Microsoft's altered approach to gaming is working as planned
posted Saturday Nov 14, 2020 by Scott Ertz
This week saw the much-anticipated release of Microsoft's 4th (or possibly 5th, depending on your view of the Xbox One X) generation of Xbox consoles - the Xbox Series X and Xbox Series S. The launch comes during a time when Microsoft has reconsidered its gaming business, placing a focus on services and subscriptions to increase recurring revenue, rather than occasional peaks and valleys. The change is part of a wider change to the company's business model, with services becoming a core aspect of the company under CEO Satya Nadella. And, as it has in other divisions, the change seems to be a success.
The console launched as the best launch day Xbox ever. Xbox head Phil Spencer said,
Thank you for supporting the largest launch in Xbox history. In 24 hrs more new consoles sold, in more countries, than ever before. We're working with retail to resupply as quickly as possible. You continue to show us the connective power of play is more important than ever.
This is compared to the Xbox One, which sold one million units in its first 24 hours. This pair of units have sold more than double that in the same time period. But, this is not the only major accomplishment for this generation of Microsoft gamers. Of those who have the new consoles already, 70 percent are Game Pass subscribers. Some were already subscribers coming into the new generation, while others signed up with their purchase. Either way, the company's subscription business model has connected with gamers in a big and meaningful way.
This milestone could have a lot to do with the addition of EA Play to the subscription, which also began this week. It could also be tied to the Xbox All Access program, which gives you access to Game Pass and a console for one monthly price. Or, it could be because of the $1 first month deal, which would be a quick and inexpensive way for new console owners to test out their new hardware.
Considering how the previous generation's launch and lead up went, it's impressive that we're here at all. As Microsoft watchers have known for years, Microsoft considered leaving the business entirely, with current CEO Nadella advocating for the sale of the Xbox division. Phil Spencer recently went into detail about the chaos that happened behind the scenes and in front of the cameras.
The company's E3 conference that year was overshadowed by Sony, which altered their entire business model before their won conference after seeing the negative response to the forced inclusion of the Kinect sensor with the Xbox One, an accessory which is officially dead today. That was followed by staff changes and merged with Ballmer's controversial view of the brand, created a lot of mixed emotions inside of Microsoft. Thankfully, Nadella did not kill the brand upon taking over, and instead brought clarity and focus on what gamers ultimately wanted - fun.
