The biggest takeaway for me from all this is that they are significantly increasing market share in US & Europe (I don't know if Europe includes the UK, but that's not really important here). US is, hands down, Xbox's strongest market historically, and if they are losing growing market share here (we saw the sales results; from June to November PS5's gap was increasing over Xbox every single month), that puts a huge problem on Microsoft's back.
Considering they are relatively a non-factor in Europe outside of UK, let alone ROTW (just look at the Japan numbers for the past, what, 3-4 months?), if they can't stay competitive in the US, it's going to be a very rough generation for them. They have the money to ride things out, but if they don't start delivering on big, mass-market AAA games and consistent quality in those and AA releases for the rest of this generation, they are just going to see further stagnation which will affect whatever their 10th-gen console plans are.
I would say even if they have plans internally to pivot away from the traditional console business model, they still need to ensure frequency & quality of enough mass-market appealing games is a priority, as that would obviously benefit them in whatever strategy they want to do going forward. But most important for me would be them earning this by cultivating those experiences with developers they already have, not simply relying on mass consolidations of publishers to buy the success others worked hard for.
I feel more confident then ever now in that 16.5 million - 17.6 million range for Xbox Series (at least up to end of 2022), meaning PS5 is outselling almost 2:1, and I think that's a higher ratio than PS4 was outselling XBO by this point in their respective lifecycles last generation. Another thing is while MS may claim to have more MAU, Sony's MAU are more valuable going by ARPU, clearly, and MAU is only important up to a point. A billion MAU means nothing if you get $1 million in total monthly revenue, unless you're using personal data of those MAUs to sell to advertisers (like Meta's been known to do). Sony have clearly found a strong balance in healthy MAU and increasing revenue (ARPU) per MAU; Microsoft has not.
Then look at the software sales; again we see nothing but growth for PS, meanwhile Xbox's were down by double digits. Yes, Sony having some big 1P games like GOWR helped contribute to software sales (obviously), but most of those sales are still 3P software, and Sony's 30% cut from those 3P sales still constitutes most of their software revenue. I'm bringing that up because Xbox's software revenue party WILL NOT be solved simply by 1P software. They've created a real problem through Game Pass; Xbox gamers just aren't buying as much software as a whole compare to PS owners. We have enough isolated examples of data to prove this (Capcom, Square-Enix etc.), but now the numbers make it obvious. And unless MS makes a change to how they handle 1P releases into Game Pass going forward, their own revenue off 1P software sales is going to get gimped. You simply can't have big individual software direct sales revenue AND huge recurring sub revenue through Game Pass; one is always going to sacrifice for the other, now MS has to realize that head-on.
And, again, no them just looking to acquire publishers and roll their revenue into Xbox's isn't going to be a long-term solution, nor a favorable one for gamers or the industry. They simply can't sustain all those additional employee salaries if they want to increase profit margins for shareholders, they won't be able to justify budgets for all the games those pubs would have funded independently, after spending billions on simply buying those publishers. Let alone whatever cultural problems those publishers may have, which we can't count on MS being able to fully solve (like with ABK). I get that them going for big publisher acquisitions is somewhat a silent admission of weakness in earnings potential confidence of the studios they have had pre-pub acquisitions, and it's a hail mary to give the gaming side one final big push on the traditional business model before maybe reconsidering that model altogether but...we still have to recognize some of the shortcomings of the acquisition strategy.
But yeah, for Sony these numbers are looking very good; they had growth in every area as a business, PlayStation especially, and it's easy to see their strategy is working out. I would still reconsider bringing over the marquee AAA single-player games to PC; at least hold off on those for a few years. Wait until you've got a sequel on the way for console, then do a PC port maybe a year ahead with some additional DLC/expansion content bundled into one to bridge into the new game. It seems like console alone is healthy enough for those games and the vast majority of the audience is on console anyway, why risk having hardcore fans of those specific games give you less money (if they buy on Steam, Valve takes a cut) and potentially do less spending in the console ecosystem? I could understand that porting strategy if Sony had their own storefront on PC, but they don't, so they kind of risk letting some of that money flow out into ecosystems owned by other companies.
The live-service GaaS games though? Yeah, sure. Definitely do console/PC for those, at least most of them, Day 1 in some cases I'd imagine. Though I can understand why in some cases it wouldn't be Day 1, or potentially ever in some specific ones. Also think PC ports of smaller, quirkier 1P games (though Sony don't really make a lot of these anymore, sadly) would make sense, Day 1 in some particular cases, too. It seems like the Steam/PC audiences really gravitate towards those kind of games (as we see with HiFi Rush as a recent example (which was a good score/hit for Microsoft), Wallpaper Simulator, Power Wash Simulator and stuff like that) and live-service GaaS shooters. I'm not saying there isn't an audience for epic single-player story-driven action/adventure games on the platform, but maybe that audience is smaller than first thought and isn't worth prioritizing at the same level of the console audience after all.
Those would be some of the only suggestions I really have for Sony going forward, but otherwise it seems like they're doing a great job. I guess soon we'll get Nintendo's results and those should be huge, particularly on the 1P software sales and software revenue sides. It's great to see them & Sony doing so well, and if MS can get their shit together, it'd be nice to see them join the party some day.
www.bloomberg.com
