“I hear you,” Xbox CEO Asha Sharma said when asked about Xbox exclusives.
It is the most conflictive debate around Xbox in recent times: that of exclusive content. A couple of years ago, Xbox announced that it would no longer have exclusive games, as if that were something to be proud of. Digital platforms revolve around exclusive content. I subscribe to Netflix to get WWE exclusively. I subscribe to Disney+ to get exclusively star wars content. I buy a nintendo switch to gain access to Mario and Super Metroid. The list goes on and it’s an obvious narrative to sell to consumers: join our ecosystem; Get exclusive content you can’t get anywhere else!
The memory decline is consuming stocks and demand.
The video game industry is worth more than ever overall, but traditional platform owners are fighting a variety of “headwinds.”
This is the year of Grand Theft Auto 6. This is the year Obligations stops shipping on previous generation consoles, such as the PlayStation 4. But despite this, PlayStation itself, the market leader, warns investors that PS5 hardware sales will decline 6% year over year, “due to a decrease in unit sales.” This follows a 46% year-over-year decline reported this month.
How is it that even PlayStation, which has an exclusive marketing activation with Grand Theft Auto 6, is predicting a drop in hardware sales?
The answer is quite simple: Amazon, Google and others AI Hyperscalers have already purchased all the memory, now and future allocations as well. There is a huge component shortage for consumer electronics, and Nintendo will also specifically raise prices later this year as its fixed-price component contracts expire. Console makers know that traditional gamers won’t accept these painful new higher prices, particularly when their disposable income is also suffering a generational reduction.
“Unfortunately, the recent increase in prices of memory and other components” nintendo explained, “And changes in the market environment, including trends in the foreign exchange market and the price of oil, are factors that we anticipate will continue in the medium and long term.”
Microsoft is obviously part of the engineering of this problem, with its own hyperscale ambitions. Unfortunately, the memory Microsoft acquired is not sent to Xbox, but to Azure, so we can use Copilot to generate cat memes, deepfakes, and pretentious LinkedIn opinion pieces more efficiently.
In essence, Xbox has been sabotaged on both ends by Microsoft here, creating a self-triggering problem and a self-fulfilling prophecy. Microsoft knows that Xbox can’t get memory at a reasonable price. Microsoft knows that Xbox can’t sell hardware at even a vaguely reasonable margin in the current climate. And Microsoft knows that putting Halo, Gears and Forza on PlayStation destroys the appeal of Xbox as a hardware ecosystem.
Microsoft designed the situation that Xbox now finds itself in. CEO Satya Nadella said during the FTC trial that he hates the idea of software exclusivity, arguing against frankly ridiculous accusations that Microsoft would take steps to make games like Call of Duty exclusive. In fact, Nadella has a long history of killing any and all of Microsoft’s hardware initiatives, with Surface on the ropes and Windows Phone six feet under.
I’m sure if Satya Nadella had his way, Xbox would become just a publisher. It is a business with better margins on paper. Microsoft wouldn’t have to deal with the headaches that come with hardware distribution, repairs, customer service, etc. But the damage to Microsoft’s credibility would be absolutely astronomical: why would you trust Microsoft products again if it left the digital content of tens of millions of Xbox users orphaned?
In fact, speaking to Xbox staff at a recent internal event, Satya Nadella commented That enterprise customers in Azure meetings often want to talk about Xbox, rather than Office 365.
That’s why Xbox Helix is still on the way. Microsoft knows that they are too involved in gaming to withdraw from their hardware ecosystem now. Nadella said it is long about games. But I’m here to tell you that Xbox won’t have a long life if it doesn’t have some kind of exclusive content.
Even if Xbox will have problems with stock levels, it should go back to exclusive games anyway.
I understand the logic. If you can’t get the hardware, you need to find the margins in the software. PlayStation’s expectation that it will struggle to move hardware even in the year of Grand Theft Auto is obviously more than true for Xbox as well. Why go overboard with marketing and exclusive games that create desire for your hardware if you really can’t? get hardware at a reasonable price?
Well, I would say the following; If you don’t do it, you won’t have an ecosystem. at all when the memory path ends. And it will end.
There is no universe where we will see God of War or The Last of Us on Xbox. There is no universe where we will see Super Metroid or Mario on Xbox. In a perfect world, software wouldn’t be limited to hardware and we could play wherever we want, much like being able to access Spotify or Netflix on any device we want. But we do not live in that universe, nor will we ever live in it. Microsoft is telling today’s and tomorrow’s customers that they shouldn’t buy an Xbox, because if you buy a PlayStation, you’ll get both Xbox and PlayStation games. Better yet, save a little more, buy a Steam Machine or gaming PC and get Xbox games and thousands of Steam exclusives too.
Taking this into account, no other conclusion can be drawn: putting Halo on other platforms like PlayStation is chaotic madness. The damage to the brand is absolutely immeasurable and will continue to plague Xbox long into the future.
This was a historic mistake made by people who think quarterly, rather than people who think about the long-term health of Xbox. The astronomically stupid decision to self-immolate will continue to have long-term consequences for the Xbox brand and its relevance to customers, developers and distributors alike.
The memory apocalypse is expected to last until 2028, I’m told. Xbox is a vast and expensive operation, more so than ever now that Activision-Blizzard is part of the equation. When Call of Duty has a bad year, it drags down the entire operation with it, as evidenced by last year’s Black Ops 7 fiasco. But therein lies the central problem: the game is not a quarterly business, nor has it ever been.
Treating Xbox like Azure or Office 365 is fiscally negligent. Gaming is a success-driven business, curated decades of creating goodwill, nostalgia and cultural attachment. Microsoft shouldn’t be thinking quarter after quarter for Xbox, in a universe where games literally take years to create.
You. Can’t. Run. Xbox. As. Azure.
As such, I think Microsoft should stop capitulating to Steam, PlayStation, and other competitors that are actually racing to finish with Xbox and instead capitulate to reality: Xbox needs exclusive content.
Microsoft needs to soak up the insane decisions of recent years and accept reduced margins to subsidize mistakes, while rebuilding the culture around the brand and once again meeting the expectations of the community and the industry at large.
Master Chief should be the Mario of Xbox, Gears of War should be the God of War of Xbox: the mascots that sell the ecosystem. Instead, they have become a symbol of Microsoft’s complete unwillingness to compete: fast, cheap ports for quick money. How sad.
Games are about the characters, worlds, and communities that surround those icons. It’s about building a generational cultural cache. Master Chief should be the Mario of Xbox, Gears of War should be the God of War of Xbox: the mascots that sell the ecosystem. Instead, they have become a symbol of Microsoft’s complete unwillingness to compete: fast, cheap ports for quick money. How sad.
I think Asha Sharma understands the value of exclusive games. Asha’s previous company, Instacart, relied on long-term exclusivity contracts with companies like Aldi and others. But can he convince Microsoft’s accountants to think about Xbox’s generational value, its cultural value, rather than its quarterly value?
In my opinion, the most likely scenario is that we will eventually return to exclusive games. In my opinion, there is no other way to go. It may not be until the memory apocalypse is over, but I wonder if it will be too late by then.
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