The end of Xbox is approaching

[binary solo]

RolStoppable said:

I considered using the word "imminent" for the thread title, but that would have carried the implication that we are only a year or two away from the end of the Xbox brand. What I'll be talking about is not a scenario like it was envisioned by the deceased (read: permabanned) VGC member Burek which saw the discontinuation of Xbox One by the end of 2016 or something like that.

Alright, on to the topic. Xbox was a defensive measure of Microsoft to protect their core business Windows. PlayStation was considered a threat for two reasons.

1. The convergence box - What if people used their video game console to do all the things a PC does? Then people wouldn't buy PCs anymore and that would have a negative impact on Windows sales. This threat was perceived as very real by Microsoft.

Today we know that that isn't going to happen. The PS3 couldn't do it. The 360 couldn't do it. The X1 doesn't do it. The PS4 isn't successful because of its multimedia functionality. What people use instead of a PC are smartphones and tablets. Microsoft's real competition isn't a console manufacturer and therefore this reason to operate a video game business is null and void.

2. Game developers - Aside from the general entertainment functionality, consumers also bought PCs for gaming which in turn led to Windows sales. (No offense to the three guys who game on a Mac.) The Xbox's purpose was to keep Direct X relevant as a developer standard, because if top tier developers moved away from the PC, then that would have a negative impact on sales for Microsoft. Sony was working on their own technology, widely known as teh C3LL.

Today we know that Sony has shelved their plans to develop their own super-processor. The PS4 is basically a PC in a standardized box, so it's using pretty much exactly the same architecture, thus making it easy for developers to develop for both the PC and consoles. Since consoles are obviously still stuck with the same processing power for years, the demand for gaming PCs remains intact which is good for Windows.

...

So what's left as reasoning for Xbox's existence is that the venture is profitable in and of itself. Otherwise there's no reason to keep it around because PlayStation isn't threatening Microsoft's core business anymore.

Microsoft already makes games multiplatform between the Xbox One and the PC. It's evident that their plans for gaming are changing. There isn't much value in the Xbox brand anymore, especially because it's toxic in most parts of the world. So why invest billions in research and development to make another Xbox? It doesn't make sense to do it. So Xbox One is going to be the last Xbox. The service, Xbox Live, is going to be rebranded eventually.

Finally, here comes the catch: This thread is not a prediction that Microsoft won't make another console. They might try again or they might not, but it's time (some might say overdue) that they abandon the Xbox brand. If they get their priorities in check, they could theoretically run a profitable console business. But the big question is if Microsoft is interested in peanuts, because the profits they are raking in from Windows are in a totally different league. They could turn their gaming branch into a service and not worry about selling hardware.

You may wonder if I hate Xbox. Yes, I do. That's why I will be happy to be wrong about the end of Xbox. Hopefully that encourages you to put some thought into your posts. So where do you see Microsoft going in the future?

I 100% agree that these are the reasons MS has no strategic justification for remaining in console hardware. However it has been proven that markets do not behave rationally, and neither do companies. Companies have the regulatory stricture of having to maximise shareholder value as the driver for companies to not do stupid things that reduce profitability. However there are attachments to products brands and ideas within a company that can carry on for a long time after those things have become strategic dead weight, as long as the costs of those things can be hidden, such as by saying that Xbox is making a profit. If Xbox is making a profit grumpy shareholders can be told to get lost.

The thing is, the mandate for a company is not to make profits, its to maximise shareholder value. If the resources being put into Xbox could be more profitably applied elsewhere then a strictly objective application of the mandate to maximise shareholder value requires Xbox to be discontinued and for that resource to be allocated to something more profitable. If one can argue a longer term strategic benefit to remaining in game consoles, or if one can argue that in fact the resources can't be more profitably utitlised then staying in consoles is justified.

If I was a non-gaming shareholder that took an active interest in the benefit of Xbox to MS as a whole I am pretty sure I'd come to the conclusion that MS must get out of game console hardware, as it has no strategic value, and it's returns are too low. 

So there are clearly irrational reasons for why MS is staying in consoles and is talking about making a 9th gen console.