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Could Microsoft sell off the Xbox?

Could Microsoft sell off the Xbox?

Fri 28 Feb 2014 8:00am GMT / 3:00am EST / 12:00am PST
Hardware

And if it makes sense for Microsoft, is Amazon in the market to buy?

It is, for the moment, just a conspiracy theory, and it goes something like this: Microsoft wants to get out of the games console business. It's planning to package up the Xbox part of the Devices & Studios division and separate it off from the rest of the company, so it can be sold as a going concern. Who's buying? Amazon, which views acquiring Xbox as a step towards dominance of the living room. If there's anything to this theory at all, the coming year or two could see the end of Microsoft Xbox and a warm welcome for Amazon Xbox.

Let's lay all the cards on the table. The evidence is sketchy and circumstantial. We know that Microsoft is looking at some pretty major strategic changes in the wake of the appointment of new CEO Satya Nadella. Nadella's focus throughout his career has been on the business end of Microsoft - servers, cloud services and enterprise tools - which remains in robust health compared to the troubled state of the firm's consumer divisions. Choosing him as CEO could suggest that the company is aiming for a future focused on enterprise tools and platforms, not consumer products.

Then there's the man who wasn't chosen as CEO, Stephen Elop. Elop used to work at Microsoft, then became CEO of Nokia. Now that Nokia is selling its mobile phone division to Microsoft, Elop is back where he started. Moreover, he saw himself as a strong candidate for the CEO job when Steve Ballmer resigned. With Nadella in the CEO's chair, Elop's consolation prize is that he's taking over as head of Devices & Studios. That's a logical choice, since Devices & Studios will include Nokia under its umbrella, at least to some extent, so Elop will continue running his old Nokia team alongside the Xbox and Surface teams at Microsoft.

Given that, it would perhaps be more surprising if Elop wasn't put in charge of Devices & Studios. His presence ought to ease the transition as Nokia is absorbed into Microsoft, a major acquisition that's likely to cause some indigestion along the way. However, during the CEO selection process, while Elop was still in the running, Bloomberg reported that he had some very interesting plans for the company if he was running it. The reported plans included, notably, a willingness to sell off business units Elop viewed as distractions from Microsoft's main goals - business units including the Bing search engine and the Xbox. As logical as his new job at Devices & Studios may seem, you can't blame people for raising an eyebrow when a man who supposedly wanted to sell off the Xbox division is put in charge of the Xbox division.

"given the plethora of Android consoles currently underwhelming the market and failing to gain a foothold, it's not unreasonable to suggest that Amazon would want to make a much bolder move into the console space"

It takes two to tango, so how about the Amazon side of the deal? Well, whispers of Amazon's keen interest in the games market have flown around for months now, including rumours that the company has discreetly hired a number of veterans from the games industry while keeping their involvement quiet - for now. Last month, Amazon bought games studio Double Helix, fresh from working closely with Microsoft to prepare Killer Instinct as a launch title for Xbox One. Something is afoot. Occam's Razor suggests a "Kindle" console, an Ouya-style box under the TV linked to Amazon's digital content platform, but given the plethora of Android consoles currently underwhelming the market and failing to gain a foothold, it's not unreasonable to suggest that Amazon would want to make a much bolder move into the console space. Plus, Amazon certainly isn't scared of making big acquisitions when it wants to open up a new market opportunity for itself - it's hard to conceive of a cash value for Xbox, not least given how obfuscated the financials of the console business are, but I don't doubt that Amazon could afford it if it really wanted to.

That's it - that's the conspiracy theory. I don't deny for a second that the evidence, if you can call it that, is pretty thin. Microsoft is probably going to refocus on enterprise; a guy who wanted to sell Xbox is the new boss of that division, but he's also the most logical choice for the job. Amazon is setting itself up for a big move into the games space and may (or may not) have hired some senior games people on the down-low. That's the sum total of the evidence, and we should all bear that in mind. Even this article exists not to promote this theory, which I view as interesting but unsupported by the available information, but rather to evaluate, hypothetically, whether there is any real possibility of an Xbox spin-off and sale. In short, there's no real evidence that Microsoft is going to do this thing, but it's an interesting academic exercise to evaluate whether they could do it if they wanted, and whether a motivation to do so might exist.

So how hard, in theory, would it be to spin off and sell Xbox? The answer to that depends on what exactly Microsoft is proposing to sell. Xbox, as mentioned earlier, is part of the Devices & Studios division, which also houses Surface and will shortly be joined by Nokia. Some other odd things are rolled into this division, apparently. It was claimed last year that the patents which force Android device makers to cough up a fee to Microsoft for every handset they sell are held, for financial purposes, in Devices & Studios, thus accounting for a big chunk of the division's revenue.

"it's plausible that Microsoft could sell the entire Devices & Studios operation, thus putting itself out of the hardware business entirely"

If Microsoft's new management had come to view Xbox as a distraction that doesn't fit with their new enterprise focus, one might reasonably ask if they'll take the same view of Surface. That product which hasn't performed well and has reportedly soured relationships between Microsoft and other hardware vendors, who aren't terribly happy with the company from whom they license the Windows operating system suddenly being in direct competition with them. The company wouldn't be happy about losing the patents related to Android, not least since Windows and Windows Phone presumably use the technology described by those patents as well, so that probably wouldn't be included in any sale, but aside from that it's plausible that Microsoft could sell the entire Devices & Studios operation, thus putting itself out of the hardware business entirely.

Alternatively, Microsoft could decide to hold on to Surface and simply divest itself of Xbox and the various Microsoft Game Studios operations. Surface would then be joined by Nokia in the much-reduced Devices division (no more studios!), which would be entirely focused on tablets and smartphones without the "distraction" of games. Such a disentanglement wouldn't be terribly difficult, either. Xbox is actually fairly well divorced from the rest of Microsoft's operations. Its operating system shares a visual language with the "Metro" interface of Windows 8 and Windows Phone, while various game-related elements of Microsoft's other operating systems have also been given the "Xbox" and "Live" monikers. Bing, of course, runs on the Xbox dashboard. By and large, though, the technology and services which drive Xbox are divorced from the rest of Microsoft - although it's worth noting that the much-vaunted Cloud functionality of Xbox One relies in part on Azure, Microsoft's cloud services platform. Any buyout of Xbox would include various contracts ensuring that any Microsoft technologies or services upon which the console relies would continue to be provided to the new owner, so this would not be a major stumbling block.

A bigger question might be, would Microsoft even want to do this? That really depends how seriously you take the idea of "distraction". Xbox One has had its thunder stolen by PS4, but is still selling well - and Xbox 360 was a major success. In fact, it's the only success Microsoft has ever had in the consumer hardware space. Xbox proved Microsoft's ability to create a great consumer brand and sell hardware to people. It's a real bright spot in a few tough years for the company - especially compared to everything else it has attempted in the consumer space, from Zune and Surface to its latest operating system, Windows 8.

Why would you get rid of that? Well, you probably wouldn't - but let's brainstorm a motive. You could argue that Xbox is a bright spot that doesn't have any real relevance to the rest of the company. Microsoft in the early 2000s wanted to reinvent itself as a consumer-facing company, but with Xbox being the only success in a small sea of failures, Satya Nadella is likely to try to bring the firm back to focusing on the enterprise market. As the oil tanker slowly turns around to head into more corporate seas, Xbox will be more and more at odds with the culture and mission of the rest of the company. It will arguably be a distraction both internally, where it won't fit with Microsoft's culture, and externally, where it will detract from a brand message that promotes Microsoft as a serious, corporate, business-focused partner for enterprise (as distinct from the more consumer-led branding of rivals Apple and Google). Selling off Xbox would generate cash (not that Microsoft needs it), streamline the company and start the new CEO's tenure with a dramatic gesture that sets out his vision more clearly than any speech or press release.

"Plenty of pundits seem to expect that PS4 and XB1 will be the last generation of consoles. Would a company as smart as Amazon get sucked into a market that's about to collapse?"

In short, Microsoft could do this and, if we assume that upper management take the notion of "distraction" seriously and are genuinely willing to abandon the firm's ambitions in the consumer devices space, there's a motive for doing it. How about Amazon's side of the table? This deal would cost billions; would Amazon stand to gain enough to justify that kind of outlay? After all, aren't consoles a dying space? Plenty of pundits seem to expect that PS4 and XB1 will be the last generation of consoles. Would a company as smart as Amazon get sucked into a market that's about to collapse?

Amazon, like Microsoft a decade ago, has major ambitions in the consumer devices space. The company built itself on the back of selling physical goods but has neatly sidestepped the so-called "innovator's dilemma" by being more than willing to disrupt its own business. The world's biggest seller of physical books became the world's biggest promoter of ebook readers. Music downloads, streaming video, cloud services; Amazon has taken an active and enthusiastic interest in every field that might disrupt its existing businesses, seeking not to shut down threats but to be the biggest player in whatever comes next. It supplemented the Kindle e-reader with Kindle tablet devices whose market performance is largely unknown, but is thought by analysts to be one of the only genuine competitors to the iPad's sales dominance. Anyone who owns a Kindle device knows that they are designed from the ground up to be a great interface to accessing and buying content from Amazon's ecosystem. That's Amazon's play; own the media ecosystem, building the devices themselves if that's what it takes.

That ambition is a pretty solid fit for the console business. Moreover, it can't have escaped Amazon's notice that Steam, PlayStation Network and Xbox Live together make up a big area of digital content provision in which it has no involvement right now. Amazon will also be paying careful attention to the interest around set-top boxes (like AppleTV and Google's TV efforts) and Smart TVs. Here there's huge potential for consumers to be accessing media ecosystems directly from their TVs and connected devices - again, a game in which Amazon has no skin. For Amazon, the ideal would be that when you want to watch or play something on your TV, you do so through Kindle interface that links right into Amazon's digital library, just like the Kindle tablets work. Of course, an Android microconsole would achieve that goal, but it wouldn't be of much interest to gamers - at best, it would capture a fringe of the market who engage with Kindle tablets.

Is appealing to gamers important? This comes back to the question of whether consoles are really dying - and honestly, who knows better about that question than Amazon? Amazon is the largest retailer in many countries. Not only does it see how many consoles and console games are sold, it also sees loads of connected information which is hidden from even game publishers. It knows how high-spending gamers are in other areas - whether they're likely to buy a lot of gadgets, a lot of books, a lot of movies or albums. It knows how much they engage with the brands they love, whether they cross-promote to friends resulting in more sales, whether they leave reviews and promote products on social media. Amazon can make an estimation of the actual value of the core gamer market more accurately than any other company.

What is that estimate looking like? I don't know, of course, but Amazon's actions in the coming months are going to tell us a lot about it. Regardless of whether the Xbox conspiracy theory pans out, Amazon is going to make some kind of game-related move relatively soon. It will be interesting to see how much importance and focus the company places on the games space at that time.

Until we see more evidence, though, it's impossible to construct a fully credible argument which places the future of Xbox anywhere but Microsoft. There's simply not enough information out there to support that kind of conclusion. That said, there is a possible motive to sell on the part of Microsoft, and a possible motive to buy for Amazon. If I had to pin my colours to a mast on this, I'd say Microsoft is probably discussing a sale with interested parties, including Amazon, but hasn't made a final decision on whether to start sale proceedings as yet. I also wouldn't read too much into that, given that it's the responsibility of management to consider such possibilities as part of their duty to the shareholders. Then again, under Microsoft's new management, perhaps such things are being considered rather more seriously than before.

42 Comments

Bruce Everiss Marketing Consultant

1,692 594 0.4
Microsoft's strategy WAS to own the own the office with Windows, mobile with Winphone and the living room with Xbone. All with Azure behind them.
Microsoft are a software company, so in the living room Live is more important to them than the hardware.

For Microsoft to surrender one whole leg of their strategy would be a massive sea change.

But is Xbone the device to own the living room when smart TVs and tablets seem to be in the ascendency?
And is Microsoft the company to deal with consumers when Amazon are vastly better organised for the job?

One possible route would be for Amazon to buy Xbone. But for Microsoft to retain Live.

Posted:7 months ago

#1

Jakub Mikyska CEO, Grip Digital

202 1,107 5.5
Let's have another angle at this.
What would happen if Amazon bough Xbox division? With brick-and-mortar game shops being in major decline, Amazon is one of the key distribution platforms for PS4, its accessories and games. With the Xbox buyout, they would also become Sony's main rival.

I guess that Amazon's profits from the whole PS4 ecosystem are negligible, compared to the rest of the stuff they have, so it wouldn't hurt them to stop selling it completely and they could throw a really big monkey wrench into their main competitor's machinery. And the same could be said about Nintendo, and any other possible new competitor in the future.

Amazon buying Xbox is an equivalent of a nuclear war in the industry and Amazon would have most of the bombs under their control...

Posted:7 months ago

#2

Rob Fahey Columnist, GamesIndustry.biz

76 190 2.5
Popular Comment
It's worth pointing out that Amazon continues to be a major seller of tablets by other manufacturers even though it has its own Kindle Fire line-up. It's extremely unlikely that it would stop selling Sony or Nintendo products to give an Amazon console (Xbone or otherwise) a leg-up - however, it would certainly give its own device front-and-centre promotion on the site which would give it a significant sales advantage over rivals.

Posted:7 months ago

#3

Curt Sampson Sofware Developer

596 360 0.6
While an Xbox-owning Amazon would surely promote the Xbox a lot more than the other consoles and their games, I can't see them dropping them, or even doing anything serious to hurt their sales, beyond attracting customers away to Xbox with better offers and more promotion. Amazon is really about having a lot of customers for whom it's the place to go buy anything their heart desires, and pushing millions of consumers to going elsewhere to purchase anything at all goes right against that core idea of their business.

And Bruce, how could MS sell the Xbox but keep Live? Live seems to be an integral part of what the Xbox is.

Edited 1 times. Last edit by Curt Sampson on 28th February 2014 9:26am

Posted:7 months ago

#4

Antony Carter Senior Programmer, Epic Games

85 47 0.6
@Jakub
Well you can still buy iPads on Amazon, that are actually fulfilled by amazon, so i don't think there one to cut off profits just because they have a competing product.

Posted:7 months ago

#5

Jakub Mikyska CEO, Grip Digital

202 1,107 5.5
It's just a conspiracy theory, like the whole article :-) But Amazon couldn't really hurt global tablet sales by stopping selling them - they are too proliferate and probably bringing way too much money. But if they owned Xbox, Sony would be their only major competitor. Not a bazillion of tablet manufacturers, but one struggling company. Perhaps they would not stop selling them completely, but they could really shift the balance much in the favor of their own device.

Posted:7 months ago

#6

Klaus Preisinger Freelance Writing

1,132 1,164 1.0
I can see how Amazon buys the Xbox, but not Live.
Live is a revenue strategy of Microsoft to offset other costs. Amazon does not need that strategy, they have their own: Prime.

The same goes for a cloud service infrastructure. Amazon does not need to build or pay for Azure to run Xbox services, they just need to migrate them from one virtual environment to the next, which is hardly rocket science considering their IT budget.

While we are on the topic of conspiracies, surrounding things Stephen Elop does for a living: did anybody consider a merger between those two companies. MSNBC on steroids if you will.

Posted:7 months ago

#7

Max Brode Videogame Consultant

11 9 0.8
Microsoft is certainly in retreat over its consumer strategy over the past five years or so. Since Windows 7 not much has worked for them. The Kin was a debacle of unprecedented proportion, Windows Phone is such a slow burner it's debatable you can even call it a smoulder, Bing doesn't seem to be popular, IE must be losing market share, Kinect has turned out to be a fad, Windows 8 is becoming more and more like its predecessor with every update, Surface is not getting anyone excited, and Xbox has thrown away its customer goodwill and market position with the XO - which also is regressing towards a 360 style interface because the new stuff just doesn't work.

In many ways you could call it cruel appointing someone CEO that didn't really have anything to do with any of it, and dumping all that stuff onto Elop, who can then be blamed for continued failure (although I'm certain that Mr. Elop will be well compensated for his troubles, no matter what).

The most striking aspect of this is that - Kin aside - all of the above services and devices were supposed to come together, run the same kernel, use the same software and feature the same interface. This certainly hasn't paid off. As a matter of fact the only variant of the 'interface formerly known as Metro' that people seem to be happy with, is the Windows Phone version. Not a lot of people are using it, and the app ecosystem is limited, but whoever took the plunge and isn't missing something they've gotten used to on rival platforms seems to like it.

So if I was Steven Elop - having just gotten to know Nokia intimately, and being dumped with the remnants of failed strategy - I'd cut off all of that stuff that holds back the one thing I gambled my career on. Windows Phone must be much easier to push forward if you don't have to consider Surface, XO and Windows Pro for every software change you want to make. So yeah, dump all of it. Nadella won't care. His baby is Azure and Elop would be doing his spreadsheet a favour.

Posted:7 months ago

#8

Neil Young Programmer, Rebellion Developments

302 383 1.3
I don't see the xbox family as a very good fit for amazon; whilst it's inevitable that they're considering some sort of console/streaming box, they presumably want one that's part of their own ecosystem: same brand, same look and feel - and probably similar OS (IE, android fork) and architecture (ARM) as the kindle fires. The xbox does none of those things

They *could* run xbox in parallel, and bring out an amazon branded console at the next generation, but that means they don't get their own console for much longer. They can't just buy it for the tech and rights, since I doubt MS will want the PR hit of selling it to anyone who won't maintain support.

If MS do sell xbox, I suspect whoever buys it will want it a self contained unit, not part of an existing ecosystem.

Posted:7 months ago

#9

Matthew Hardy Studying Multimedia/Game Design, ITT Technical Institute

42 105 2.5
Popular Comment
No one has mentioned, including the author, what I think would be the most obvious reason to buy the Xbox system - Kinect.
The future of apparel/retail will be a digital one, like everything else. A smart camera (Kinect) & a machine powerful enough (Xbox1) to superimpose, realistically, any clothing or jewelry Amazon sells (its a lot) onto the customers body (by way of TV) would be a major boon to their entire retail space. Think of the implications.

Posted:7 months ago

#10

Chris Lewin Software Engineer, EA

20 67 3.4
Popular Comment
Considering some of the people Amazon has plundered from my organization, I think this move is unlikely. They seem to be more interested in growing their own system than buying in one with a (recently) tarnished reputation.

Posted:7 months ago

#11

Robin Clarke Producer, AppyNation Ltd

321 748 2.3
@Klaus

"Do you want to buy our razor business? Oh, we'll keep the blades business if it's all the same to you." Yeah that makes sense.

Edited 1 times. Last edit by Robin Clarke on 28th February 2014 1:50pm

Posted:7 months ago

#12

Andrew Ihegbu Studying Bsc Commercial Music, University of Westminster

461 167 0.4
It would be foolish to say the least. This is the first generation that Xbox could be massively profitable in.

Posted:7 months ago

#13

Tameem Antoniades Creative Director & Co-founder, Ninja Theory Ltd

196 164 0.8
Kinect is not the only game in town when it comes to camera-based motion analysis. But regardless, I'm not sure what the recent NSA/GCHQ shenanigans means for the future of this tech.

Posted:7 months ago

#14

Todd Weidner Founder, Big Daddy Game Studio

412 981 2.4
While Xbox and so forth may not be a huge cash cow for microsoft, it is a HUGE source of marketing and a way to keep relevant and "hip" to the public at large. It allows microsoft to be known by the average person in ways that remind people of fun and cutting edge tech. It buy and creates customer loyalties. If you lose that, what is left? In a generation or two microsoft will just be some obscure business OS and software that may or may not be of much relevance anymore.
Lets remember a 12 year old today playing an xbox game is a CEO or Govt admin 20 or 30 years down the road, and we all use and support what we are comfortable with.

I think it would be a big mistake, it would simply remove microsoft from too many people's everydays lives. Out of sight, out of mind.

Posted:7 months ago

#15

Nick Wofford Hobbyist

180 190 1.1
I don't think it's a solid move. The Xbox is just too integrated into MS. Spinning it off would just lead to a terrible console, cut off from the things that make it work. Azure-powered MP, for instance, would instantly die, as would all cloud computing. (Yes, Amazon could try to replicate it, but that would take years.)

Posted:7 months ago

#16

Ralph Tricoche Studying MA, CUNY

31 66 2.1
If I here in a position to influence change I would whisper in Iwata's ear and urge him to buy Microsoft's Xbox hardware. Therefore leapfrogging years in R&D.

Posted:7 months ago

#17
I am interested it has taken this long to see the media report the possibility - it was swirling round when the head of the XB division left months before the launch of the XBOne.

MS investors are not happy with the money drain that Bill Gates got them into with XB, and the continued investment and lack of return is a burden that is out of the scope of the company's core plans.

For the consumer game industry, a new owner of XB would be good and bad - good, to have a new investor, bad that that new owner will not continue to support investment into media / advertising.

It would seem that E3 this year will be wall to wall with executives hawking their CV's as they look for new jobs - link this to the down turn in console sales and the games industry is beginning to look on the cusp of major change!

Posted:7 months ago

#18

Barrie Tingle Live Producer, Maxis

381 181 0.5
Sammy/SEGA should pick it up and call it Dreamcast 2.
Hey now, I can hold onto a dream can't I? :)

Posted:7 months ago

#19

David Reeves Consultant

4 4 1.0
XBox suffer an acute 'geographic' problem

Firstly they are not coordinated in Europe and operate fundamentally in English, whereas PlayStation's strength always has been the very strong MD's in Europe and EMEA, Germany and France are very big markets, the Middle East is now bigger than Spain. Nintendo are headquarted in Germany.

Secondly, absolutely no traction in Japan and Asia.
Lastly, few 1st party titles from XBox (this has saved Nintendo)m (Over the years, Naughty Dog, Insomniac , Guerilla Games, Liverpool Studios, London Studios from SONY ) ....big money spinners....

As a stand alone, the right people with International knowledge and experience could make XBox extermely profitable in 2 years.

(not to mention a handheld)

Posted:7 months ago

#20

Rick Lopez Illustrator, Graphic Designer

1,269 942 0.7
Seriously, I think microsoft would have done better by simply selling it as a dedicated gaming machine, that can do other things too rather than a machine that can do everything. Make it less expensive and have modular features. An example would be to sell the kinect seperatly for those who are interested in it and not have to make people pay for it if they are not interested. Having all these media options detract attention from one another. XB1 is lost in its definition of what it is, its a box that can do everything... and defining what is everything is where the problem is. before people used to buy XBOX to play games. I think it was better if the product.

Cause to all honesty I really dont care about the motion sensor, voice commands or the camera feature. And all these features for the NFL and sports media, I would hardly use either, thats why i have cable TV. I can easily swipe though differant menu's and TV channels by simply moving a finger on a remote.

And selling the XBOX division without XBOX Live is just selling and empty box. The core of the XBOX expirience is "live". So if I were amazon Id simply manufacture and sell my own gaming machine.

This also leaves me to wonder what will happen to peoples digital purchases, if they sell the XBOX division without XBOX Live? At the end of the day, no company is invincible and maintaining online services and virtual products and purchases costs alot of money.

id be ok with a Digital only purchases if I was allowed to back it up on any type of fisical media, such as DVD, Blu-Ray, hard drives or flash drives. The service can go down but id still be able to access my purchases OFFLINE at ANYTIME.

Posted:7 months ago

#21

David Serrano Freelancer

300 272 0.9
Popular Comment
Xbox 360 was a major success.
I don't think a product released with a fatal design / manufacturing flaw which eventually cost Microsoft over a billion dollars and took over three years to fix can objectively be classified a success. From a business point of view, the 360 was possibly one of the most disastrous consumer electronics / hardware launches in history. Because for half of its shelf life, the hardware was a financial black hole for MS. The console only survived the RROD fiasco because of the mainstream appeal of Xbox Live and the market share MS inherited, not earned, while Sony overpriced the PS3.

With that said, I'd love to see what Amazon would do with the Xbox brand because Jeff Bezos is exactly the type of person the core game market desperately needs. Because unlike Microsoft, Amazon has a record of actual innovations, creating new markets and providing consumers with high quality services. Anyway you look at it, if Amazon purchased the Xbox brand it would represent a massive upgrade for the core industry and the medium on every level possible. Which is exactly why it will never happen lol.

Edited 1 times. Last edit by David Serrano on 28th February 2014 8:26pm

Posted:7 months ago

#22

Adam Campbell Associate Producer, Miniclip Ltd

1,179 967 0.8
It possible but I see it as being detrimental to their position in the market.

All the top dogs in the industry are ultimately trying to push their software, services and on-line destinations to the customers but they all have a hardware business of sorts that helps deliver them.

Xbox is seen by some as a bit of a black sheep but it has successfully disrupted a market that had seriously dominant players (i.e. Nintendo and Sony) and it has seen levels of spending and engagement that some analysts consider to exceed its rivals. Xbox One (in a world of supposedly declining consoles) is still expected to increase its installed base as is the PS4 over the course of the current generation. I don't see a good reason to throw this delivery method away.

With Windows Phone, Microsoft have not only more than doubled their market share over the previous year, they now have the company (Nokia) which has driven this. Working together, Microsoft will put themselves in an even better position than before and perhaps find a way to find more customers in developing markets, which Nokia has been good at.

Even the Surface 2 has seen significantly higher sales compared to the original and gets praise for being one of the reasons (alongside Xbox One) for record revenues.

Many people are already lining up every potential buyer in their minds but I don't see much evidence this would be a good strategic move at all. If anything, selling off Xbox and the rest of the devices business could see the likes of Amazon, Google and Apple become even more of a threat to their future.

tl:dr

Sounds bad in my opinion but we'll see.

Posted:7 months ago

#23

Robin Clarke Producer, AppyNation Ltd

26 50 1.9
I think it would be a big mistake, it would simply remove microsoft from too many people's everydays lives. Out of sight, out of mind.
The Xbox userbase is dwarfed by that of Windows, so I doubt they'd be that worried.

Posted:7 months ago

#24

Curt Sampson Sofware Developer

596 360 0.6
David, I don't think it's reasonable to call Xbox "not a success" based on RROD issue. They've compensated greatly in other places, especially in things like managing to charge a subscription fee to everyone who participates in on-line multiplayer. (Getting an extra $5-$10/month off these people gives them a quite large source of income that their competitors don't have. I'm still a bit shocked that they got away with it with so little complaint.)
Because unlike Microsoft, Amazon has a record of actual innovations, creating new markets and providing consumers with high quality services.
You want to be careful with that one. Amazon has a long history of Wal-Mart levels of pressure on their suppliers, and the book trade widely consider Amazon to be a very mixed blessing, at best. They make a good argument (with which the courts have to some extent agreed) that Amazon has caused significant harm to book publishers and almost single-handedly greatly reduced the perceived value of ebooks. Were I a game publisher, that would make me extremely nervous.

Posted:7 months ago

#25

Paul Jace Merchandiser

936 1,412 1.5
I honestly think they'll get rid of Elop before they get rid of the Xbox brand. I can understand why the new managment might bring this up but Xbox is very strongly incorporated into Microsoft's far reaching plans to own the living room space. And if they did sell it off I don't think it would be a good fit for Amazon, not that this would matter. Microsoft is definitely not in need of any quick cash but it's pretty obvious(and has been for many many years) what they should sell off to make some extra money, while also lessening one more drain on the companies finances: Bing. They should have gotten rid of bing along time ago but keep it around because they think it can compete with Google(it can't). And if they aren't willing to get rid of a non-competitive product like bing then I can't really see them getting rid of an actual competitive product like the Xbox. Atleast the latter makes them money.

Posted:7 months ago

#26

Nick Wofford Hobbyist

180 190 1.1
On the whole, I just don't see it happening. MS isn't looking to scrap their hardware; they picked Satya for his knowledge of the Cloud, which will only be fully accessible for MS hardware. Selling the Xbox would only leave them completely removed from the industry.

@David
The 360 took MS's original $10B investment and cut it to less than $3B, and that's with the RROD. That's a pretty successful console. Live alone generates a minimum of $240M a year, assuming everyone's on the cheapest plan. The 360 had the highest attach rate of any system, and sold as many units as the PS3. If that system didn't make money, then this whole industry is in trouble.

Posted:7 months ago

#27

Jeff Kleist Writer, Marketing, Licensing

355 214 0.6
@Rob Amazon has stopped selling Nintendo products in the past, though I agree that the likelihood they would make the choice to abandon Sony and Nintendo by their choice is nil

@Matthew exactly. That's a huge part if why Kinect is in every box. It's. So you can try on your Glasses.com order, and see how they go with those new jeans, along with a hundred other uses. Want to see how that new couch looks in your living room? Order a pizza? Kinect is there

Amazon has stole a lot of the Xbox brain trust. The most impersonally see is that Amazon buys 40% of Xbox, enough so they gave big returns coming and patent access. ISS far as Surface goes, it's finally starting to get traction, the Pro anyway., especially in business. It's not something that they're going to want to give up.

Posted:7 months ago

#28

Nick Wofford Hobbyist

180 190 1.1
@Christian
That division is dealing with the $10B loss that the original Xbox incurred. The 360 cut that loss by over $7B. Selling the Xbox now, when it's about to generate straight-up profit instead of just making really large payments on debt, would be a mistake.

Posted:7 months ago

#29
Seems many of you are dancing round the head of a pin - Mr. Gates placed a large debt on MS shoulders with the XB and now after three versions and countless sums they have only now just started to start cutting the great losses incurred in this expedition into console game development. I wonder how many investors in MS would have agreed to to the Sega merger back in 2001 now rather than invest so much in their own console!

Lets face facts guys - ditching XB, while keeping just XBLive is a good move for a company that is supported as a software / content operation.

Posted:7 months ago

#30

Greg Wilcox Creator, Destroy All Fanboys!

2,193 1,170 0.5
Andrea: Funny you should mention that. When Lou Costello dies, Bud Abbot tried to go on without him, voicing himself in a cartoon series (another actor played Lou).

Anyway, since Amazon has Double Helix already, who knows what's next. I guess we'll see over the next few months. I can't see them dumping XBL unless it's re-branded Amazon Live or something like that...

Ah well, PURE plug and play gets another kick in the balls (ow!)...

Posted:7 months ago

#31

David Serrano Freelancer

300 272 0.9
@Curt Sampson
They've compensated greatly in other places, especially in things like managing to charge a subscription fee to everyone who participates in on-line multiplayer.
I not sure how Microsoft's Xbox division is structured, but it's a safe bet the 360 and XBL are individual profit centers. So even if the Xbox division generates profits on the integrated product and service, as a stand alone product the 360 was a massive failure on multiple levels. Because how could incurring a billion dollars or more in unplanned, unbudgeted expenses be viewed as anything else?
Getting an extra $5-$10/month off these people gives them a quite large source of income that their competitors don't have. I'm still a bit shocked that they got away with it with so little complaint.
MS got away with too many things because Sony created market opportunities for them which simply shouldn't have existed. If Sony had reasonably priced the PS3 and provided a free on-line service which was more or less on par with XBL, they would have forced MS to make radically difference choices and decisions from the start.
Amazon has a long history of Wal-Mart levels of pressure on their suppliers, and the book trade widely consider Amazon to be a very mixed blessing, at best.
But with AAA game sales declining year after year as development costs continue to rise, the market clearly could not bear higher developer - publisher royalty, certification or service fees. And I suspect Amazon and Bezos would be smart enough to acknowledge this, and to act accordingly. If Amazon did acquire Xbox, I doubt they would have any expectation of earning a short term return on the investment. Because from a business point of view, the core console and AAA game market are both fixer-uppers.

Posted:7 months ago

#32

Eoin Moran Studying Bachelor of Engineering, University of Melbourne

35 32 0.9
Since I am not a business person I don't really know much about this sort of stuff, but could it be possible for Microsoft to split the Devices and Studios into it's own company, similar to say the News Corp split?

Posted:7 months ago

#33

Curt Sampson Sofware Developer

596 360 0.6
David, I disagree to some extent with pretty much all your points, but the one most needing comment is this:
...with AAA game sales declining year after year as development costs continue to rise, the market clearly could not bear higher developer - publisher royalty, certification or service fees. And I suspect Amazon and Bezos would be smart enough to acknowledge this, and to act accordingly.
In the last year, on the eve of a new generation of consoles, we've seen a decline. But over the last decade, the general trend in "core" game sales has been upward. This is quite different from the book market, which has also actually seen the same trend toward "blockbuster" titles that the major publisher game market has. Bezos has had no compunctions about taking all he can get from book publishers, despite them being in a considerably more perilous situation than game publishers, and has shown no concern at all for the health of the book publishing industry, beyond that enough of it exists that he can keep selling Kindle books.

There is no reason whatsoever to think that he would see games any differently. They're just another mass market product, along with books, movies, music and a lot of other things, that you get as cheaply as possible to sell on to the consumer.

There's a good argument to be made that Amazon played a big hand in the death of an even minimally profitable midlist book market that's happened over the last 5-10 years. Do we really want to see games go the same way?

EDIT: In fact, the IGDA has already complained about Amazon's policies for their Appstore. Essentially, Amazon reserves the right to sell your game for any price they like, so long as they pay you at least 20% of the retail price you asked for. If the promotion would help them, they can unilaterally reduce the price of your $9.99 game to $2, and give you that $2 per copy rather than the $7 you were expecting.

Edited 1 times. Last edit by Curt Sampson on 4th March 2014 6:12am

Posted:7 months ago

#34

Jeff Kleist Writer, Marketing, Licensing

355 214 0.6
@Barrie re Dreamcast 2

That was Xbox 1, not Xox One :)

Posted:7 months ago

#35

Jeff Kleist Writer, Marketing, Licensing

355 214 0.6
@Dvaid

Putting Japanese issues with not understanding the internet aside, it is precisely that $60 a month that paid for gobs of the innovation on Live. It paid for servers to support cross game chat, standardized interfaces because people were always dealing with the same infrastructure, it supported them helping Netflix Streaming become the oiled machine it is today, hell it's what paid for the constant R&D that gave us three dashboards in seven years it's what let them support indies to allow them free online play.

So it's not just that Sony had no clue about the internet beyond "giant shopping mall" (gee think how much all that money they spent on home coulda helped prevent the hack).

And that's a big part of why Sony is now charging, because they have to. Essentially their only innovation last gen for online was "free games!" While it's a great one, don't pretend that Live is all about sucking consumers dry. That's what DLC and early access movies are for.

I agree with you that the hardcore gamer model is incompatible with the way thry do business, which is why I think a spinoff with them buying in is the only scenario that makes sense. Most people just have no idea how big X1 and Kinect are going to be in various permutations in products that have nothing to do with gaming. Right now my uncle is working on medical devices that use Kinect to watch the infirm, and it immediately detects drops in blood pressure, breathing, all kinds of nuanced stuff. Robots are using them, you name it. Kinect will continue to be a non factor in gaming outside of fitness and music titles, but it's inclusion has always been about everything else anyway.

Posted:7 months ago

#36

Paul Shirley Programmers

178 150 0.8
@Jeff Kleist

I think most of us are very aware of how successful the 1st Kinect was in niche markets outside games. I have little doubt Kinect2 will enable even more niche markets. What I don't see is that dragging the XB1 along for the ride, not in the non-MS niches, not in the media business MS so desperately wants to own a share of.

You could certainly build a successful business from the non gaming use of Kinect, it disagree about it being a big business. I doubt it's more than a minor consideration inside Microsoft, where Kinect is inseparable from their 'owning the living room' media lust.

Posted:7 months ago

#37
@Paul, sadly the ability to build any future business based on the Kinect is not possible following the sale of the company behind the tech / patents to Apple. The news of this move and the new Google spacial tech caused many to see Kinect as a dead end - adding to questions on the MS XB division viability.

Posted:7 months ago

#38

Klaus Preisinger Freelance Writing

1,132 1,164 1.0
Some parts of the Kinect remain desirable, others remain questionable.

Voice control remote is not something you need the Kinect for. You could put the Microphone in the chassis of the XboxOne and still have that feature in every console sold. Voice control is not the worst idea in the world, merely one you might not need. Even then, "Xbox! Stop Listening" is a 1980ies slasher movie waiting to be be made.

Gesture control is the tricky one. The Kinect makes quite a few assumptions about how the layout of your living room should be, where you are while playing and how you should play. The Kinect assumes you like making grand gestures, while every other interaction you have with a piece of technology consists of minute gestures, such as pushing a button, or moving finger a few millimeters. Just like smartglass, gesture recognition looks great in ads and presentations, but just isn't practical in reality beyond a novelty factor.

Plus you have to be comfortable with having a video camera pointed at your family space while being (most likely) hooked up to the Internet. Even if you might get entertained by a bit of augmented reality software, the price you pay is giving up more private space. Then again, ten years back we laughed at a man in the newspaper, who upon finding out he was on a government watch list for no reason, started to do a surveillance blog about himself. Today, we wonder what a newspaper was.

Posted:7 months ago

#39

Curt Sampson Sofware Developer

596 360 0.6
Jeff Kleist writes,
it is precisely that $60 a [year] that paid for gobs of the innovation on Live.
True, but that innovation could have been done without charging the customer. I'm not convinced that Sony spent significantly less on developing PlayStation Network. Live is a better product not because Microsoft charged for it, but because Microsoft, at the time, both had a better vision of the future and was significantly better than Sony at designing and building software and systems like that.

(The consensus on why the PS3 never got cross-game chat was that they simply didn't have the resources [CPU and memory] left in the box to do that after release, because they'd not planned for it from the beginning. You'll note that in other areas where they'd obviously fallen short, such as not having achievements/trophies, they eventually caught up.)

Microsoft charging a subscription fee for Live Gold was purely a marketing thing, not technical at all. They bet that being able to do on-line play would be valuable enough that they could get away with charging for it, and they turned out to be right. (The Xbox team had always believed that broadband connectivity would become a major component of gaming, which is why even the original Xbox came with integrated Ethernet.)

Edited 1 times. Last edit by Curt Sampson on 4th March 2014 6:27am

Posted:7 months ago

#40

Jeff Kleist Writer, Marketing, Licensing

355 214 0.6
@Curt

It's because they didn't plan for it, and because it would have required huge rewrites of the OS, AND the expense of the data centers. The additional expense of testing, patching etc all existing titles was icing on the cake (and yes, memory CPU issues might not be fixable). Cross game chat requires a robust centralized system, and nothing on PS3 PSN is like that that Basic functions and shopping. A lesson MS should have learned from that messed up parties until this new patch.

Being quite involved in the media side of things, trust me, that money has gone a lot of places you don't directly see. Netflix Streaming? Gold subscriptions helped pay to create the tech it ran on till recently when you stream cable to your 360. That was gold subs too. So much of the media backbone is because they had the money to toss stuff at the wall and see what sticks. Is it huge profit too? Yup.

@klaus they tried putting it in the box. Placement of the system in the room, combined with audible and electrical noise make putting Kinect in the box impractical. Yeah, the drivers still need work, forget about gesture control, active control anyway. It's clunky at best and will remain so until a full holographic interface is practical, with Dance Central closest to something that works. Think more about " I wonder hiw that couch in friends looks in my living room". It's not just one set of voice controls either, it's sorting out who's speaking. There's a ton of factors that are behind the scenes that make Kinect not just what a headset mic couod do.

There's a lot of experimentation going on, but don't be suprised if the device making sure grandma hasn't fallen and can't get up, or what's helping you choose a new paint scheme isn't an Xbox One under the hood five years from now

Posted:7 months ago

#41
I'm surprised that no-one thinks the most obvious thing will happen given that it's the Windows Phone guy who's taken over the division which contains the Xbox, Surface and Phone products.

They'll make an Xbox version of Surface and Phone and improve the interoperability between them.

Personally that's the direction I've thought Microsoft has been going in for a while although I do think there's something in how the management structure has now been setup. Essentially Microsoft has split itself into two separate companies and the parent company is the server side run by Nadella and if Elop doesn't deliver quickly I think he'll take the fall and the whole thing will get sold off or there will be reverse merge so there definitely could be truth in this however premature.

Edited 2 times. Last edit by John Owens on 7th March 2014 4:54pm

Posted:7 months ago

#42

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