would devs waste time on a bespoke Xbox SKU, when a Steam version will play on this hypothetical box?
I think if they go in the direction of an expensive, non subsidized Xbox, it will basically be a PC with Xbox branding, to get every game automatically, like other niche hardware like the steam deck. I don't think they would get every game with an install base of 10 million users or something.
 
Why would devs waste time on a bespoke Xbox SKU, when a Steam version will play on this hypothetical box?
They still need to some optimization for that box, just like they do for Steam Deck. So it is just a little more effort.
 
The idea is that Microsoft gets the Xbox GDK to where if a developer makes a PC game, they have to do very little if anything for it to be an Xbox game.

Microsoft's PC store already misses a ton of third party games that have a Steam and Xbox version, so simplifying the process would bolster their PC store instantly. If the console is basically a PC, combining the console and PC stores would be a necessity.

Wouldnt Microsoft want to roll out this magical GDK years before the launch of this box to bolster their windows store and work out any kinks?
And wouldnt this box then run unoptimised code, where users would need to dive into settings menus to get stable 30/40/60 fps? A far cry from a console experience.

All while being significantly more expensive than PS6, and not upgradeable like a PC.
 
Phil Spencer had a interview with Xboxera recently, some interesting comments about the future from Spencer:



The point he makes that he isnt ''trying to move them all over to Xbox anymore'' could be an indication that the next Xbox hardware won't be subsidized and will be considerably more expensive than say the Switch 2, which means it won't be a mass market competitor.

I think the next Xbox hardware is basically only about selling their hardware to diehard Xbox users who won't want to move to any other console and PC, and get good profits from every sold console.

Not replying to you but this whole 70% narrative Phil is trying to build.

We know that from what he really means as we see from his emails, MSFT still wants to be a platform holder and get a 30% cut, its just their hardware platform has collapsed so their new platform is GP. Go ask Phil why he wants 30% of all MTX on GP.

Sure 70% revenue is nice.
You know whats better: 30% pure profit. 0 risk, Phil spends 100% of the cost and PS gets straight 30% profit.
30% margin is already above the most profitable 3rd P publishers.

Which is why the richest gaming companies are platform holders: Apple, Google, Tencent, NetEase, Playstation, Nintendo.
 
Not replying to you but this whole 70% narrative Phil is trying to build.

We know that from what he really means as we see from his emails, MSFT still wants to be a platform holder and get a 30% cut, its just their hardware platform has collapsed so their new platform is GP. Go ask Phil why he wants 30% of all MTX on GP.

Sure 70% revenue is nice.
You know whats better: 30% pure profit. 0 risk, Phil spends 100% of the cost and PS gets straight 30% profit.
30% margin is already above the most profitable 3rd P publishers.

Which is why the richest gaming companies are platform holders: Apple, Google, Tencent, NetEase, Playstation, Nintendo.

The interviewer brought this point about the 70% and Phil was kinda like "yeah, is nice to have this money, it help us", doesn't looked to me he was trying to build a narrative.

In fact he also said they make more money on their own platform and that's why is important to have one, but some people will never buy an Xbox.
 
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It'll be this but also trying to carve out a market for mid range desktop buyers. Younger people are buying PC over consoles and Xbox has been pivoting to target Gen Alpha with the push to PC. Having a box that can compete with a mid range build (~$700-800) and run Steam games (plus maybe better integration of gaming specific apps like streaming capabilities), could position the box to a different market while still being "viable" for regular console users as next gen will be more much more expensive to start than this one did. They don't want to only sell to what will be a capped and eventual shrinking userbase.

The handheld will be more mass market friendly in a bid for cloud gaming adoption and Xbox's eventual (Soon™) mobile store. Device powerful enough to native play Series S games, cloud access, and the mobile store.

Sell both at slight or big profit and Microsoft would not care where a consumer interacts with Xbox. PS5/6 and Switch 2? They can now buy Xbox games and MS gets 70% of the sale. Buy an Xbox? Now Microsoft gets some money selling the console plus 100% of first party sales, subs, and 30% of any game or MTX bought on their platform.
If Microsoft won't invest in Xbox as a dedicated platform, despite that platform guaranteeing them 30% royalties on every sale, I don't see why they would invest in an approach that all but guarantees that the 3rd party royalty model will be destroyed by the ability to simply install Steam and circumvent Windows Store, which has been a weakness of Microsoft's business for well over 10 years now. In which case they're doing all the legwork manufacturing hardware at low/no margins and then handing those customers over to Valve when it comes time for the actual high margin activity. Xbox could maybe justify it to Microsoft on the basis of defending Windows' place in the market as the "default" for PC gaming, I guess, but that doesn't make it viable as a profit-generating business.

I absolutely think there's massive headroom for disruption in the PC market right now though, as purchasing hardware has become a poor customer experience in the same vein that the PC software market was primed for disruption by Steam in the early 00s.
 
This is a factor that I think so many really fail to appreciate.

Yeah, that also played a part in Sony's previous years where they posted one revenue growth after another but their margins were abysmal.
And one part of this was just their audience switching to digital, and Sony (like Microsoft, but not Nintendo) booking 100% of digital 3rd party sales as revenue instead of the 30% from physical sales (+ any other fees they get from a physical sale additionally to the 30%?).

While Nintendo has better margins because they only book their 30% from 3rd party digital sales as revenue.
 
Yeah, that also played a part in Sony's previous years where they posted one revenue growth after another but their margins were abysmal.
And one part of this was just their audience switching to digital, and Sony (like Microsoft, but not Nintendo) booking 100% of digital 3rd party sales as revenue instead of the 30% from physical sales (+ any other fees they get from a physical sale additionally to the 30%?).

While Nintendo has better margins because they only book their 30% from 3rd party digital sales as revenue.
Platform fees on physical are much lower than 30% btw, usually closer to half that. I believe it's around $9-10 for a full price game on PS/Xbox and the rate drops based on MSRP.

For Nintendo platform fees for Gamecards are determined by ROM size.
 
If Microsoft won't invest in Xbox as a dedicated platform, despite that platform guaranteeing them 30% royalties on every sale, I don't see why they would invest in an approach that all but guarantees that the 3rd party royalty model will be destroyed by the ability to simply install Steam and circumvent Windows Store, which has been a weakness of Microsoft's business for well over 10 years now. In which case they're doing all the legwork manufacturing hardware at low/no margins and then handing those customers over to Valve when it comes time for the actual high margin activity. Xbox could maybe justify it to Microsoft on the basis of defending Windows' place in the market as the "default" for PC gaming, I guess, but that doesn't make it viable as a profit-generating business.
This.

Unless a royalty sharing agreement is in place (which is unlikely for a variety of reasons), the idea of a SteamXbox machine is either not gonna happen or it will have a wonky integration (because investment in keeping the integrations up will be one-sided and thus minimal).
 
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