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S.T.A.G.E. said:

Exactly. Microsoft hid behind third party because they were winning and got so many deals. The victor tends to get the spoils and third party are running back to Sony now just like in the PS2 era. While they did that they built up no defenses and had a pretty big exclusives drought towards the end of the gen, proving that trying to emulate Sony's ten year plan is not exactly healthy for them unless they can stretch out their development cycle across a decade. This means they need more internally made first party franchises. People choose to be blind. Its good to read a refreshing comment when someone thinks.

I completely agree with what you are saying and I would like to expand on this.  I feel that Microsoft missed their chance on really building up their first party studios.  That is not to say that they can't do it right now with the XB1, it's just that the best time to do it was during the 7th generation with the XB360.  

As you have mentioned, Microsoft hid behind third party games (looking better on XB360, timed DLC, etc) and gained success through Sony faultering with the PS3.  They had huge support in America and Europe over their direct competitor, Sony.  They had their blockbuster hits coming out (Halo, Forza, Gears, and Fable) to compliment their third party success and rode that the entire generation.  Keep in mind that the 7th generation wasn't short, but rather, the longest a gaming generation has lasted to date.   There was so much negativity surrounding Sony during this time, which was exactly the right time to purchase studios and/or start developing a close relationship with other studios.  Microsoft had timed exclusive games, Bioshock/Mass Effect, and the gaming community was not in uproar because the XB360 was the place to play.  You had Sony losing exclusivity with games, such as Metal Gear Solid and Final Fantasy, with a constant "PS3 got no games" circulating around the internet.  

What I am trying to say, is that THIS was the perfect time for Microsoft to increase their first party studios just as how Sony did during the PS1 and PS2 era. You don't try to do it when you are down and you have so much negativity surrounding you.  Now it's not like Microsoft had only two or three years to gain support from studios and to partner with them during this time.  They had eight years (2005-2013) to increase their first party studios and they didn't capitalize on it.

Phil Spencer is doing a phenomenal job trying to turn the XB1 around, but I feel it is too late.  The time to steal the thunder away from Sony was during the XB360 era.  Of course the console reveal at Microsoft's E3 Press Conference didn't help their image, but they would still have DDR3 instead of GDDR5.  Sony would still have third party marketing rights with timed DLC over the XB1.  So I think we would be in the exact same place, where Microsoft needs to have an increase in 1st party studios, with or without the bad 2013 reveal.  Now Microsoft can try to increase their first party studios; however, they have to convince the studio to work with a system that isn't selling as well while battling the gaming communities negative remarks.  That is why I have been stressing that they needed to do this last generation instead of this one.  

Another big issue that Microsoft needs to fix is their image, and I don't mean the bad image with the DRM policies etc.  I am talking about differentiating themselves from the XB360.  Microsoft should continue to support Halo, but I honestly feel that they should drop Gears since the last installment took a dive and to get rid of "the same exclusives as 360" argument.  Of course it was a smart move to release Gears 4 so that you can see this franchise on the next generation hardware; however, I feel that this should be the last in the series.  Microsoft needs to take a gamble, although a rather small one, and allow The Coalition to develop their new IP that they had envisioned prior to jumping on the Gears wagon.  Now I say that this is a gamble because they are afraid that the consumers aren't going to buy the new IP as much as Gears.  But this is where they are all wrong!  This is one of their top developers, not a gamble.  That is like not trusting Naughty Dog on their new IP after Uncharted 4.  Have some faith and take a risk Microsoft.  Complacency only leads to failure, only the paranoid survive.

The last thing that Microsoft needs to fix is to not compete against themselves.  We saw it last year when Sunset Overdrive got smothered with Halo: TMCC and Forza Horizon 2.  We are again seeing this with Rise of the Tomb Raider, Halo 5, and Forza 6, not to mention games like Battlefront, Fallout 4, and COD.  It baffles me as to why they didn't release Sunset Overdrive in the Spring of 2015 when they knew they were going to have such a huge gap without games.  Releasing all of their games all at once causes XB1 exclusive games to steal sales from  other XB1 exclusive games.