Microsoft looks beyond console wars with the new Xbox

A customer carries the PlayStation 5 console at an electronics store in Sydney on November 12, 2020, the official launch day of the PS5.

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Microsoft and Sony both released new video game consoles this week: Microsoft The X500 is the Xbox Series X. And the Series 300 Series S, which includes two models of the Sony PlayStation 5, starting at 400.

The last generation consoles released by both lasted about seven years. With the latest systems, Microsoft and Sony are using different strategies to attract gamers and earn more revenue from gamers.

There’s a lot in line.

The epidemic has given people more free time to play. Players may join in the coming years, which means big business for both companies.

Gaming represents 24% of Sony’s revenue. It accounts for 8% of Microsoft’s revenue, but is widely regarded as the third most valuable public company behind Microsoft and Saudi Aramco, and any success in gaming will benefit many shareholders.

What happened last

In 2013, when Microsoft released the Xbox One and Sony PlayStation 4, Sony shipped 4.2 million new consoles, ahead of Microsoft 3.8 million, according to estimates by technology industry research firm ITC.

The Sony PlayStation 4 was priced at $ 400, $ 100 below the Xbox One 500 price. Microsoft spent time developing Xbox’s entertainment capabilities, rather than focusing directly on gaming. First, the Xbox One came with Kinect, a device that allowed people to control the Xbox with voice commands and motion gestures. It was not a huge success, and in 2014 Microsoft released the $ 400 Xbox package that left Kinect.

Later, PlayStation 4 owners gained access to exclusive games not available on other computers, including “Unknown 4”, “Horizon Zero Dawn” and “Spider-Man”. The Xbox One received some of its own features, including the “Hollow 5”.

However, every year the Xbox One is sold, according to the PlayStation 4 IPC.

Microsoft has changed its gaming approach since the introduction of the Xbox One. Bill Spencer, executive vice president of gaming at Microsoft, said in an interview On the edge Last year’s console shipment, a routine measure of success, was not as important as engagement, including the number of people involved.

This change follows the revolutions in other Microsoft products under Satya Nadella, who replaced Steve Palmer as CEO in 2014. The company stopped insisting too much on protecting Windows. It released versions of its office applications for Android and iOS, and it brought the teams productivity application in the Office suite to the open source operating system Linux. Linux became accessible on Windows. Microsoft began converting Office customers to subscriptions, and this gave Windows 10 for free.

Satya Nadella, CEO of Microsoft, speaks to participants during the Viva Technology event on May 24, 2018 at the Parc des Expositions Borde de Versace in Paris.

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The new Xbox Series X and S do not have exclusive new titles like last time. How does Microsoft stand out?

The answer is the Xbox Game Pass, an online subscription service that provides customers with a list of over 100 games, downloading and downloading the previous three Xbox consoles – all for up to $ 10 a month. Just like Netflix does with video, Microsoft plans to upgrade the service with new titles over time.

Microsoft’s offer is wider than Sony’s new PlayStation Plus CollectionIf you subscribe to the PlayStation Plus online multiplayer service, a similar service with 20 PlayStation 4 games costs $ 5 per month.

GamePass subscribers who pay an additional $ 5 per year can access the service to play Xbox games on Android devices; Games are offered on the Internet from Microsoft data centers. (Microsoft wants to provide a similar service to the iOS device, but says Apple has App Store policies Prevented from doing so.)

The mobile option refers to the kind of response to the Nintendo Switch, which offers powerful gaming in a small format. Sony’s PlayStation Cloud Gaming service now supports mobile devices.

Studio contracts

More games are coming.

Microsoft’s gaming division is in an acquisition that includes 23 game-development studios, including the $ 7.5 billion Genimax acquisition of Microsoft. Announced In September. It is above 11 in 2018 And larger than Sony’s 14-studio set. Microsoft approaches game developers in Japan, Nintendo and Sony’s home country, Bloomberg Announced earlier this week.

Microsoft’s 343 Industries Studio is set to go on the next episode of its popular “Hollow” series of sci-fi shooting games with new Xbox consoles this holiday season, but in August Announced The game is delayed until 2021.

In contrast, the Play 500 PlayStation 5 and Play 400 PlayStation 5 digital versions (which do not have a disk drive) can play exclusive games such as “Marvel Spider-Man: Miles Morals” and “Demons Souls”. The PS5 also features a software modification and key controller design.

Without any of these features in the new Xbox, people expect hardware upgrades as a factor to go with Microsoft.

They are there, but they will not be enough to overthrow Sony.

What Microsoft is concerned about right now

“I do not see any technology that can give this generation a transparent pump for content,” said Seamus Blackley, the father of Xbox, a former Microsoft employee who first pushed Microsoft to catch Sony.

Blackley has tried Microsoft’s new gaming hardware, and said he thought Sony’s PlayStation 5 would at least be on hand first.

ITC agrees with Blackley’s expectation. Louis Ward, ITC’s director of gaming research, said Sony expects to sell 5 million PlayStation 5 consoles this year, and Microsoft is looking to sell 3.8 million Xbox Series X and S consoles. Jared West, chief marketing officer at Microsoft’s Xbox Business, told CNBC in an email that Microsoft expects to sell every console it builds this year in terms of gaming usage. He expects more than is needed.)

Investors are less focused on Microsoft’s console sales anyway. Last year the company introduced a new metric: revenue growth for Xbox content and services, including game pass subscriptions and the long-running Xbox Live service for online gaming, as well as sales of popular games such as MinCroft for non-Microsoft devices. That figure is higher than overall gaming revenue growth in each of the last four quarters.

Also, more console sales are not necessary for Microsoft funding. Microsoft ends its current fiscal year with June 30th, which would be less than the company’s total volume, Morgan Stanley analysts Keith Weiss and Josh Bare wrote in a note distributed to customers last month.

“I think Sony will come out of the gate quickly with hardware sales, but I don’t think Microsoft cares,” said Ben Thropp, founder of Frame Interactive, a Vermont game development company. He has worked on several PlayStation games, and expects to buy the new PlayStation and the new Xbox – not right now. He said that unlike Sony, Microsoft is more focused on raising game pass subscribers than moving consoles.

The West was faced with the fact that Microsoft offers the most powerful console ever built, and said it was totally interested in selling consoles.

“But focusing only on the console is an incomplete way to evaluate the gaming industry, and how it will grow in the future,” he wrote. “Developers who work with us can reach gamers through the cloud across PC, console and mobile. And there are many options for how all new players will play when they pick up their games.”

Watch: Next-generation Xbox and PlayStation consoles face a ‘challenging battle’: Analyst

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Veronica Tucker

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