Xbox Lost the Console War. Now It’s Redefining Gaming. | WSJ The Economics Of

00:06:35
https://www.youtube.com/watch?v=yuZtbsSrdwo

Zusammenfassung

TLDRThe video delves into Microsoft's evolution with Xbox, moving from a focus on powerful gaming consoles to offering the Game Pass subscription service. Originally dependent on exclusive console gaming, Xbox Game Pass now allows users to play games on multiple devices. This strategic shift is driven by a desire to increase customer reach and create a stable revenue stream, despite the console's historical losses. By acquiring game studios, Microsoft seeks to enhance its content library, setting itself apart in a competitive field where Sony, Nintendo, and newer tech giants also vie for dominance. Although cloud gaming presents cost and performance challenges, experts see its potential growth, particularly as global subscription rates remain low. Xbox continues to innovate in content delivery while still releasing new hardware, ensuring it remains a key player in the gaming industry's evolving landscape.

Mitbringsel

  • 🎮 Microsoft's Xbox Series X represents its powerful console offering.
  • 📈 Shift from consoles to subscription services like Game Pass aims for wider reach.
  • 💡 Game Pass offers multi-device gaming but faces subscription growth challenges.
  • 💰 Microsoft invests heavily in acquiring game studios to boost its game library.
  • ☁️ Cloud gaming includes challenges like performance lag and high operational costs.
  • 🤝 Despite losses, Xbox hardware still plays a significant role alongside Game Pass.
  • 📊 Competition in cloud gaming includes major tech companies like Amazon and Google.
  • 📉 2023 saw only 6% of global gamers subscribed to cloud gaming services.
  • 🕹️ Game Pass addresses consumer interest for affordable, accessible gaming content.
  • 🔍 Xbox leverages its large data centers to support cloud gaming infrastructure.

Zeitleiste

  • 00:00:00 - 00:06:35

    Microsoft's Xbox Series X is highlighted as a powerful flagship console, though the focus has shifted to a subscription service that expands game accessibility beyond Xbox. Despite historical competition, Microsoft launched Game Pass in 2017, aiming for more recurring revenue and broader accessibility. This strategy seeks to counteract the volatility of game sales by integrating more users without relying on console sales. With game studio acquisitions, including Mojang and Activision Blizzard, and Microsoft's significant data infrastructure, Game Pass emerges as a formidable service against competitors like Sony's merged subscription service. Microsoft aims to transcend traditional gaming models by leveraging its scale and technology, though adoption has been slower than projected, facing challenges in changing consumer behaviors and the high operational costs of cloud gaming. As hardware continues to evolve, Xbox's future strategy is more aligned with content delivery and cloud services, challenging the conventional console war narrative.

Mind Map

Mind Map

Häufig gestellte Fragen

  • What is Xbox Game Pass?

    Xbox Game Pass is a subscription service offering access to a library of games on various devices, with different tiers providing additional features like cloud gaming.

  • Why did Microsoft shift to a subscription model?

    Microsoft shifted to a subscription model to attract more customers who don't want to buy a console and to create a steady revenue stream less dependent on blockbuster game releases.

  • How has Microsoft's acquisition strategy helped its gaming division?

    Microsoft has acquired several game studios, expanding its library significantly, which enhances its subscription offerings and competitive edge.

  • What are some of the challenges of cloud gaming?

    Cloud gaming can be costly to operate and faces issues like potential lag, which can affect gaming performance, particularly in competitive games.

  • Is the Xbox still relevant with the rise of Game Pass?

    While Xbox focuses more on content with Game Pass, it continues to release new hardware, showing that consoles are still a part of its strategy.

  • How does Microsoft's Game Pass compare to Sony's offering?

    Microsoft's Game Pass offers extensive content across various devices, leveraging its vast resources and data centers, whereas Sony has combined its services to compete but remains more traditional.

  • What percentage of gamers subscribed to cloud gaming in 2023?

    In 2023, about 6% of gamers worldwide were subscribed to cloud gaming services.

  • Why do some gamers hesitate to subscribe to services like Game Pass?

    Some gamers prefer owning their games rather than subscribing, as they want the flexibility to play at any time without worrying about games disappearing from the service.

  • What does the future hold for Xbox hardware?

    Xbox is not phasing out its hardware soon; new versions of its consoles are expected, but content appears to be the primary focus moving forward.

  • Who are Xbox's main competitors in cloud gaming?

    Xbox's main competitors in cloud gaming are other tech giants like Amazon, Nvidia, and Google, which also have significant resources and infrastructure.

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Automatisches Blättern:
  • 00:00:00
    - [Narrator] This is the Xbox Series X,
  • 00:00:04
    Microsoft's most powerful flagship console.
  • 00:00:06
    For a long time, you needed an Xbox
  • 00:00:09
    to play games like "Halo" or "Gears of War".
  • 00:00:11
    Then Microsoft decided you don't.
  • 00:00:14
    So it launched a monthly subscription service
  • 00:00:16
    that lets users play the latest games on a bunch
  • 00:00:19
    of other devices, but it's increasingly competitive
  • 00:00:23
    and will take a lot of investment to make it work.
  • 00:00:25
    So, will this shift pay off?
  • 00:00:28
    And what does it mean for the future of the console?
  • 00:00:31
    This is The Economics of Xbox.
  • 00:00:35
    Today, with more than 30 game studios,
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    Xbox is an industry mainstay,
  • 00:00:39
    - But it had to really earn that position in the market.
  • 00:00:41
    - [Narrator] The console war began in the 1970s
  • 00:00:44
    when video game companies started competing
  • 00:00:46
    to create a more powerful console and win more customers.
  • 00:00:50
    By the '90s, the biggest players
  • 00:00:51
    were Sony, Nintendo, and Sega.
  • 00:00:54
    And in 1997, consumer spending on consoles
  • 00:00:56
    surpassed arcades for the first time.
  • 00:00:59
    A few years later, Microsoft entered the scene
  • 00:01:02
    with its first generation Xbox.
  • 00:01:04
    To entice customers into their ecosystems,
  • 00:01:06
    most of these companies tried to keep the prices
  • 00:01:08
    on their consoles as low as possible,
  • 00:01:11
    selling them at a loss.
  • 00:01:13
    Xbox loses up to $200 per console,
  • 00:01:16
    but the brands made up the difference by selling games
  • 00:01:18
    and other accessories.
  • 00:01:20
    - The more consoles you sell, the more software you're going
  • 00:01:24
    to sell with it.
  • 00:01:25
    - [Narrator] The PlayStation
  • 00:01:26
    outsold the Xbox every single time.
  • 00:01:29
    Microsoft only came close to beating Sony
  • 00:01:32
    with the Xbox 360.
  • 00:01:33
    Analysts say this was because the PlayStation 3,
  • 00:01:36
    which ran customers up to $600, was priced too high,
  • 00:01:40
    but the Xbox lost ground with the next generation,
  • 00:01:43
    and ultimately, it lost the console war.
  • 00:01:47
    In 2017, Xbox launched Game Pass,
  • 00:01:49
    positioning itself as a services brand.
  • 00:01:52
    - It's more interested in making content available
  • 00:01:54
    to people, whatever device they choose to play on.
  • 00:01:57
    - [Narrator] Game Pass is a tiered service.
  • 00:01:59
    The least expensive plans offer gaming on either console
  • 00:02:02
    or PC, and the most expensive plan has multi-device gaming
  • 00:02:06
    and other features like streaming games from the cloud
  • 00:02:08
    and access to certain games the day they're released.
  • 00:02:11
    In essence, Microsoft is betting
  • 00:02:13
    that it can get more customers
  • 00:02:14
    if they don't have to buy a console.
  • 00:02:16
    This model also gives the company
  • 00:02:18
    a recurring revenue stream, so it doesn't have to rely
  • 00:02:21
    as much on blockbuster successes.
  • 00:02:23
    - So Game Pass solves the problem on the consumer side
  • 00:02:25
    by making lots of content available for cheap,
  • 00:02:28
    and on the business or the supply side in terms
  • 00:02:30
    of offsetting the financial volatility
  • 00:02:33
    associated with entertainment.
  • 00:02:34
    - [Narrator] Microsoft's head of gaming, Phil Spencer,
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    has said Game Pass is profitable.
  • 00:02:38
    - And I think it will stay in that 10 to 15%
  • 00:02:41
    of our overall revenue.
  • 00:02:42
    - [Narrator] But Microsoft isn't the only one
  • 00:02:44
    stepping into the subscription world.
  • 00:02:46
    In 2022, Sony merged its subscription services,
  • 00:02:49
    PlayStation Plus and PlayStation Now,
  • 00:02:52
    and relaunched it to compete with Game Pass.
  • 00:02:54
    There are two key things that give Microsoft an edge.
  • 00:02:57
    First, it's a much larger company
  • 00:02:59
    with lots and lots of money.
  • 00:03:01
    And for the past decade, Microsoft has been using that money
  • 00:03:04
    to acquire game studios, beefing up its library.
  • 00:03:07
    In 2014, it bought Mojang, the maker of "Minecraft"
  • 00:03:10
    for $2.5 billion.
  • 00:03:12
    In 2021, it bought ZeniMax Media,
  • 00:03:15
    owner of "Fallout" and "Doom" for $8.1 billion,
  • 00:03:19
    and in 2023, it finalized the purchase
  • 00:03:21
    of Activision Blizzard, the maker of "Call of Duty"
  • 00:03:24
    and "Candy Crush" for $75.4 billion.
  • 00:03:28
    - To put it in perspective, that is a little bit less
  • 00:03:31
    than what Sony makes annually.
  • 00:03:32
    - [Narrator] Second, as a giant tech company,
  • 00:03:34
    Microsoft owns lots and lots of data centers,
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    over 300 worldwide.
  • 00:03:39
    Some of which help support Game Pass and cloud gaming.
  • 00:03:42
    - The incumbents like Nintendo and Sony,
  • 00:03:45
    they live and die on great content,
  • 00:03:47
    and this magnificent retail distribution
  • 00:03:50
    infrastructure that they've built.
  • 00:03:51
    So it's in Microsoft's interest
  • 00:03:53
    to push into its data centers
  • 00:03:56
    and its infrastructure in the cloud,
  • 00:03:58
    because it can't beat Sony and Nintendo at retail.
  • 00:04:01
    - [Narrator] This puts it in an arena
  • 00:04:03
    that mainly other massive tech companies
  • 00:04:04
    like Amazon, Nvidia, and Google can really compete in,
  • 00:04:08
    but there are lots of obstacles.
  • 00:04:10
    To start, adoption has been slow.
  • 00:04:12
    In 2020, it targeted 71% subscriber growth and reached 86%,
  • 00:04:16
    but the following year, it fell short.
  • 00:04:19
    And in 2022, it missed its target by a long shot.
  • 00:04:22
    - Some people are just not comfortable
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    with the idea of not actually owning a game.
  • 00:04:26
    They may wanna play a game, put it down for six months
  • 00:04:29
    and pick it up later, or a year later, or more,
  • 00:04:31
    and it may not be in the subscription service
  • 00:04:34
    anymore after that time.
  • 00:04:36
    - [Narrator] So as of 2024,
  • 00:04:37
    Game Pass has amassed 34 million subscribers.
  • 00:04:40
    Some of the biggest challenges are specific to cloud gaming.
  • 00:04:43
    A feature included in Game Pass's top tier.
  • 00:04:46
    Traditionally, game data was stored locally on cartridges,
  • 00:04:49
    disks, or downloaded straight to the console.
  • 00:04:52
    With online multiplayer games,
  • 00:04:54
    data like each player's actions were streamed.
  • 00:04:57
    But with cloud gaming, the entire game is streamed
  • 00:04:59
    to your device, which can be laggy.
  • 00:05:01
    - If it's a competitive game,
  • 00:05:02
    a millisecond can mean the difference
  • 00:05:04
    between winning and losing.
  • 00:05:05
    - [Narrator] Cloud gaming is also expensive to operate.
  • 00:05:08
    - The economics have changed,
  • 00:05:10
    but they haven't immediately changed to,
  • 00:05:13
    you know, only run a profit.
  • 00:05:15
    Both of those offerings, whether those
  • 00:05:16
    are product-based and conventional,
  • 00:05:18
    or whether they are streaming and more digital,
  • 00:05:21
    both of those run at a loss in principle,
  • 00:05:24
    but to recuperate and that to earn money in those contexts
  • 00:05:27
    is a very different proposition.
  • 00:05:29
    - [Narrator] One report found that just 6% of gamers
  • 00:05:31
    around the world were subscribed
  • 00:05:32
    to a cloud gaming service in 2023.
  • 00:05:35
    Still, experts believe it will grow substantially.
  • 00:05:38
    - Cloud gaming is one of those few components
  • 00:05:40
    where they could possibly thrive and lead,
  • 00:05:43
    even if that's a much more modestly sized industry.
  • 00:05:46
    - [Narrator] Microsoft isn't getting rid
  • 00:05:47
    of the Xbox anytime soon.
  • 00:05:49
    Later this year, it will release new versions
  • 00:05:51
    of its current generation, the series X and S,
  • 00:05:54
    but it's clear that Xbox views its content as the future
  • 00:05:57
    of the company, not its hardware.
  • 00:06:00
    - It is incredibly difficult for these large companies,
  • 00:06:02
    in spite of their resources, to be agile and innovative.
  • 00:06:06
    And so, you know, they're always watching someone else
  • 00:06:08
    just run the show.
  • 00:06:10
    And so in many ways, you could make the argument
  • 00:06:12
    that the current effort and investment towards Game Pass,
  • 00:06:15
    and X Cloud, and all of the things that they're building
  • 00:06:18
    and acquiring goes towards perhaps finally being
  • 00:06:21
    in the driver's seat for the first time,
  • 00:06:23
    - [Narrator] Giving it the chance
  • 00:06:24
    to win whatever the new gaming war will be.
  • 00:06:27
    (screen buzzes) (relaxing music)
Tags
  • Xbox
  • Game Pass
  • cloud gaming
  • Microsoft
  • gaming industry
  • subscription service
  • content acquisition
  • console war
  • gaming strategy
  • PlayStation