So many Xbox leaks

[kitler53]

It's the equivalent of a person saying "I'm a self made millionaire. I bought a successful company with daddys money"

you should probably keep the trump insults in the politics thread....

I think they could buy Unity. That'd be a purchase I'd be fine with.

oi, tough one for me.   

I see your point that unity needs new leadership.   but I don't like engines being in the hands of platform owners.    MS would probably be the best of the big 3 but I think that would still be highly anticompetitive. 

[kitler53]

Q. Have you ever reached the conclusion, sir, that Xbox "lost the console wars," to Sony and Nintendo?

A. Have I reached that conclusion?

Yes.

Q. And what does lost the console wars mean?

A. In a relatively fixed market size of console games globally, we have no opportunity to kind of improve our third-place standing.

Q. Why launch a Generation 9 console?

MS. WINKINSON: I'm going to object to asked and answered. I think you asked him the exact same question.

Q. How much money did Microsoft invest to develop and launch the Generation 9 Xbox console, ballpark?

A. I don't have a good answer for a specific amount that we invested, maybe a billion dollars.

Q. Why -- what is your understanding of why Microsoft invested a billion dollars to compete with a Generation 9 console after it had lost the console wars?

A. There are three billion people who play video games on the planet. The industry is about $200 billion in revenue, all up, most of those players playing off of console.

For us, we felt we had an opportunity to help connect player and creators of games, and the creators of the games are building games on our console. Without having a console in the market, you'd really have no developer engagement to help us connect players' engagement across all devices.

Q. Given that, what you just said, is having a console offering a necessary part for Microsoft Gaming to compete in the gaming
industry today?

A. No.

Q. How does that reconcile with what you just said about needing to offer a console for developers, et cetera?

A. Keeping our console relevant and engaged with developers, I believe gives us the best opportunity to be relevant in the future of gaming, but there are other options that you could take, other strategic decisions you can make that are not
continuing to build the console.

Q. The decision that you have made as the leader of Xbox/Microsoft Gaming that Microsoft Gaming should continue and will continue to invest in console; is that right?

A. We're continuing to invest in the
Xbox console, yes.

Q. Okay. And why are you continuing to invest in Xbox console despite your conclusion that you lost the war?

A. Because our console -- we have developers that focus on our console platform and we believe that we have the opportunity to make games that are running on our console available to more players across more devices.

Q. So, in your view and understanding of the strategy for gaming, you have chosen to continue offering an Xbox console into the future as part of your strategy, correct?

A. We have chosen to continue to build Xbox consoles as part of our strategy, correct.

Q. And I take it, am I correct, that your objective in continuing -- one of your objectives in continuing to offer consoles is to do so in a manner that makes as much economic sense for Microsoft as you can, correct?

A. In our inroads in the gaming industry all up, yes

Q. Is Microsoft Gaming presently planning to launch a Gen -- strike that.

Is Microsoft Gaming developing a Gen 10 console?

A. We are not currently developing a Gen 10 console.

Q. Have you started discussing among the gaming leadership team and the Microsoft senior leadership team about offering a
Generation 10 console?

A. We have started early discussions on what a next generation could look like.

Q. Have you discussed a launch date 24 for Gen 10 Xbox console?

A. We have roughly talked about 2027 or 2028 as potential launch years.

9 Q. And as of today, is it your understanding of Microsoft Gaming strategy and plans that Microsoft will continue to develop a Gen 10 console?

A. I think that question remains to be answered. For planning purposes, we are assuming that Gen 10 would happen until it's proven that it should not.

Q. What are the factors that would potentially lead you to no longer offer a
Gen 10 -- strike that.

What are the factors that would lead you as leader of Microsoft Gaming to decide, you know what, we're just not gonna do anymore consoles, we're not gonna offer a
Gen 10?

A. If we're not able to gain relevance off of console and expand the market opportunity for us in Xbox, I would not encourage us to do another console.

Q. I think you said, it is your current planning at Microsoft to grow off console and develop a console device, right, for Gen 10?

A. Those two are very -- they're both big concepts and they're kind of unrelated. I would say the first one is an imperative, our business must grow off console otherwise this business makes no sense for us.

The second consideration of I have to keep teams focused on what we might be
able to do so that we have the opportunity to make a decision on a Generation 10 console down the road.

Q. Do you agree with the projections that are expressed in this chart?

A. I do not believe that that is what the future Xbox business would look like.

Q. So, Ms. McKissick is wrong?

A. This is a presentation from our devices organization to the gaming leadership team, so this is the view from the team that
is chartered with building our hardware on
what the future business would look like.

I can fairly safely say that if we do not make more progress than this off of console, we would exit the gaming business.

Q. And how wrong is she by 2030? How would you rearrange the chart basically to
make it more accurate for your projection of 2030?

A. I wasn't trying to make a projection on 2030, I was saying if this were the outcome that we were trending towards, we would not continue in the business, so the numbers would go down. So, I wasn't trying
to make a counter prediction, I was just saying if this were the outcome, we would --
I don't believe we'd still be in the business.

Q. And what outcome are you driving towards so that you could still be in the business?

A. Well, a majority of our customers are found off of our own hardware.

Q. By 2030?

A. I would hope by earlier than 2030. So, when you asked me if I agreed with this chart that the light green and blue depending on what colors you see there would have to be much larger much earlier.

Q. And when is it your goal to have a majority of Xbox subscribers off console?

A. I would say by FY26, '27 that we should be in that position or we'd have to make a different decision with the business.



Q. If it doesn't work out to gain efficient share in mobile, would Microsoft then have an incentive to start pulling some of these levers to ensure that business can survive in the 200 million TAM for console?

A. If you look at Microsoft as a global business and its scale, the Sony business inside of Microsoft is really no more meaningful than the Xbox business, it's not a -- the size of business that Microsoft is pursuing with all of its resources. Our pivot in this business is to constantly talk about three billion gamers, $200 billion in revenue top line and our ability to be a
participant in that growth. I don't -- in any world where we would not succeed on mobile and PC and decide that we would go backwards to a closed device flat TAM market and invest our resources there, I would not advocate for that.

Q. So, it's either -- I want to be clear about this, in three to four years,
it's either that Microsoft succeeds --Microsoft Gaming succeeds in going to achieve what you think it needs to achieve in the vision for mobile and PC or said shutdown was too draconian, but -- or what?

A. I'll call it divesting of what we have. My view is if we don't succeed on mobile, that it's really been caused by the two mobile platform holders excluding us from distributing our service. And we see that today where Apple blocks us from launching on their platform, through their store, I should say, and Google really constrains our ability to succeed. And how we're trying to counter that is to acquire some popular mobile content to help us create some allure for gamers that we can then use to have some engagement on those platforms where we might be able to use cloud and other distribution to gain a foothold on those platforms. Because if we don't gain a foothold on mobile, there's really no future for us, in Microsoft investment in gaming.

Q. Do you think that thesis that you just expressed --

THE COURT REPORTER: I'm sorry. Can you say that again?

Q. Do you think that thesis that you just expressed is understood in the marketplace --

A. No.

Q. -- about Microsoft Gaming?

A. No. No, in terms of -- in terms of trying to drive excitement with our customers and our developers and our partners, I try not go out with the Phil doom and gloom conversation about where we are. But I know from the time I took this job, Satya, one of the first conversations I had with him is, he wasn't sure why we're in the gaming business. But at that point, in the Xbox One generation, he said we clearly are -- we're out of position with our product, so let's go try to fix that and then decide what we should go do. And we've made progress through innovations like Xbox Cloud Gaming and Game Pass and shipping our games on PC. But we will reach the asymptote of where we can make progress definitely on console, we're probably already there. We will ship probably half of the consoles that PlayStation does this next year. And if we
don't, so we have to make progress in mobile. But I don't go out with that on my kind of gaming T-shirt when I'm doing PR.

so in reading this, i've said and this bascially confirms,...   MS can't get to hundreds of millions of gamers on a gamepass sub on just console/PC.   yes there are a billion gamers spending hundreds of billions of dollars but my mom plays some game on an ipad where she looks for objects in a picture kind of like "where's waldo".   she's never going to play starfield.   ....also, she's never going to play for a sub on ipad.   she'll only ever play f2p games.

the console market is a big market but i think it's mostly a no/slow growth industry.   it will mostly grow with population growth.   there is a slight growth in that i'm in my 40's and video games weren't soo common in the older generations as they are in the newer generations.   but people like my wife will never be converted into becoming a gamer no matter what MS/sony/nintendo do.

[the-pi-guy]

It's pretty wild how quickly we got:
- information about the next few years of hardware
- a large chunk of Bethesda's game line up
- gamepass information


A lot of the Bethesda stuff was pretty clearly delayed, some pretty substantially.

It'd be wild to get this kind of information from Sony so far ahead of schedule....

[Dr. Pezus]

So Phil admits he's a PR guy and MS is losing the battle. Interesting

[the-pi-guy]

In terms of subscriptions and the impact on larger publishers I realized that I haven't really done a good job sharing our view on the disruption AAA publishers potentially see and how their role in the industry will likely change with the growth in subscription platforms like Xbox Game Pass.

We should start with the question of why game publishers exist in the first place. And like many other forms of media the idea of a game publisher was created from an access "moat"; like movie studios locking up theater distribution, album companies locking up radio play, game publisher's scale in physical retail game sales allowed them to secure retail shelf space, in-store promotion and margin structure beyond what any individual studio could dictate when games were primary sold in retail stores. If you were a studio, you needed a AAA publisher to reach a customer at an Egghead software. [NB. Egghead Software was a brick-and-mortar retailer that went bankrupt in 2001.]

This constriction in the access from creator to consumer stayed in place for years and in that time AAA game publishers increased their control. The creation of digital storefronts like Steam, Xbox Store and PlayStation Store eventually [democratized] access for creators breaking physical retail's lock on game distribution.

AAA publishers were slow to react to this disruption. The AAA publishers did not find a way to leverage the moat that physical retail created in the digital realm in a way that had them continue their dominance of the game marketplace. They have not found a way to effectively cross promote, they have not found a way to build publisher brands that drive consumer affinity (the way Disney has in video), they did note create a social platform that would allow them reach beyond their aggregate IP [monthly active users].

Without a lock on physical distribution the role of the AAA publisher has changed and become less important in today's gaming industry. Over the past 5-7 years, the AAA publishers have tried to use production scale as their new moat. Very few companies can afford to spend the $200M an Activision or Take 2 spend to put a title like Call of Duty or Red Dead Redemption on the shelf.

These AAA publishers have, mostly, used this production scale to keep their top franchises in the top selling games each year. The issue these publishers have run into is these same production scale/cost approach hurts their ability to create new IP. The hurdle rate on new IP at these high production levels have led to risk aversion by big publishers on new IP.

You've seen a rise of AAA publishers using rented IP to try to offset the risk (Star Wars with EA, Spiderman with Sony, Avatar with Ubisoft etc). This same dynamic has obviously played out in Hollywood as well with Netflix creating more new IP than any of the movie studios. Specifically, the AAA game publishers, starting from a position of strength driven from physical retail have failed to create any real platform effect for themselves.

They effectively continue to build their scale through aggregated per game [profit and loss] hoping to maximize each new release of their existing IP. In the new world where a AAA publisher [doesn't] have real distribution leverage with consumers, they don't have production efficiencies and their new IP hit rate is not disproportionately higher than the industry average we see that the top franchises today were mostly not created by AAA game publishers. Games like Fortnite, Roblox, Minecraft, Candy Crush, Clash Royale, DOTA2 etc [were] all created by independent studios with full access to distribution.

Overall this, imo, is a good thing for the industry but does put AAA publishers, in a precarious spot moving forward. AAA publishers are milking their top franchises but struggling to refill their portfolio of hit franchises, most AAA publishers are riding the success of franchises created 10+ years ago.

With Xbox Game Pass we've created a new platform for AAA publishers to try to navigate. As we grow more sustained and predictable monetization of gameplay through our subscription platform we will have more insight, revenue stability and incentive to invest in new experiences to continue to drive the subscription momentum.

Yves Guillemot's, CEO of Ubisoft, comment to us was with the growth of subscriptions like XGP he will double down on creating value on his existing franchises but cut back on new risk bets as he has no mechanism like XGP that helps amortize the investment risk in any piece of content across an entire subscriber base.

UbiSoft and EA are two publishers trying to build a subscription now but kind of like their reaction to Steam 15 years ago they are not moving quickly or boldly enough to scale. They also lacked a platform like Xbox console to launch on top of launching on Xbox, as we know, gave us access to a large player base, creator base and monetization base.

We launched our new subscription platform from the existing device platform. We've offered to help AAA publishers, and we are with EA Access carried in Xbox Game Pass Ultimate this year (very possible that Ubisoft's subscription comes to XGPU as well) but overall the AAA publishers are too reluctant to put $60 retail at risk to create a more predictable revenue stream and without an existing per user monetization platform they lack real distribution.

On the flipside, the individual studio or smaller publishers see XGP as an incredible way for a studio to get their IP in front of millions of players, offset risk by selling us an XGP window for their title, and gain the viral exposure that gameplay on our network provides. The vast majority of XGP's early release, non [first party] games are independent studios offsetting their title risk by working with us on a window and doing so successfully.

XGP and our ID@Xbox program are two main reasons why we've seen a 3x increase in developers on Xbox this generation compared to the 360 generation. Circling back to [Take-Two Interactive] on Friday. They have supported us with XGP, they were a launch partner and continue to participate, even with their biggest game Grand Theft Auto. They are interested in bringing their second biggest franchise, Red Dead Redemption, to XGP as well. But they are also concerned about the transition and how XGP will impact their long term economics and if they are being honest on Friday this should come up.

Much like how Netflix disrupted video, gaming subscriptions will disrupt the AAA publishers, whether it's our subscription, Apple Arcade or Amazon's coming subscription, this change is coming. Our goal is to find a way to both grow our subscription (which is our new platform) and help the AAA publishers build towards a successful future. For publishers with 2-3 scale franchises that's a difficult transition.

Again, taking a clue from Hollywood, it's not clear how a standalone subscale media publisher grows is this world without adapting to new paradigms or getting consolidated but we believe we can help a Take 2 by increasing monetizable [total addressable market] across more endpoints inside of a global platform like Xbox Game Pass (inclusive of xCloud).

I'm not sure how deep the discussion with Take 2 will go on Friday but this would be a good discussion with them. They are living the disruption to their model and we are hoping this will come through. They are a good partner but also leery of these changes. Our team has these discussions with publishers all the time and we always learn from our partners as they try to navigate the moving ecosystems.

Sauce

[the-pi-guy]

Sorry I realize I just dumped a giant pile of text

Phil Spencer believes that gamepass will give AAA publishers a new way to navigate with a predictable revenue model.  

Basically:
- publishers were needed for distribution
- they aren't anymore and lots of the biggest games are from independent studios.
- publishers have switched to making massive games instead. Independent studios would struggle to make $200 million game productions, in an attempt to stand out.
- $200 million games tend to be old franchises as there is less risk.
- subscriptions make it easier to amortize cost, and make new IPs more viable.
- Ubisoft and EA are moving too slow to set up subscriptions.

[Legend]

"This constriction in the access from creator to consumer stayed in place for years and in that time AAA game publishers increased their control. The creation of digital storefronts like Steam, Xbox Store and PlayStation Store eventually [democratized] access for creators breaking physical retail's lock on game distribution."


Pretty ironic since gamepass goes against this progress, just moving the control over to microsoft.

I'd be so much more supportive of game subscriptions if they were open to every developer with set terms. Regular sales have gone down so much for some genres so getting accepted into gamepass can be make or break for a studio.

[kitler53]

he talks all about how retail became "gate keepers" but on the retail side there were dozens if not hundreds of stores dealing in video games.

gamepass and ps+ extra are the industry's new gatekeepers,.. there are only 2,.. and the gatekeepers themselves deal in the production of games and thus are heavily incentivized to see 3rd parties fail.  ...especially with respect to gamepass as MS is clearly foaming at the mouth to grow though acquisition. 

it is anti-competitive in the same way it would be anti-competitive if disney owned all movie theatres.   

"This constriction in the access from creator to consumer stayed in place for years and in that time AAA game publishers increased their control. The creation of digital storefronts like Steam, Xbox Store and PlayStation Store eventually [democratized] access for creators breaking physical retail's lock on game distribution."


Pretty ironic since gamepass goes against this progress, just moving the control over to microsoft.

I'd be so much more supportive of game subscriptions if they were open to every developer with set terms. Regular sales have gone down so much for some genres so getting accepted into gamepass can be make or break for a studio.

haha, your post wasn't there when i was writing but this,.. 100%!

[the-pi-guy]

[Legend]

Buying valve, did not see that one coming.

[the-pi-guy]

I apologize for starting this conversation.

But does it feel likely a world where MS has bought two publishers, has previously compiled a list of 12 big publishers, that Sony hasn't at least considered the same?

[BananaKing]

I apologize for starting this conversation.

But does it feel likely a world where MS has bought two publishers, has previously compiled a list of 12 big publishers, that Sony hasn't at least considered the same?

Yeah I think Sony should consider doing the same. I think  they should target take two. Because if you read that list, its obvious MS would target them or Sega next.

[Legend]

I apologize for starting this conversation.

But does it feel likely a world where MS has bought two publishers, has previously compiled a list of 12 big publishers, that Sony hasn't at least considered the same?

Does Sony have the money? They could spend a few billion but much more would be difficult. They'd be screwed if some other opportunity presents itself in the near future.

I think they need to buy Ubisoft though. They have dropped a lot in value and are definitely within Sony's price range. Buy them and Sony would good IP and a huge amount of developers to help assist with various projects. Plus I just don't want Ubisoft to die.  

[BananaKing]

Does Sony have the money? They could spend a few billion but much more would be difficult. They'd be screwed if some other opportunity presents itself in the near future.

I think they need to buy Ubisoft though. They have dropped a lot in value and are definitely within Sony's price range. Buy them and Sony would good IP and a huge amount of developers to help assist with various projects. Plus I just don't want Ubisoft to die.  

I think they could easily get a loan, use stock, and deferred payments.

They also been profiting billions for years, and have huge revenue and cash flow.  

[Dr. Pezus]

Lol sure they want those for their mobile presence and pc.