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Think Outside the Xbox
How will Microsoft's cultural and philosophical transition affect their gaming division?
Microsoft’s transition since 2014 has been remarkable in many ways, on the outside and at the core of the company. It has made tremendous changes within a short period, to the point where the company is hardly recognisable. Satya Nadella took over as Chief Executive in 2014 after everyone got bored of the evil mastermind Steve Ballmer — watch this if you are not familiar with him — and now the company’s culture and business strategy, and even their philosophy, have changed to the point where the company is hardly recognisable.
He set the tone early on by announcing Office for iPad within weeks of taking over. Clearly, the product was being developed internally for much longer, but management were reluctant to publish it in order to avoid cannibalising Office’s desktop sales and not to strengthen Apple’s mobile OS. Four years into Mr Nadella’s tenure, we have seen further dramatic changes. Internally, employees are free to use whichever computer they please, whether Windows, Linux, or Mac-based — hard to imagine at the company that produces an OS. They even started using Git! Office is now everywhere, Windows has become a “service” with regular updates, and people working there seem to be more passionate than ever. Azure is their new growth-driver, the industry that sees no slowing in growth, where even Amazon Web Services, the largest player by far, grows rapidly. And in order to attract the “developers developers developers” we all love to your cloud platform, you have to cater to as many as possible. Mac or Windows; Linux or Windows Server, Azure wants your money. To achieve that, the cultural shift to openness was necessary.
So how does this bode for their gaming division? Microsoft has been struggling very much in this console generation, with a sloppy start (bundling Kinect with the Xbox One and marketing it as a TV set up box, on top of weak components) which partly arose due to the arrogance of them being the “winners” of the last generation with the Xbox 360. What they forgot is that the powerful network effects created during the span of one generation with each new console release are lost — the machines for the most part, are not backwards compatible, and as such there is little to no incentive to stay loyal to a company. If Sony produces a better new generation machine, it can easily tempt over customers with no sense of losing out. Everyone starts from scratch.
For Microsoft, this position of weakness may be the reason for some pro-consumer changes like enabling cross-play in games like Fortnite and Minecraft. Cross-play is the ability to play multiplayer games against individuals who own consoles of other platforms. On Fortnite, PC gamers can play against Xbox, Nintendo Switch, and even mobile games. That is an incredible step in the right direction for consumers. In my last newsletter, I discussed the downsides of exclusive games but in this case, two players may own the exact same game on different platforms are still are prevented from facing each other online. Most interestingly, developers openly admit that there are next to no technical limitations to allowing cross-play and it is all up to the who controls the platform.
Sony infamously prevented cross-play for Fortnite on their consoles which lead to a visceral backlash against the company. Whilst they did concede on Fortnite, they have not enabled it for other titles as of yet. This saga has really earned Microsoft some credibility amongst the gaming community.
There are some other things Microsoft has achieved recently that are simply fantastic. They created and promoted their new “Adaptive Controller” to improve accessibility. Furthermore, they have shown off their new streaming service that is not limited to their consoles but lets you stream console games even on your phone. The Xbox Game Pass has been a modest success, what many call a Netflix-like approach to video games. Microsoft is certainly willing to experiment and open up their platforms, and even finally acknowledged that Windows is their other gaming platform, now that we have some Xbox exclusives also released on the PC (e.g. Quantum Break). Game Pass, Mr Nadella just announced, will soon be available on PC, too. I do not game on an Xbox One, nor do I know many who do, but it is great that not owning their console does not prohibit me from at least playing their games on PC. It is also great for the developers now that their art can reach more people.
If this pro-consumer push continues into the next generation, Sony will struggle a lot, they will have to continue to utilise their biggest leverage: their outstanding exclusives produced by their studios with rich history. Sony definitely understands gamer in a way that Microsoft sometimes does not. The pipeline for exclusives on PlayStation is incredibly rich and only comparable to Nindendo. Microsoft seriously lacks behind in this regard and in future, if it is to attract the most customers, must address this. Building relationships with studios, or owning them, as well as trusting them with the creative process is vital. Scalebound is the prominent cancellation where some reports do suggest unnecessarily high levels of meddling and disagreements by the company with the developers. There is hope. Interestingly, under Mr Nadella, the company’s approach to acquisitions and the corporate development that follows has improved significantly. What used to be the case, an example being Bungie, the prolific studio responsible for the Halo series, the studio and the staff were required to move to Microsoft’s HQ, and hand over much control by having to comply with the bureaucracy of a megacorporation, and losing the company culture in the process.
Now, companies who are acquired by them, like Wunderlist, LinkedIn, and GitHub for example, are allowed to continue to be based in their home locations with the ability to maintain their culture or even their existing structure. A company is not a set of ideas but the environment in which those ideas come to light. It is, quite frankly, idiotic to spend vast sums on acquiring an organisation, and in the transition process to lose most of the value. Instead, keep companies independent where possible. Guerilla Games and Naughty Dog are fully owned subsidiaries but remain autonomous thanks to the structural segregation. What Microsoft could offer is to create or acquire companies under their umbrella and to offer their business services (accounting, HR, legal) and wealth, offloading aspects like funding, sales, and marketing from the studios, allowing the studio to focus fully on their core competency just like Sony Interactive Entertainment takes care of those aspects for their own studios
The result, of course, is the symbiotic relationship that lead to games like Horizon: Zero Dawn or Uncharted, some of best-selling games of the last few years all whilst being limited to one console. Sony’s ability to nurture great studios, provide creative freedom with tremendous business and technical support is responsible for that. Another benefit? Sony’s studios can provide first-hand feedback when designing future hardware. Microsoft has a lot to learn in this regard.
It does look like Xbox is changing slowly for the better. Pro-consumer behaviour will only be beneficial for all of us and set a good precedent for others to follow. If such changes continue, then I do want to see Microsoft succeed. Competition is beneficial for innovation and Sony has been far too comfortable this generation.
Sorry for the delay in sending this issue out but I hope it has been insightful. Writing is hard! I will try to flesh out some of the thoughts articulated here in future.
As always, hit reply with feedback and comments. Thanks so much for reading.