The ongoing legal battle between Epic and Apple has resulted in all sorts of interesting details about the industry's inner workings being made public, but sometimes, it's the information you can't see that's the most interesting of all.
That was certainly the case this week with the redaction of portions of a deposition from an Xbox business development representative -- redactions which Axios Gaming's Stephen Totilo reported had been made due to revealing commercially sensitive information about Nintendo.
The discussion surrounding the redactions is all related to Microsoft's struggle to get xCloud game streaming services onto iOS (which it ultimately failed to do, as Apple insisted that every game on xCloud had to be evaluated as a separate submission to the App Store), so there's only one sensible interpretation of what was said in the redacted portions -- they must refer to discussions between Microsoft and Nintendo about putting xCloud on Nintendo's Switch.
The Game Pass team are specifically mentioned in this context, so the discussion seemingly wasn't about something more technical and behind-the-scenes, like Nintendo using Microsoft's cloud services in a more general sense (following in the footsteps, perhaps, of the deal Microsoft has with Sony to provide cloud services).
The only things the Game Pass team could have been discussing with Nintendo were either putting Nintendo's games on Game Pass -- and let's just dismiss that one out of hand, shall we, since the chances of Nintendo's games turning up on someone else's platform are about as likely as the Louvre agreeing to lend you the Mona Lisa to spruce up your downstairs toilet for a few months -- or putting Game Pass on Nintendo's console.
Of course, the actual nature of that conversation is totally unknown, and it's entirely possible that it consisted largely of Microsoft saying "Hey, we'd like to put Game Pass on Switch," followed by Nintendo saying "No" about as quickly as it's possible for a major corporation to turn down a business proposal from a multi-trillion-dollar company. If that's the case, then the whole interaction is only telling us what we already know -- that Microsoft's strategy for xCloud and Game Pass is to make them accessible on every platform imaginable, from consoles and PCs to smart devices and just about anything else that can handle a streaming client.
If that were the case, though, I'm not sure why such large sections of the testimony would be redacted, or considered commercially sensitive -- although Nintendo's lawyers are no doubt the "abundance of caution" types. The more interesting prospect, though, is that Nintendo actually engaged in these discussions with Microsoft beyond mere corporate politeness, because even if they ultimately went nowhere (or hey, who knows, perhaps the channel is still open and the discussions may bear fruit down the line), the simple willingness to talk about how xCloud on Switch would work tells us some pretty interesting things about both of those companies' thinking.
The dream of Game Pass on Switch is almost certainly a dead end, but the fact the discussions happened is fascinating in itself
For Nintendo to allow xCloud access on Switch -- for it even to contemplate that possibility -- is a huge deal, because on the face of it, it runs counter to the company's entire business model. Nintendo makes its money from software sales -- either selling first-party games, or letting other companies sell third-party games from which it extracts a license fee. Game Pass is, at its heart, a whole ton of game software that's not licensed by Nintendo and would, in this scenario, be playable on the Switch -- and as anyone who subscribes to it will no doubt tell you, having Game Pass is a pretty big disincentive for players to spend money on standalone software. It would also create a weird scenario where Switch versions of third-party games would be more or less competing with the Xbox versions on Game Pass, on the same hardware -- which could complicate Nintendo's relationships with third parties significantly.
So why might Nintendo even think about allowing such a thing? Well, that's where the mere existence of these discussions gets interesting in terms of what it tells us about Microsoft, too. The only way that this deal could possibly have worked out -- could possibly even have been worth discussing -- would be if Microsoft were willing to give Nintendo a cut of Game Pass subscription revenue. This would presumably have been some kind of pro-rated cut based on how much time users were spending on Switch compared to other platforms, so Nintendo's share would be boosted if players accessed xCloud a lot through the Switch -- but given the near-certainty that Game Pass presently generates razor-thin margins for Microsoft, if any at all, the chances are that any Nintendo deal would have involved Microsoft actually reaching into its own pockets to compensate the company for every player who accessed the service on Switch.
Even so, this might have been worth considering for Microsoft -- in fact, the payments it would end up making to Nintendo could ultimately be a bargain for Microsoft, which could treat them as a great investment in the future of the Xbox platform. There is absolutely enormous value in owning the customer relationship, and the reality is that someone playing Game Pass on a Switch is, in that moment, far, far more a Microsoft customer than a Nintendo one.
On balance, Game Pass on Switch is unlikely to actually happen for precisely that reason -- not because the financials couldn't have been worked out, since Microsoft could comfortably afford any reasonable revenue share Nintendo demanded, but because it's hard to imagine Nintendo being willing to give up its customer relationships for almost any price.
Moreover, Nintendo is fairly legendary for being outright bone-headed stubborn about the level of control it exercises over software on its platforms, so the notion of giving up that control and allowing Switch owners access to a bunch of software Nintendo has potentially never even seen, let alone approved, over a streaming service belonging to a totally different company, would probably be enough to provoke nervous breakdowns all across Kyoto.
The dream of Game Pass on Switch is almost certainly a dead end, then -- but the very fact that the discussions happened, and that they appear to have gone a little past the level of a corporate courtesy call, is fascinating in itself. That Nintendo is requesting the redaction of commercially sensitive material from a Microsoft executive's testimony about the relationship between Xbox and Apple is an insight into just how complex things have become at the top of the console industry.
We've come a very long way from the era of "My hardware is better than yours" type console wars -- this time around it's all about services, software, business models, and a battle over the most basic notion of what a games console actually is. The notion of an Xbox service on a Nintendo console may seem outlandish now, but this new and unusual console war is likely to create some very unusual allies and bedfellows in the years to come.