Microsoft’s console strategy could make it tough for Xbox

Microsoft’s console strategy out of E3 2016 has prompted fierce debate about the company’s future in gaming, and how it plans to transition into the “next generation” after a disappointing commercial performance by Xbox One.

It’s strategy for that console, which is currently stretched out between a redesigned “slim” console, a beefed up “don’t call it next-gen” upgrade called Scorpio, and Xbox-PC cross-platform functionality, suggests the company is vying for different markets at different times.

The Xbox One S, for example, is due for release this August, and while Microsoft claims it’s for a “new audience” — which certainly makes sense, and presents a clearer vision for the company’s console strategy than the one it amplified at E3 — you have to wonder whether pricing a redesigned three-year-old console is really going to attract newcomers anyway.

There are some major challenges for Microsoft over the next 12-24 months, and there’s something about its current strategy that seems like a desperate lunge to reignite an Xbox brand that, while certainly influential in the industry, couldn’t possible be resigned to constantly finishing in second-place behind its nearest competitor.

It seems crazy to think that Microsoft would ever leave the dedicated gaming hardware market, but a perfect storm of bad outcomes could force its hand.

The Xbox One S is dead on arrival

The timing of Xbox One S, which launches this August, seems strange next to Microsoft’s plans to close the gap between console and PC gaming. The company’s intentions to attract new Xbox owners is ambitious, but this late in the generation, and with a muddled philosophy that blends PC and console, it seems like an uphill battle to convince a newcomer to fork out a few hundred bucks on a console that will be obsolete in 16 months.

It’s certainly not as muddled and divisive as Microsoft’s 360-to-Xbox One transition, but it’s close. Microsoft infamously hit back at critics of its always-online Xbox One plan, by telling people without a solid internet connection to “buy an Xbox 360” instead of investing in an Xbox One. The Scorpio’s 4K focus suggests the Xbox One S is more like an alternative for those unprepared to truly upgrade, than it is a sleek and affordable alternative for those keen to get into console gaming.

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The question is whether the Xbox One S is really all that appealing anyway. Was it the appearance of the hardware, the size of the HDD, and the lack of 4K upscaling that led to the Xbox One being outsold 2:1 by the PS4? Of course not. The hope that the Xbox One S will appeal to people yet to invest is bold and confident, and you have to give it to Microsoft in that case, but with Scorpio around the corner in gamer time, the Xbox One S seems like a hard sell, even if the market isn’t necessarily the hardcore gamer.

Its Xbox-PC cross-platform plan pushes fans to PC

Windows Play Anywhere is a fantastic initiative, but you have to question why someone would invest in a console when the hardware philosophy there is starting to mirror that of PC. The Scorpio is being marketed as an “upgrade”, not “next-gen”, and Microsoft has, for whatever reason, been clear that everything on Xbox One will work on the next console. Why upgrade if everything I own already works as intended? And why invest in console at all if all the best games are on PC anyway?

I’m no PC gamer, and I can never see myself making that transition, but Microsoft’s gaming division seems stuck between a commitment to dedicated hardware, and an improvement of software and services. It’s plan for the Surface range, for example, seems far more succinct than its plan for Xbox, which suggests to me that this is all part of a long-term vision to eventually Window-fy every platform coming out of Microsoft.

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What this means for the Xbox brand is anyone’s guess, but Microsoft is in a pickle here with an Xbox One S that could be dead on arrival; Xbox sales could drop steadily as people hold out for Scorpio, which opens the door right up for PS4.5 and Nintendo’s NX. Maybe this is part of Microsoft’s plan to slowly transition its entire gaming division. Fascinatingly, at a time when it unleashed its new plan for Xbox, it announced a multi-billion dollar purchase of Linkedin. It can now monitor trends, interests and corporate narratives in ways that could shape its future planning, and it all seems to tie in with the company’s refocused plan on digital, and de-emphasised focus on hardware, a direction it had initially hoped to take with the Xbox One before a gamer backlash forced it to change things up.

A world without Xbox

Analysts are critical of Microsoft’s console philosophy, suggesting its plan is to slowly exit the dedicated gaming hardware market and refocus on Window platforms. Analyst DFC said as much post-E3, questioning the motive behind announcing the Xbox One S, which the firm also believes will be a hard sell.

I found this quote particularly damning:

“When the PlayStation launched Sony was a more diverse company trying to use its game system to promote Blu-ray. Now Sony is a smaller company and the PlayStation brand is its most successful product line. PlayStation is now the tail that wags the dog and former games head Kaz Hirai now runs all of Sony. On the other hand, with Microsoft, the game business is the ugly step-child that somehow must integrate with the company’s operating system strategy.

It raises an interesting point about how Microsoft has struggled since the introduction of the Xbox One. Its muddled philosophy at launch pushed away a lot of diehard Xbox fans, and while it’s made massive inroads since, it hasn’t quite recaptured the essence of what made the 360 great. I don’t think it will leave the market anytime soon, but Microsoft still seems intent on merging divisions and perhaps even doing away with its gaming division all together. The “step child” analogy is the perfect way to explain how Xbox has struggled to find its feet in a large family with plenty of history.

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