Why Microsoft's Xbox Strategy is a Generation Ahead


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If you've been following the most recent news in the gaming industry, you've probably heard about Xbox Game Pass, Microsoft's new subscription service that has been dubbed the "Netflix of Gaming" by many news outlets as well as gamers.

For a low monthly subscription, gamers get access to a library of hundreds of titles, both from Microsoft's internal studios (which now include all of Bethesda after an acquisition earlier this year)

And from a wide range of rotating 3rd party titles. While this may already seem like a revolution in the way games are delivered and sold, Game Pass is leading a second revolution as well, and that revolution resides in the cloud.

Cloud Gaming and The Advent of "Play Anywhere"

One often overlooked bonus of Xbox Game Pass's Ultimate tier is the ability to play games in the cloud. This means that by streaming them directly from Microsoft data centers, gamers can play the vast majority of Game Pass's library on their Android phone or Chromebook, with support for iOS and Windows 10 currently in an invitation-only beta, with many more platforms promised for the future. Speaking of beta, cloud gaming itself is still a beta feature for Xbox as well, with the stated goal being the ability for Xbox gamers to play their entire Xbox digital library, even outside of Game Pass, through the cloud. This has subtly repositioned the Xbox brand from a console brand to a service, which could have a massive impact on the gaming space as a whole.

 While the newest generation of consoles has seen unprecedented success (both Sony's PlayStation 5 and Microsoft's Xbox Series X have been highly sought after since their launch) Game Pass has seen similar success, with the service having over 23 million subscribers as of April 2021.

Xbox Game Pass Ultimate While Microsoft does have some competition in the space, mainly from Amazon and Google with their Luna and Stadia services respectively, Microsoft is uniquely positioned to establish itself as the major player in the space. They have the infrastructure, data experience, and money that Amazon and Google bring to the table, while also having the decades of gaming experience companies like Sony and Nintendo (Microsoft's traditional competition in the gaming space) could offer. Thanks to Azure, Microsoft's cloud computing service for its enterprise line of products, Microsoft has over a decade of experience with cloud services and infrastructure. In addition, thanks to their console gaming business, they have over two decades of experience in the gaming space as well.

This experience in the gaming space has been bolstered by several acquisitions, both big and small. Microsoft made headlines earlier this year when they acquired gaming behemoth Bethesda for $7.5 billion, but the company has been steadily acquiring game developers the last few years. Microsoft enters the new generation of gaming with 23 internal studios, compared to 15 at the launch of the Xbox One, the company's previous console. While analysts assumed this was the company bolstering its library of exclusives to compete with the likes of Sony and Nintendo, it's starting to look like they may have been looking further ahead than that.

Game Pass Originals

The way most people have described Game Pass is as the "Netflix of Gaming." Microsoft may be taking the comparison seriously, as these acquisitions signal them learning from Netflix's hurdles and mistakes. When Netflix first launched, they established deals across the film and TV industry, leading to the service becoming most viewers' default TV streaming app. But as companies saw how lucrative streaming was becoming, they started creating their own streaming services and hoarding their content. This forced Netflix to heavily invest in their own original programming, now known as Netflix Originals. Xbox PlayMicrosoft seems to foresee something similar happening in the gaming industry. But unlike Netflix, which ultimately was just a small startup when it first launched, Microsoft is one of the biggest companies in the world and has the capital to buy enough developers to build a solid pipeline of internal content. Even if Game Pass didn't include third party titles, after the Bethesda acquisition, the service would be worth it based on first party titles alone, which was Microsoft's intent. Sony and Nintendo built their companies on the back of exclusive franchises, and whenever they seriously enter game streaming this will most likely be their biggest strength as well, so Microsoft has already been preparing.

But their biggest acquisition, Bethesda, offers more than just a large library of AAA titles and multiple teams of experienced developers. Bethesda, also looking towards the future of gaming, had already started development on their own cloud technology, Orion. This technology is a software-based solution to optimize game engine performance in the cloud, something that''ll prove invaluable as cloud gaming grows and evolves. There were reports Microsoft was considering other companies (WB Games was a name that was mentioned) for a major acquisition, but may have ultimately settled on Bethesda because of their familiarity and investment in the cloud.


When taken together, all these moves by Microsoft seem to indicate a company that is looking beyond the traditional console model of gaming and is building towards a future of both subscriptions and cloud streaming, and they seem to be poised to take control of this new space in gaming.

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Wednesday, 05 October 2022