[Opinion] April 2023 is the beginning of the end for Xbox as we know it.

[Heisenberg007]

I wanted to put my thoughts on the record by saying that the downfall of Xbox (as we know it) has just gotten into 5th gear.

Will Microsoft just wrap up the Xbox division? No.

But I do think they will abandon their consoles very, very soon. After that, they will primarily become a game publisher. With the resources, studios, and IPs available to Xbox Game Studios, they can be a reasonably good multiplatform publisher, adding operating profit to Microsoft's balance sheet.

Here are a few of my logical reasons why I think Xbox would be abandoning its console in the next few years:

• Microsoft loses up to $200 per Xbox console sold. On the other hand, PS5 has been selling at a profit for nearly 2 years now.
• The idea of selling a console at a loss is not an uncommon one. Because console platform holders recover money by selling first- and third-party games on their platform. Unfortunately, the Xbox user base now does not buy as many first or third-party games.
  • Third-party games.
    • For example, Resident Evil 4 Remake sold 74% on PS5 and only 26% on Xbox Series S|X in the UK. However, the console sales split in the UK market is relatively equal: PS5 (56%) and Xbox (44%).
  • First-party games.
    • Digital Foundry mentioned that Xbox games have decreased in sales by up to 80%. Microsoft also has confirmed that Game Pass cannibalizes game sales. And since all first-party games launch on Game Pass day one, their game sales continue to decrease.
• Talking of Game Pass, it has been 464 dayssince Microsoft last shared the Game Pass subscriber count.
  • Microsoft had earlier stopped sharing console sales numbers in Oct. 2015 because of poor console sales.
  • Then the argument was that console sales do not matter, and Game Pass subscribers are all that matter. Now, Microsoft has stopped sharing that as well.
  • Before Microsoft stopped sharing Game Pass numbers, Game Pass had "missed its subscription target" for 2 consecutive years. Then it all went quiet.
• Talking of console sales, Xbox is being outsold by PS5 by nearly 3:1 now. PS5 has started averaging 24 million consoles per year recently. Xbox Series X|S is averaging 8.5 million consoles per year. And this is after investing more than $10 billion dollars in the division, only for acquisition.

If Microsoft stops selling consoles, they will immediately increase its profitability. The only reason why Microsoft has kept Xbox alive is the hope that one day Xbox will capture the market share and contribute to Microsoft's profits. That's the reason Microsoft invested in Xbox. But the results did not improve.

Microsoft outright said that they needed Activision Blizzard King to compete. Now that the acquisition has been blocked, how will they compete?

I believe Microsoft will soon realize that this is not working, and Xbox won't be able to capture the PS5 market share. Consequently, they will shift its business model to becoming a third-party publisher and put its games on Nintendo and PlayStation as their combined user base is ~200 million gamers who spend the most money on buying games.

This strategy will also enable Microsoft to acquire more companies and publishers without strict scrutiny.

Lastly, Microsoft's involvement with Cloud gaming and Game Pass will make it easier for Microsoft to shift to this new model.

April 2023 is the beginning of the end for the Xbox console hardware. We're witnessing history in the making.

 

[anonpuffs]

I think the end started December 2022. As soon as Phil hinted that Xbox was going to start raising prices I was pretty sure that Microsoft had started shifting into looking at the gaming division as not a long term growth project but something that needed to drive revenue and profit in the present. They weren't seeing the gains they thought they would in subscriptions so rather than continuing to throw money into a pit they'd start leaning on the division to make money now.

 

[Gediminas]

I wanted to put my thoughts on the record by saying that the downfall of Xbox (as we know it) has just gotten into 5th gear.

Will Microsoft just wrap up the Xbox division? No.

But I do think they will abandon their consoles very, very soon. After that, they will primarily become a game publisher. With the resources, studios, and IPs available to Xbox Game Studios, they can be a reasonably good multiplatform publisher, adding operating profit to Microsoft's balance sheet.

Here are a few of my logical reasons why I think Xbox would be abandoning its console in the next few years:

• Microsoft loses up to $200 per Xbox console sold. On the other hand, PS5 has been selling at a profit for nearly 2 years now.
• The idea of selling a console at a loss is not an uncommon one. Because console platform holders recover money by selling first- and third-party games on their platform. Unfortunately, the Xbox user base now does not buy as many first or third-party games.
  • Third-party games.
    • For example, Resident Evil 4 Remake sold 74% on PS5 and only 26% on Xbox Series S|X in the UK. However, the console sales split in the UK market is relatively equal: PS5 (56%) and Xbox (44%).
  • First-party games.
    • Digital Foundry mentioned that Xbox games have decreased in sales by up to 80%. Microsoft also has confirmed that Game Pass cannibalizes game sales. And since all first-party games launch on Game Pass day one, their game sales continue to decrease.
• Talking of Game Pass, it has been 464 dayssince Microsoft last shared the Game Pass subscriber count.
  • Microsoft had earlier stopped sharing console sales numbers in Oct. 2015 because of poor console sales.
  • Then the argument was that console sales do not matter, and Game Pass subscribers are all that matter. Now, Microsoft has stopped sharing that as well.
  • Before Microsoft stopped sharing Game Pass numbers, Game Pass had "missed its subscription target" for 2 consecutive years. Then it all went quiet.
• Talking of console sales, Xbox is being outsold by PS5 by nearly 3:1 now. PS5 has started averaging 24 million consoles per year recently. Xbox Series X|S is averaging 8.5 million consoles per year. And this is after investing more than $10 billion dollars in the division, only for acquisition.

If Microsoft stops selling consoles, they will immediately increase its profitability. The only reason why Microsoft has kept Xbox alive is the hope that one day Xbox will capture the market share and contribute to Microsoft's profits. That's the reason Microsoft invested in Xbox. But the results did not improve.

Microsoft outright said that they needed Activision Blizzard King to compete. Now that the acquisition has been blocked, how will they compete?

I believe Microsoft will soon realize that this is not working, and Xbox won't be able to capture the PS5 market share. Consequently, they will shift its business model to becoming a third-party publisher and put its games on Nintendo and PlayStation as their combined user base is ~200 million gamers who spend the most money on buying games.

This strategy will also enable Microsoft to acquire more companies and publishers without strict scrutiny.

Lastly, Microsoft's involvement with Cloud gaming and Game Pass will make it easier for Microsoft to shift to this new model.

April 2023 is the beginning of the end for the Xbox console hardware. We're witnessing history in the making.

don't worry, Phil is a visionary, he will find the way...

 

[Vertigo]

Xbox died with Halo.

 

[Nhomnhom]

It's more like the actual end, everything that comes next is but a formality.

I could tell that they were done for the moment there was no lineup of games for the Series release, to me that signaled that for a long time they might not have been sure they would even release it.

Bethesda and ABK were just desperate attempts to gain some relevance before they change directions. If just the former MS studios turned third-party they would be an irrelevant publisher.

 

[ksdixon]

Xbox died with Halo.

Xbox died with Skittles the Tiger and Milo, let's be real.

 

[TheLastOfSnatcher]

Xbox died with Halo.

I mean...

"If we lose our way with Halo, we lose our way with Xbox," says Spencer

Microsoft Game Studios boss Phil Spencer has admitted that the Xbox platform would lose its way if the same happened wi…

www.vg247.com

 

[ksdixon]

I think the end started December 2022. As soon as Phil hinted that Xbox was going to start raising prices I was pretty sure that Microsoft had started shifting into looking at the gaming division as not a long term growth project but something that needed to drive revenue and profit in the present. They weren't seeing the gains they thought they would in subscriptions so rather than continuing to throw money into a pit they'd start leaning on the division to make money now.

That's how I took it too. And I thought they'd try and use ABK games on GP as cover to shut the back doors, and soften the blow with introducing Family Plan properly.

 

[Vertigo]

I mean...

"If we lose our way with Halo, we lose our way with Xbox," says Spencer

Microsoft Game Studios boss Phil Spencer has admitted that the Xbox platform would lose its way if the same happened wi…

www.vg247.com

343 destroyed their entire brand. Xbox was built on Halo. Not the other way around.

I don’t even think this is hyperbole. It’s all Phil Spencer and 343’s fault.

 

[BigMclargeHuge]

I'd say it's been downhill ever since the kinect. Wouldn't surprise me if they just ride this generation out and then ditch hardware all together.

 

[Entropi]

I'd say it's been downhill ever since the kinect. Wouldn't surprise me if they just ride this generation out and then ditch hardware all together.

I totally agree. MS hit the jackpot with the 360 and was great until 2010 when it tried to follow Nintendo with Kinect and everything fell apart. We know what came next.

 

[Swift_Star]

Poor Bethesda...

 

[Deleted member 417]

Great OP @Heisenberg007

However I disagree that MS will go third party. even if they try to do so, what games and pedigree can they offer? They ruined Rare, Halo, Gears, Forza, Ryse, Dead Rising and everything else they've touched. Their own support studios make games worse (Ghostwire Tokyo) and none of the games they own carry much weight - save from TES. Starfield doesn't look to be bucking the trend.

The best way for Xbox to continue forward is a complete culture change and gutting of Greenberg and Spencer at minimum. Make a new console, launch a new console or refresh of the Series consoles and ditch both the S and X and turn them into emulation/streaming machines.

Other than that, they should sell the studios they have bought, recoup what little they can and forget that they ever tried to enter the gaming market.

 

[ghostz]

 

[Bryank75]

It's what happens when you prioritize being massive, astronomical numbers over sound business practices.

I'm gonna keep banging this drum, they were never in gaming for the right reasons, they are not creators. They wanted to control gaming, like they control other industries. Put everything behind a subscription and sit there earning billions doing as little as possible.

Gaming hardware makes no sense for them, it never did.... it distracts from PC, which is their main platform as a company.

Software is their thing but not in a creative sense... so maybe they should sell key franchises to their strongest partners, like EA and negotiate agreements to support their launcher as a priority and Gamepass in the longterm.... something along those lines??

 

[Dabaus]

I wonder if they abruptly pull the plug or do it slowly? I actually think it will be abruptly and sloppy. Like mass layoff from all their first party studios the same day type stuff.

 

[Bryank75]

I wonder if they abruptly pull the plug or do it slowly? I actually think it will be abruptly and sloppy. Like mass layoff from all their first party studios the same day type stuff.

Oof, I never like seeing people lose their jobs. Developers don't deserve to lose their jobs for Microsofts bad decisions.

 

[daniel5043]

I wonder if they abruptly pull the plug or do it slowly? I actually think it will be abruptly and sloppy. Like mass layoff from all their first party studios the same day type stuff.

It would be layoffs at first

 

[John Elden Ring]

Nah, wait until we find out if they actually lose the deal with AKB

 

[KiryuRealty]

I wanted to put my thoughts on the record by saying that the downfall of Xbox (as we know it) has just gotten into 5th gear.

Will Microsoft just wrap up the Xbox division? No.

But I do think they will abandon their consoles very, very soon. After that, they will primarily become a game publisher. With the resources, studios, and IPs available to Xbox Game Studios, they can be a reasonably good multiplatform publisher, adding operating profit to Microsoft's balance sheet.

Here are a few of my logical reasons why I think Xbox would be abandoning its console in the next few years:

• Microsoft loses up to $200 per Xbox console sold. On the other hand, PS5 has been selling at a profit for nearly 2 years now.
• The idea of selling a console at a loss is not an uncommon one. Because console platform holders recover money by selling first- and third-party games on their platform. Unfortunately, the Xbox user base now does not buy as many first or third-party games.
  • Third-party games.
    • For example, Resident Evil 4 Remake sold 74% on PS5 and only 26% on Xbox Series S|X in the UK. However, the console sales split in the UK market is relatively equal: PS5 (56%) and Xbox (44%).
  • First-party games.
    • Digital Foundry mentioned that Xbox games have decreased in sales by up to 80%. Microsoft also has confirmed that Game Pass cannibalizes game sales. And since all first-party games launch on Game Pass day one, their game sales continue to decrease.
• Talking of Game Pass, it has been 464 dayssince Microsoft last shared the Game Pass subscriber count.
  • Microsoft had earlier stopped sharing console sales numbers in Oct. 2015 because of poor console sales.
  • Then the argument was that console sales do not matter, and Game Pass subscribers are all that matter. Now, Microsoft has stopped sharing that as well.
  • Before Microsoft stopped sharing Game Pass numbers, Game Pass had "missed its subscription target" for 2 consecutive years. Then it all went quiet.
• Talking of console sales, Xbox is being outsold by PS5 by nearly 3:1 now. PS5 has started averaging 24 million consoles per year recently. Xbox Series X|S is averaging 8.5 million consoles per year. And this is after investing more than $10 billion dollars in the division, only for acquisition.

If Microsoft stops selling consoles, they will immediately increase its profitability. The only reason why Microsoft has kept Xbox alive is the hope that one day Xbox will capture the market share and contribute to Microsoft's profits. That's the reason Microsoft invested in Xbox. But the results did not improve.

Microsoft outright said that they needed Activision Blizzard King to compete. Now that the acquisition has been blocked, how will they compete?

I believe Microsoft will soon realize that this is not working, and Xbox won't be able to capture the PS5 market share. Consequently, they will shift its business model to becoming a third-party publisher and put its games on Nintendo and PlayStation as their combined user base is ~200 million gamers who spend the most money on buying games.

This strategy will also enable Microsoft to acquire more companies and publishers without strict scrutiny.

Lastly, Microsoft's involvement with Cloud gaming and Game Pass will make it easier for Microsoft to shift to this new model.

April 2023 is the beginning of the end for the Xbox console hardware. We're witnessing history in the making.

I don’t know why you think dumping hardware will make it easier for the largest software company on earth to buy up other software companies.

If anything, it will get harder for them with the regulatory awareness of their cloud monopoly intentions.

Also, most consoles lose money per unit for one to two years, but most Xbox consoles kept losing money for their whole lifespan, notably the original Xbox actually cost 40% or so MORE to make by the time they stopped production than when they started due to bad decisions and licensing deals for components.

Microsoft never intended XBox to make a profit, they intended it to drive Sony out of business, they always intended to lose as much as needed in the first two generations to achieve that goal once they were sure they were off the hook for the antitrust actions in 1999-2000 launched by the FTC.


Aside from that, solid post.