Yes, Duopolies are what the major tech industries are running currently. 

Sega lasted 4 generations before they left, Xbox is in their 4th generation now.

I dont disagree that MS make better hardware than Sony, 3/4 gens they have accomplished this. But Hardware isn't necessary for the business to strive anymore.

This thread is about a business move not a gamer move.

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.

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

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.

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

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

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.

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.

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.

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

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Microsoft spends billions in RnD on all of their divisions, it is the whole point of RnD and RnD in one division can have beneficial applications in other divisions or across the board with new tech advances, software advances, etc. Microsoft still does have a Surface line-up which they no doubt spend billions on in RnD too and Surface is a much smaller division than Xbox. Making a loss on Hardware is irrelevant because the 30% cut more than makes up for it.

You need to ask yourself a simple question, do you believe that Microsoft as a 3rd Party would be bigger than Activision-Blizzard-King? Because that is your floor, Activision-Blizzard-King are currently the largest 3rd Party Publisher at $8bn FY Revenues. Microsoft Gaming is $16bn. Microsoft Gaming would have to not only beat Activision-Blizzard-King but double them in order for this to not look like a bad move and maintain their current Revenues. Fortnite, Call of Duty, Grand Theft Auto, etc, are all mentioned regularly in Fiscal Reports because they are large revenue drivers.

There is absolutely no chance that Xbox as it currently stands is anywhere near a Revenue driver as much as ABK is in 1st Party Software alone.

I'll repost my Quarter calculations: Xbox's Recent Quarter = $3.6bn "Gaming" and "Nearly $1bn" on Subscriptions (Xbox Live Gold + Game Pass), Hardware = $500m. Content and Services (Subscriptions) = $3.1bn. Around $2.1bn in the Quarter came from "Content" in a Quarter which Microsoft released Hi-Fi Rush, Age of Empires II HD and Goldeneye HD. I can only guess but I'm pretty confident in saying the vast majority of that $2.1bn came from 3rd Parties.

Look at Fiscal Year as a whole: $15.4bn. Content & Services = $12bn/$15.4bn, 78% of the Total. In a FY which Xbox released Grounded, Pentiment, Hi-Fi Rush, Goldeneye and Age of Empires II HD. Phil recently said that Game Pass accounts for around 15% of Content & Services so that would give us $1.8bn to Game Pass. The remaining $10.2bn would be Xbox Live Gold and Content.

Taking into account the extremely light FY, I would confidently guess that the vast majority of that $10.2bn is 3rd Party transactions. Now you may ask what about Xbox software currently selling on PlayStation/Steam. Well it gets tricky to work out now because every transaction made on Steam/PlayStation Stores, Microsoft will only take 70%.

Lets use Minecraft as an example though, its best years are around 20m in Sales. It's a $30 title. That gives us $600m a year at a maximum if all transactions happened on the Xbox store where Xbox would take 100% of the cuts, which we know is nonsense but since we don't know the platform breakdown it's too hard to work out. Even if we give Minecraft a very generous $600m and lets say roughly $400m for other 1st Party content, that would only give a total of $1bn and still leave us with $9.2bn between 3rd Parties and Xbox Live Gold.

Even if Xbox IPs made $2bn. We'd be left with $8.2bn from 3rd Parties and Xbox Live Gold in the Year. You remove that then Xbox is now a $7.2bn Business. Now they have to make up $7.2bn in 1st Party Content by going fully 3rd Party.

If they want to remain the same $16bn FY company, then they need to double what the current biggest 3rd Party Publisher makes, that is not happening, few have the selling power of Activision-Blizzard-King. They are a machine. Xbox has to consistently beat CoD, Diablo, Overwatch, Candy Crush, World of Warcraft, etc.

Just to be clear, it's not that they have to 'beat' ABK specifically but I'm using ABK as an example of where the floor is for Xbox as a 3rd Party and putting into perspective what they would have to beat (by double) to remain the same $16bn a year company. I'm putting into perspective that even ABK's juggernaut selling power doesn't come close to $16bn a year.

Microsoft isn't going to willingly shave off billions from their business and I think the fact that we aren't told profits would actually go even more in favour of Microsoft NOT doing that because the only data we would have, and shareholders would have, is Xbox halving their business. Microsoft does often not report profit on individual business units.

Microsoft is nowhere near being able to go 3rd Party. What they'd have to do first is a few major adjustments.

• They'd have to massively expand their Mobile presence in order to replace a lot of the lost Revenue, King is one of the biggest drivers of ABK.
• They'd have to massively improve the Windows Store experience, until then, 90% of PC Gamers are using Steam over Game Pass PC.
• They'd have to hope that xCloud takes off in a big way - Unlikely, Imo and made harder if they drop Xbox hardware.
• They'd have to find a way to transfer the millions of Game Pass Subscribers on Xbox over to other Consoles.
• They'd have to find a replacement for Xbox Live Gold for Game Pass Ultimate.
• They'd have to grow multiple IPs into massive successes.
• They'd have to acquire a lot more content Imo and they just failed at getting ABK. Not because of Xbox hardware but because of xCloud.

Right now there is not a chance in Hell that they could go 3rd Party and even in the near future Imo. I think this future is 15 years away at minimum with the amount of things they'd have to do, many of these things will also grow their Console business too. Xbox Hardware at 50m-60m selling can still be a huge Revenue and Profit driver via 3rd Party/1st Party, they don't have to be #1.

Even the One X was not that much more powerful than the PS4 pro.  The thing is, the margin above what Sony was shipping was not near enough of a lead in hardware to even make the most jaded PS owner blink.  It's the same today, on paper the Series X is considered the more powerful of the 2 this gen consoles but when it comes to games, we are not seeing enough of a headway from the Series X over the PS5 to make any real difference.

What I am saying is that MS can never let Sony get the lead on hardware as the 3rd place system because being the market leader and having the better hardware just makes any kind of run for marketshare that much harder for MS.  Unless MS could differentiate their hardware enough from Sony to carve out its own space like Nintendo, then it's always going to be a war for better faster hardware which MS either needs to win significantly or at least be on par but being on par really doesn't help.

I really only believe MS ever had the most powerful system was the first Xbox, after that its been pretty much Sony all the way.

I totally agree that there is immense pressure to release a game and we have seen it countless times especially on the PC with really subpar performance.  A delay of Redfall would have been a bitch for MS no matter what but the game really was not in a shippable state.  Even Phil knows this because he personally had to come out and apologize.  It could be that the information he was given was not correct, because I doubt, he has time to review every game coming out personally but in this instance with how bad 2022 was for output, the damage is huge with your first AAA game release.  I guess the expectation for Redfall were way to high but now every game will be given a bigger critical eye which will make it even worse to hit above weight for their remaining games this year.

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? 

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? 

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. 

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. 

Actually we could even ignore all the details and margins and just ask, what would be the total profit on current situation and what he expect it to be doing what he suggest (won't even ask for justification, breakdown, etc). Because even if the profit margin were to increase with this move the total profit would certainly decrease (even if MS doesn't give the numbers).

As someone who primaries on Xbox, the answer is obviously "no." Xbox Game Studios could go third-party tomorrow and it wouldn't matter much for MS's financials in the long run.

That being said, I'd prefer they didn't. I like their hardware, I vastly prefer their controllers (though the DualSense is Sony's best controller to date), and I think that competition is good for the industry.

Sony losing massive amounts of market share with the PS3, including getting trounced by the 360 in the U.S., caused Sony to make a system that was more affordable for players and easier to develop for.

The PS4's initial reception combined with MS making serious mistakes regarding used games, mandatory online, and forced Kinect caused the pendulum to swing back in Sony's favor, though not quite as hard, and as a result MS quickly abandoned their most controversial plans.

Now here in Gen 9, the only big mess-up either Sony or MS has made is the latter mistakenly thinking that producing more units of the Series S than of the Series X was a good move because it was cheaper and therefore a lower barrier to entry, when in reality it's become clear that in a "you get what you pay for" scenario, people will willingly pay more for the premium SKU.

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.

The Xbox One X was substantially more powerful than the Playstation 4 Pro, the games have absolutely proven that.

But it's also an irrelevant point to make, the extent of how much more powerful a console is doesn't change the fact a console is more powerful.

The amount of consoles being sold is the other irrelevant point to make, because the discussion isn't about sales or market-share.

Agreed.
It also helps if Microsoft doesn't make stupid hardware choices as well. I.E. eSRAM+DDR3 vs GDDR5.

That is false.
You even stated as such in your previous paragraph where you stated the "Even the One X was not that much more powerful than the PS4 pro."

I honestly had zero expectation in regards to Redfall as I personally wasn't interested in the title.

It's just a shame that it didn't do well technically or critically as I would like to see every competent developer do well.

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.

Don, you would be the front running of seeing Xbox exit the market, so what brings you here? Clearly not to defend this forecast..?