(Business Perspective) Does MS really need Xbox Hardware?

[Gettysburg4]

As I see it Microsoft is trying to thread the needle here to profitability and growth, but in a much quicker timeframe than rigidly sticking to an Xbox console+PC exclusivity timeline would allow for. Where if they stuck to that approach they'd likely record a loss on many of their in-pipeline games, well before they pushed xbox console numbers up to the 80~90m region they'd need to really be a prime player in the industry, rather than part of the support cast.

What they may perceive as their window of opportunity is this: be the *only* participant that brings AAA current gen games to consumers at a wide variety of price points.
Looking ahead they can have 4K gaming with a digital only Xbox series X, 1440P gaming with the digital only Xbox series S, and 1080P gaming with a future xbox streaming dongle that hits an ultra low price.

So we have a $499 console at the top end, a $249 console at the midrange, and a $99~$149 console at the low end (shipped with a controller). All digital so no dollars lost to the second-hand market, with further options for the dongle to be built-in to premium 4k televisions (potentially adding a $49 entry option for consumers with the right television, i.e. they only need to buy a controller), and an additional option of replicating the dongle (1080P) or series s (1440P) capabilities in a future handheld device.

Now that begins to look pretty compelling against Playstation. Where Playstation is relatively 'stuck' at $349~$499 price points, Xbox can hit much lower price points and thus potentially address a larger market (noting even if Sony tried the same approach, Xbox owns its own cloud infrastructure, where Sony would have to go third party, so the comparative cost advantage would remain).

Meanwhile, because getting those devices out, and finding a market for them will take time, they get to continue to fund game development by releasing on a variety of devices. Gamepass *stays off* Playstation, but full priced games get released there. So a compelling reason to buy Xbox remains. It is the best place to access Gamepass if one wants a 'console like' experience for their access (e.g. off PC).

This approach also allows Xbox to be a desirable place for third parties to publish because, with the second hand market deleted, each purchase on xbox can represent a full retail return to the publisher, without it costing them subsequent units. Literally a sale on xbox digital at full price is worth significantly more than a Playstation retail purchase (on average), meaning they can both reach a larger potential market with xbox, as well as obtain top per unit value from that market.

Now it might not all pan out of course, key will be keeping the Xbox console brand alive and not having it die in the water in 2024,25,26, but I would say there is something in this for Xbox purists.. by Xbox going third party they get to keep funding a wide range of games that we in turn get to enjoy on gamepass, cementing it as the best value buy in gaming that will continue to be denied to Playstation & Switch owners.

For anyone not adamant they need a console that can play discs, & who favours overall gaming value over playstation exclusives, or who regardless of anything else, is price sensitive, xbox would have the best positioning in the market. Playstation gets those who want physical, and those who value playstation exclusives and access to the largest range of games even if it costs them plenty for it, PC gets those similar to the aforementioned case, who don't mind added complexity and cost of keeping their PC up to date, Switch gets younger gamers, and xbox is there for everyone else. And everyone else is the bigger market, IF xbox can grab their attention and make them realise it.

Key: *don't* put gamepass on playstation or switch, *do* put full priced releases day and date (or after a short delay), & *do* move xbox to all digital and hit lower price points with options at $99~$149 in the form of streaming dongles/built into tv capabilities. Keep pushing the series s and x as low in price as they can go.

Final key, and I think this is overlooked in how much it has retarded xbox sales, *don't* increase the price of gamepass, and better yet, *roll back* its most recent price rises. Grow gamepass to 100m units via the above strategy, and then look at its pricing at that point. Allow the deletion of the secondary market, and wider distribution of full price releases to make up the difference in the meantime.