Xbox has received criticism for their lack of first party exclusives. But when it comes to services, Microsoft is leading the pack.
Since its reveal in 2013, the Xbox One has faced an uphill battle. Between the expensive price point, poor messaging, and anti-consumer DRM and games licensing model, the console struggled to find its place in the 8th generation. Now, almost five years removed from the veritable shitshow that was E3 2013, the Xbox’s overall outlook has stabilized.
I’ll caveat this article with the recognition that Xbox hardware sales have been solid in comparison to previous generations. Xbox — along with the PlayStation and Switch — has made those claiming that 2013 was the beginning of the end of console gaming look quite foolish.
Regardless of current strengths or weaknesses in today’s market, every company must strategize for the future. Much has been made about the current direction of the Xbox One with most of the emphasis placed on their lack of first-party exclusive games. But the company has found themselves with an identity firmly rooted in something, that if executed correctly, could have a tremendous payoff in the future: gaming services.
A Whole New World
We live in a services-oriented world. If you can think it, there’s a service for it. Netflix, Hulu, and Prime Video deliver virtually endless programming to subscribers for a small monthly fee. Apple Music and Spotify have completely altered the way people consume music. Companies have even found a way to turn things like meal prep, bacon, and cocktails into a subscription service. The lesson? People are willing to pay a small monthly premium for a large swath of content.
To some extent, Microsoft has always paved the way in terms of services-based innovation. When the company set out the vision for the original Xbox, online play was at the center of that vision. Though Sega had previously attempted online features with the Dreamcast, a lack of technological advancement and availability spelled a swift end to the experiment.
Xbox took the proverbial baton and ran with it. In 2001, Microsoft revealed the original Xbox console complete with an ethernet port to accommodate the ever-expanding population making the shift to broadband. The decision came at a time where none of the other available consoles could connect to the internet without an external modem and additional software. Eight months after the console’s launch, the company revealed Xbox Live, a service that would forever change the landscape of gaming.
Xbox Live brought console connectivity and downloadable content into the mainstream, created huge gaming communities, and was the platform from which the company launched some of its most influential programs like achievements, Xbox Live Arcade, and Games with Gold. Now, according to Microsoft’s latest earnings report, Xbox Live plays host to nearly 60 million unique users.
A Renewed Focus
It was clear that the initial reveal of the Xbox One didn’t land with gaming fans, and executives all the way at the top of Microsoft felt it. “It was obvious Microsoft needed a reboot,” Xbox boss Phil Spencer said during a presentation at the 2018 DICE Summit. “Morale had hit a low, we were all massively frustrated we kept missing big trends. In some ways, it felt like real innovation was impossible. And the in-fighting and fiefdoms were so famous, people made fun of it. Which would have been funny, if it hadn’t been so true.”
In a 2014 interview with Fortune, Spencer talked about the changing landscape of Xbox’s vision. “We are starting a new chapter at Microsoft, with the strategy to create a family of devices and services that empower people around the globe for the activities they value most, and entertainment always ranks high on that list.”
That reboot came through the Xbox One’s launch of a number of different services that act as strong differentiators in the console space. Though not Microsoft-owned, the first gaming service that the company threw its support behind was EA Access. Launching in August 2014, EA Access allows grants subscribers a number of benefits from discounts on EA titles and subsequent DLC to a perpetual vault of games that subscribers could download and play for the life of their subscription. What Sony executives said ” does not bring the kind of value PlayStation customers have come to expect,” Microsoft saw as an opportunity to jump into a market rather unexplored — a Netflix-style service for gamers.
Since then, and despite an apparent lack of first-party exclusives, Xbox has slowly built up a bevy of services that have strengthened the platform as a whole. Since 2015, the company has launched backward compatibility, Xbox Game Preview, the Xbox Play Anywhere initiative, and the Xbox Game Pass, while continuing to improve upon existing Xbox Live features.
Xbox Eyes the Future
The new direction stands in stark contrast to the console’s direct competition, the PlayStation 4 and Nintendo Switch. While Sony has launched its own set of services including PlayStation Vue and PlayStation Now, but these have been more ancillary to Sony’s core vision which centers around its strong first-party catalog. While PlayStation Now fills a similar role to Xbox Game Pass, a small library of current games and the limitations of streaming content over an internet connection means it hasn’t quite found the success of Microsoft’s counterpart.
Because of their unique position in the market, Microsoft has an opportunity to establish themselves in an emerging space before a total market disruption. People want services like Game Pass, and the service can allow Xbox to innovate the way they develop and deliver games. They already started by announcing that all exclusive games from Microsoft Studios would be available day one on Game Pass; as we’ve seen with Sea of Thieves, already.
“The storytelling ability in TV today is really high, and I think it’s because of the business model,” Spencer told The Guardian. “I hope as an industry we can think about the same. [Subscription services] might spur new story-based games coming to market because there’s a new business model to help support their monetization.”
What’s missing from this current vision as far as follow through is a volume of compelling first-party experiences that draw users into this kind of service. Netflix has no shortage of original programming. If a person doesn’t find one thing interesting, something else will likely catch their attention. But they didn’t get there overnight. It takes time, talent, and a level of persistence that only those who truly believe in their vision possess.
This territory remains uncharted for Xbox and only time will tell if it will pan out, but Spencer is aware that these services can only carry them so far. In a tweet earlier this month, he said “high quality and diverse” first party games are the goal.
Our hardware took time, our service/platform/BC took time and continuing to grow our 1P will take time. A high quality and diverse 1P (yes, with SP) built the right way is our goal and what our customers deserve. We can have similar results to what we've seen in hw and platform.
— Phil Spencer (@XboxP3) April 13, 2018
Only Microsoft knows what their studios are currently developing. State of Decay 2 is set to launch later this month, Halo 6 and a new Forza game are almost certainly in the pipeline, and Crackdown 3 has yet to release. Following the release of the Xbox One X, Spencer spoke of the company’s increased investment in first-party development. E3 2018 could shine a light on what some of those dollars have gone to. If Xbox can parlay their strong new service-oriented identity and powerful hardware with quality games, they have weathered the storm and set themselves up for long-term success.