The State of Xbox is Strong
Perhaps a surprising situation for anyone who has paid only a cursory interest in the brand over the past decade. After the success Microsoft experienced with the Xbox 360, the company decided to double down on the aspects of its product that were seen to be appealing to the broadest possible market. This brought us the infamous “TV, TV, TV.” press event announcing the latest and greatest from Xbox: the Xbox One.
From its awkward name to the focus on multimedia instead of games, and mixed messaging around digital rights management, the Xbox One stumbled right out of the gate. Sales of the system lagged behind competitors. The performance of the hardware underwhelmed, and Xbox studios struggled to deliver AAA games outside of the trinity of Halo–Gears–Forza (“H-G-F”). By the midpoint of the eight-generation of video game consoles, few would blame an observer for writing off the Xbox brand as dead.
With that stage set, it’s understandable to believe that Xbox entered the ninth generation of video game consoles on its back foot. The brand’s market share was entering a nadir and public perception seemed to argue this outcome was well deserved. Much of the conversation around the Xbox brand focused on the fact, “Xbox has no games”. This is to say that the brand had few compelling titles which could be exclusively experienced inside the Xbox ecosystem, outside of H-G-F. Deserved or not, public perception is difficult to change. Therefore, when Phil Spencer was promoted to the head of Xbox in 2014, he faced a near Sisyphean task of repairing the brand’s reputation. The question was, where to start?
Turning the Ship
Phil chose to start with the games, by refocusing the Xbox brand on the experience of playing great games. The hardware team started developing the Xbox One X in an effort to regain the performance crown from competitors and signaling to the market that Xbox should be viewed as a performance-focused brand. The company committed to a backwards compatible library of games, which featured quality of life improvements since their original releases, and continued to invest in the expansion of available titles.
Next, Xbox set its sights on building out a world-class portfolio of video game development studios. Kicked off by the purchase of Mojang Studios, the makers of Minecraft, in 2014. The move was supplemented by a flurry of acquisitions in 2018/19 including names like Ninja Theory, Obsidian Entertainment, and Double Fine Productions, before being capped off with the coup de grace of buying ZeniMax Media, including all of the Bethesda Games studios, in 2021 for a net $7.5 billion. This occurred mere months before the launch of the newest console generation.
Even with the change in marketing narrative from Xbox, and the monetary investment in new games studios, the brand still needed to deliver great games within a seamless ecosystem. Luckily, the groundwork for giving gamers just such an experience was already being laid in Redmond, through the vehicle known as Game Pass. This service was integral to aligning the Xbox brand with the business initiatives of its parent company.
Microsoft had signaled an intention in the mid-2010s to transition from a vendor of discrete SKUs of software to a seller of subscription services of its varied software suites. Game Pass was the trojan horse that elevated Xbox to a strategic investment within Microsoft. Building an entertainment industry subscription revenue stream promised to be a very lucrative endeavor for Microsoft. So much so that Phil Spencer was elevated to the Senior Leadership Team at Microsoft, reporting directly to CEO Satya Nadella.
A New Beginning
The Xbox Series X|S generation began with a significantly changed marketing message from its predecessor hardware. These new boxes, first and foremost, are intended to play games. Games that you’ll either only be able to experience in the Xbox ecosystem or will be played best by Xbox hardware. These marketing messages are easy enough to propagandize for a company, it’s much harder to execute against those promises. Throughout its first year, the Xbox Series consoles have started cashing the checks that its marketing department wrote.
Game Pass delivered strong exclusives and day one cross-platform experiences (including a former Sony exclusive in MLB The Show 21) throughout the year. The strong lineup was buttressed by investments in broadening access to games by Microsoft. This included the launch of Xbox Cloud Gaming, the finalization of the Xbox backwards compatible program, and continued focus on accessibility to games through both hardware (e.g. Xbox Adaptive Controller) and software (e.g. mobile game inputs, accessibility features in first-party titles, and cross-platform progression). These accomplishments are building a case for Xbox that the future is brighter than what was experienced last generation.
Avoiding a Drop from the Precipice
However, even with the recent successes of Xbox’s new strategy, the company has experienced some growing pains. The first, and perhaps most cacophonously acrimonious, was the indefinite delay of the expected launch title Halo Infinite. While the benefit of hindsight allows us to see this delay was the correct decision, it was a big blow to the confidence consumers had in the Xbox brand, right as the company was trying to convince gamers their box was the best value proposition.
Then, while consumers were still waiting for clarity on when they would next play as Master Chief and only a few weeks after the 2020 holidays, Microsoft managed to score a spectacular own-goal. The company chose a Friday near the end of January to announce that access to play games on its soon-to-be-rebranded Xbox Live service would double for new subscribers. Going from an annual price of $60 to a nose bleedingly steep $120. Oh, and the service wouldn’t be improved or upgraded in any way, it was just going to cost more.
Astutely, Microsoft responded to the negative reaction with haste and canceled the planned increase, as well as announced certain games would be going free-to-play online. If the company hadn’t, it might have permanently damaged the brand right at the very beginning of the new generation. Thankfully level heads prevailed in Redmond and Xbox started changing the narrative around its video game catalog. This kicked into high gear at 2021’s E3 press conference, where Bethesda’s newest IP, and most anticipated game in years, was announced as Xbox exclusive. And continued into Autumn with a string of great releases from Xbox’s studios, including: Microsoft Flight Simulator, Psychonauts 2, Sea of Thieves – A Pirates Life, and capstoned by the recent Forza Horizon 5, and Halo Infinite releases.
The State of Xbox: What the Future May Hold
While the first year’s release schedule came in very solidly for Xbox, the company intends for this to be only the opening salvo. Microsoft has already shown its hand for this upcoming generation; Xbox will see continued investments in Game Pass, Cloud Gaming, and new studios to complement the company’s ability to produce compelling exclusive games. These investments will be delivered across a diverse and integrated hardware/software ecosystem, with touch controls on mobile games, game streaming options, and cross-platform progression.
While this well-integrated ecosystem is just beginning to come together, it has been a major public focal point, highlighted by Microsoft’s CEO Satya Nadella on many occasions. With Phil Spencer reporting directly to Satya, the Xbox brand has become a key strategic investment for Microsoft as a company.
The commitment and excitement around the Xbox brand inside Microsoft is perhaps at its highest point and, if the upcoming games are any clue, fans of the hobby should be very happy to have a company investing in these great experiences. While the success of an individual game is never guaranteed, excitement is building far beyond the tired H-G-F narrative. In the coming years, Xbox players will have Avowed, Fable, Perfect Dark, Red Fall, Hellblade II, State of Decay 3, Indiana Jones, Starfield, The Elder Scrolls VI, and, of course, the next Forza Motorsport, and to be announced Gears (of War) 6. A lineup only the most hardened cynic could scoff about.
More Games Means We All Win
At its lowest point during the Xbox One era, whispers abounded that Microsoft may sell off or unceremoniously shutter the Xbox business altogether. These rumors do not engender a feeling of confidence in consumers; why buy a product that may be unsupported in a year or so? This negative feedback loop, where a lack of confidence in the product by the sponsoring company leads to a lack of confidence in the consumer market, can quickly become a self-fulfilling prophecy for a brand that is impossible to escape.
Thankfully, in the case of Xbox, the right leadership was empowered at the right time to build a truly compelling case for the brand. The entire Xbox team, headed by Phil Spencer, has made a compelling case for why the brand deserves to exist and why consumers should take notice. With continued focus and investment from Microsoft, the Xbox brand could reach heretofore unforeseen heights. Will Xbox be the number one hardware seller? Can Microsoft make more profit than its competitors over this generation’s lifecycle? Will more people be subscribed to Xbox’s online service than its competitors? No one knows for certain, but the mere fact these are expected to be viable questions at the end of this generation of video game consoles is a phenomenal feat for everyone at Xbox, and a harbinger of more great experiences to come for us gamers!