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VAMatt on 18 April 2023
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Machiavellian said:
VAMatt said:

There is zero chance that MS wants to remain in a money losing business like video game hardware.  The only reason they are in it now is to sell software.  But, they are now actively and openly trying to make it so that hardware is irrelevant.  

There are no companies on planet earth that want to make consoles. It's just that a few companies decided that was the best path to generating lots of software revenue.  All of those companies would prefer to not have to deal with rhe hardware anymore.  MS seems to be the one with the most ambitious plan to get out of it. 

What make you believe that consoles is a money losing position.  That is not how the business works.  The reason you can sell hardware at a lost is because people can only purchase games and play on your system because MS gets their cut no matter who is selling the game on their platform.  In order to maximize your own revenue stream, you need to do both.  You need your own mobile hardware that is not tied to Android or IOS, that you can sell your subs to and also maximize your profits from your own store front.  MS will continue to make their own console just like they continue to make their own Hardware because it keeps more customers in their eco system dependent on their hardware and software.  They also want anyone who want to play their games but are still locked to other environments like IOS, Android, Nintendo and Sony systems. Its about maximizing all your revenue streams, not just limiting to just one.

This is why MS has added their cloud initiative to GP, because it gives them flexibility to maximaze GP no matter the hardware someone is using but like Nintendo, they need that sweet spot on the mobile front that gives a bigger screen then your largest phone and allow you to take your games easily anywhere you go.  A switch like Series S would do exactly that and cover all bases.

What you're saying here doesn't make sense.  Game pass (the Cloud Gaming functionality) is very clearly intended to eliminate the need for hardware.  MS says it all the time "we want to bring games to more people, no matter where they play".   This cloud functionality serves mostly the same purpose as hardware in the traditional gaming model. If people want to play games, they'll have to pay you to do it. Not every game available will be developed by Microsoft, but Microsoft will be making money from those games.  The difference here is that Microsoft will not have to lose a bunch of money on the front end to make money later. They'll just be selling a profitable service the entire time.

It is possible that the profitability of software will be driven down, as the business may become a bit more competitive once it's not tied to hardware. But, the profitability of the business overall, at least in theory, should be greater, because they eliminate the loss leader that gets people into the ecosystem.