Microsoft’s Xbox Future Strategy: Expanding Beyond Consoles
4 min read
Microsoft’s Xbox business has been facing challenges in recent years. The sales of Xbox Series S and X have lagged behind Sony’s PlayStation 5, and the growth of Xbox Game Pass subscriptions has slowed down. In response to these challenges, Microsoft is reportedly preparing to take Xbox beyond consoles by bringing some Xbox exclusives to rival platforms, such as PS5 and Nintendo Switch.
The first two Xbox games that are set to appear on non-Xbox platforms are Hi-Fi Rush and Pentiment. Microsoft is also planning to launch Sea of Thieves on non-Xbox platforms later this year, with other first-party titles also under consideration. This shift in strategy is a significant one, as it will give Microsoft more reach for its first-party games and an opportunity to generate more gaming revenue. However, it also comes with risks.
Microsoft’s overall gaming business has recently surpassed Windows in terms of revenue, thanks to the Activision Blizzard acquisition. The giant $68.7 billion acquisition will be weighing on Microsoft’s mind, particularly when you consider that Call of Duty is a big multiplatform game that drives key revenue across these platforms and mobile. The slowdown in Game Pass will also be a factor in Microsoft’s decision to consider more multiplatform games.
In May 2022, Microsoft had an ambitious goal of 100 million Xbox Game Pass subscribers by 2030. At the time, the service, which lets Xbox owners subscribe to a library of games, was sitting at 25 million subscribers. However, the growth of Xbox Game Pass stalled, with major exclusives like Starfield and Redfall getting delayed from a 2022 release to 2023. Microsoft has not provided any update on subscriber numbers to investors since then, and some analysts estimate that Microsoft is only at around 33 million subscribers.
Microsoft has instead focused more on PC Game Pass growth and scaled back some of its Xbox Cloud Gaming plans. The combination of Xbox Series S, the effective $299 Game Pass console, and cloud gaming was supposed to drive a big part of the 100 million Game Pass members figure, but sales of Microsoft’s latest consoles won’t get the company there alone. Microsoft has been looking at other avenues for Xbox Game Pass or gaming revenue growth, particularly on mobile.
The Activision Blizzard acquisition includes mobile games like Call of Duty Mobile, Candy Crush, and Diablo Immortal. A new Xbox mobile gaming store could launch this year, with Microsoft banking on the EU’s Digital Markets Act forcing Apple and Google to change how they distribute apps on mobile devices and ultimately open up their platforms and stores to competition. However, Apple’s surprise new plan to comply with the European Union’s latest tech regulations has left Microsoft and others frustrated.
Microsoft held an internal town hall for Xbox employees last week, where Microsoft Gaming CEO Phil Spencer, head of Xbox game studios Matt Booty, and Xbox president Sarah Bond all addressed employees. While Xbox executives reassured employees that Xbox hardware would continue, they didn’t directly address the rumors about Xbox exclusives coming to the Nintendo Switch and PS5. Instead, Microsoft is expected to have a vision that distracts from some select Xbox games heading to rival platforms.
There are whispers of an Xbox handheld, with Windows Central’s Jez Corden claiming earlier this month that “Xbox literally greenlit several new hardware projects in the past couple of weeks.” Days later, Corden speculated about a potential Xbox handheld, and Spencer liked a post on X describing the handheld as “inevitable.” Microsoft has a habit of teasing future hardware, such as Project Scorpio, which was described as “the most powerful console ever” before it shipped 18 months later as the Xbox One X.
A disc-less Xbox Series X refresh and a new Xbox controller leaked last year, and these could still arrive. However, Spencer quickly dismissed the leak as old plans, so maybe that hardware has been canceled. Regardless, without some public commitment to future hardware, Microsoft could have a problem. By gradually opening up Xbox games to Nintendo Switch and PS5, this also opens up questions over how many games will be multiplatform in the future. If you can play Xbox games anywhere—including PC, the cloud, the Nintendo Switch, and the PS5—then why would you want an Xbox? That’s the big question that Microsoft needs to answer on February 15th.
Microsoft’s Xbox future strategy is to expand beyond consoles and bring Xbox exclusives to rival platforms, such as PS5 and Nintendo Switch. This shift in strategy will give Microsoft more reach for its first-party games and an opportunity to generate more gaming revenue, but it also comes with risks. Microsoft’s overall gaming business has recently surpassed Windows in terms of revenue, but the growth of Xbox Game Pass has stalled, and the Activision Blizzard acquisition includes mobile games. Microsoft is also looking at other avenues for Xbox Game Pass or gaming revenue growth, particularly on mobile. However, without some public commitment to future hardware, Microsoft could have a problem. Microsoft is expected to have a vision that distracts from some select Xbox games heading to rival platforms, and there are whispers of an Xbox handheld. Microsoft will reveal its future Xbox strategy on February 15th.
