(Business Perspective) Does MS really need Xbox Hardware?

[Azzanation]

Ryuu96 said:

See Post.

Cons

1. Xbox hardware is needed for xCloud. Microsoft uses Xbox hardware for xCloud because it makes it easier for developers to work with it and easier to upgrade when needed. This is because if the developer has already done the work to port to Xbox consoles, it can be more easily configured for xCloud. Take a look at Stadia which was custom hardware making it harder for developers to support and thus it had awful support.

1) Xcloud can be available on everything (TVs etc)

2. Microsoft would lose hundreds of millions in revenue from Xbox Live Gold.

2) The loss of Gold will be recovered with 2 major audiences.

3. Xbox Live Gold is inherently linked to Game Pass Ultimate as a major selling point, if it were to be removed then a large portion of Game Pass Ultimate subscribers would very likely drop down to Game Pass Basic = Less revenue.

3) You lose the Live revenue and gain it all back plus more with GP growing.

4. Microsoft makes literally billions from the 30% cut of 3rd party software transactions.

4) They will gain more money with GP subs increasing.

5. Sony would likely not accept a Game Pass with 3rd parties.

5) Sony don't have to accept GP. If they don't, someone else will and they will create competition for Sony because they give their potential Rival a phenomenal deal over them.

6. Even if Sony accepted a 1st Party Only Game Pass, it could cause users to unsubscribe because it's not feasible that Microsoft can fill it all out on their own. Sony would also likely demand some sort of Revenue sharing too from Game Pass, they aren't going to allow it for free.

6) MS can easily fill GP with its own games. 20+ studios making games including their history of previous games.

7. Abandoning Xbox hardware means Microsoft has nowhere to get 100% of the cut on 1st Party Sales aside from Windows Store which nobody uses. Selling titles on Sony hardware means that Sony takes 30% of the cut rather than the 100% which Xbox gets on their own hardware.

7) MS won't need the 100% cut because they will gain 200m+ more gamers to potentially buy their digital games. The billions they make on relying on hardware also has to recover the billions they spent on creating the hardware. They can cut the loss completely.

8. Porting is an issue, unless they wanted to start fresh then they'd have to port dozens, if not hundreds of 1st Party titles over to PlayStation and Switch. Porting costs time, money and resources. Unless they use xCloud for the past titles but Cloud Gaming is simply not feasible for many and may never be feasible or even a preferred option for a large portion of Gamers. It's an uncertain market.

8) They won't need to Port if PS is the main platform. XCloud will be on TVs just like GP. So if you cant play on your Xbox, go play on your TV.

9. You'd have to find a way to transfer the millions currently subbed to Game Pass on Xbox over to PlayStation or Switch.

9) Time will convert people over to PS. Also GP is a service not a console. GP will be accessible on all major tech products. Its pretty simple.

LudicrousSpeed said:

No offense but you are laughably off base with a lot of this.

1. there’s zero guarantee that Sony or Nintendo would allow GamePass on their platform, even a “first party only” version.  Right now Sony allows EA Play and a classics only version of Ubisoft+, neither of which offer what GamePass does. Nintendo doesn’t have either, probably because they consistently have weaker hardware than PS/Xbox and most EA and Ubi titles skip Nintendo hardware. How do you think a GP on Nintendo hardware would work? 

1. MS will just sell their games separately on PS, they will sell more software than how it is now.

2. even if somehow MS got GamePass on PlayStation, it wouldn’t be GamePass as it currently exists. You admit they’d have to drop third party games. They’d also have no reason to include Gold in GPU anymore, so $10 is their main subscription. Only now they have to give Sony a large chunk of each sub. And you’re crazy if you think Sony will allow a service that puts games like Starfield and Halo and Fable and Horizon and Doom and TES into the service day one and cut Sony out of a lot of their sales cuts. If Sony allowed GamePass on PlayStation, they’d force MS to do it like EA does it and put their games into the service long after release. So now as a consumer, why do I even want GamePass? 

2. They wont care if they have 50m+ subs making them $3b every 6 months.

3. so now that we know GamePass doesn’t exist on Nintendo and sucks on PlayStation, that’s a ton of lost subs. Erase the truckloads of money they make off XBLG as well. Also they don’t just make money on digital sales, they get licensing fees on every disc sold, around 10-15%. So there’s a ton more money lost. And now instead of making around $50 on every physical game sold themselves and 100% of every digital game, they make around $35 on physical and $45-50 on digital titles (at $70). So again, tons of money lost. 

3. Its all about the subs.

4. what this essentially boils down to is you are way off base concerning the amount of money MS makes off of services, software sold, and their store. There’s a reason they’ve stayed in the industry for decades despite finishing every gen way behind the leader. Because they make money. They make peanuts as a third party publisher. Ryuu is right, they’d have to double what ABK makes just to make as much as they make now as a hardware provider, and that’s before their acquisitions have started pumping out games. Once that happens they’ll make a lot more providing hardware. 

4. Every gen MS were looking at closing Xbox, it was the Subs that kept them in it. Its their future.

Pemalite said:

Hardware absolutely is necessary for a console business venture to be successful in the current climate.

Microsoft is trying to be vertically integrated here and emulating the Apple business models, where despite being outsold by Samsung, they still make more profit.

Whenever there is a duopoly, the market tends to be less innovative.

Graphics processors for example were making it's greatest jumps in technology when we had 3dfx, Matrox, S3, Rendition, PowerVR, Trident, SiS/XGI and more.

Just recently we have had a 3rd player re-enter the PC GPU market (Intel) which will bring back the 3-way competition after S3 couldn't keep up with it's Chrome GPU's.

In terms of x86 CPU's we actually have Via, Intel and AMD. - Via was very big on small-form factor/ITX/Netbooks with Nano before that market blew up and Intel and AMD released Atom and Bobcat.
Before that you had IBM, NEC and Cyrix (Which got bought by Via) and more.

We also have Zhaoxin making big strides overseas in the x86 market, typically borrowed heavily on Via's x86 designs, but now building their own architectures for low-cost markets.

Obviously x86 doesn't exist in a vacuum and we have ARM encroaching on every x86 market providing competition, but also MIPS.

Even in Ram we have Samsung, Hynix, Elpida, Transcend, Powerchip, Infenion, Kingston, Micron and more.

In the OS market you obviously have Windows, Linux, MacOS, Android, Chrome OS.

So I honestly don't know where you have gotten the false idea that tech is driven by duopolies.

We have been running the Hardware business between AMD and Nvidia for GPUs and AMD and Intel for CPUs for decades, they have been the only two that really matter.

MacOS and Windows is the only thing that matters for home PCs and Android and iOS only matters in Mobile. You can throw all these random small names which literally mean little in the grand scheme of things for the main consumer.

The console business is a complete waste of money for the 3rd player. Just leave it up to Sony and Nintendo and focus on selling software.