welcome back to the show today it’s pretty wild it really is rare that we get a story of this scale but here it goes in 2021 one year after the Xbox series consoles stumbled their way into the world Microsoft CEO satian adala was allegedly considering two options for Xbox option a stop to basically wind it down and get Microsoft out of games Market option b was to double down now Microsoft do deny this report right but even though they do deny it it does seem to fit what we all saw because at that stage Microsoft was floundering the series consoles were behind their big mascot brand in the form of John Halo had a rough launch and we all know how it would go on to go and The Vibes were turning on them so if you were in satin adella’s shoes what would you do get out or double down and certainly what appears to have happened is a doubling down almost $1 100 billion do of Acquisitions between Activision Blizzard King and of course Bethesda ZX that is so much money and I get why it’s a competitive market go hard or go home and as much as say Starfield was not a pure win and redfall was quite the disaster picking up activ Vision blizzard sure did help in fact take a look here this is their recent financials and you actually see that every element of growth in Xbox’s financials was driven by uh Activision Blizzard which sure does say something about the underlying Xbox business uh kind of struggling okay it’s rather grim and today we have got two things thing Number One X Box’s reported goal is 100 million Game Pass subscribers by 2030 that would be triple the number of Game Pass subscribers as of the Activision blizard King acquisition and two and this is a ginormous one analysts are now suggesting the cost of Game Pass is really quite gargantuan to the tune of 80% of sales being cannibalized is absolutely insane so you want to sit down for this one preferably on today’s million goal Game Pass is absolutely plan a for them and after the price hikes it’s $14.99 for Day One games and consoles $1.99 for the same in PC or $19.99 for both plus Cloud streaming so for their console base that is $179.81 a year for access to a games library that as an example through 2024 had 137 games which is just over $4,600 in value technically added and of those 37 were day one some of them were fairly big hits like your pal worlds your Frost Punk twos your Manor Lords like from the Indies and then you got the top tier ones and six first parties most notably I think are blop 6 and Indiana Jones so if you are happy to not own your video games and to just have access to a library yeah you can say it’s a pretty banging deal almost as if a massive tech company is dumping truckloads of money into some sort of big strategic initiative yeah that’s definitely what’s happening and for developers Game Pass is something that has changed so one game pass deals are much harder to come by these days even though like yes it is Indies third parties Etc that still bulk the pass out and the less good news here is not just being said by bitter Indies who didn’t get deals it’s actually being said by teams who have previously championed Game Pass we’ve heard from so many different sources that it’s being pretty rough over there when deals do happen they’re also smaller these days but for the longest time we had all heard The Line Game Pass deals increase your sales and yeah there’s cases where that could happen but it’s also suspiciously close to ah you’ll get so much exposure we’ll pay you with that exposure and now we’ve got an analyst pointing out just how bad that can actually be here’s Christopher dring until recently he was of game industry. Biz and he has been doing trade journalism for 17 years he is a very well-connected guy and in a Q&A he dropped this anecdotally games that are in Game Pass can expect to loose around 80% of its expected premium sales on Xbox it’s less if it’s a big mainstream Rel release but generally dot dot dot look at how low hellblade 2 charted or where Indiana Jones came or even Starfield Game Pass clearly hurt sales of those titles on Xbox so yes you’re in a strange situation where Game Pass can cannibalize loads of sales meaning that these Xbox titles don’t actually appear as high up as you could expect on sales charts now 80% is a hell of a lot and the rub here is that Microsoft cannot sell games on their own platform which does make sense I mean why buy a new game when you can just access that game for far less money while for that same amount of money also getting access to loads of other games in fact Microsoft themselves even told Regulators right during the ABK acquisition that they fully expect to see a decline in real sales for at least a year which of course makes perfect sense especially a singleplayer narrative game like Indiana Jones or hellblade 2 why would you pay full price for something that you’ll play once or twice through right you’re just not going to do that it doesn’t make sense Microsoft are knowingly sacrificing vast quantities of upfront money but they’re doing it for a reason they know that their own wall Garden is pathetic so they’ve changed tact it’s now less about them having a wall garden and more them being an invasive species and making their way into other people’s walled Gardens rather shockingly my phone is an Xbox my iPad an Xbox uh you are an Xbox sadly my fridge is not an Xbox but basically this is actually an Xbox is the Crux of their latest marketing campaign for everything the idea basically is that every device you have anything with a screen will of course work with Game Pass ultimates Cloud streaming so if you buy a new TV there’s a pretty damn High chance that you’ll have Xbox pre-installed on it and that’s as an example why Microsoft ultimately abandoned their Streaming Stick you know a bit like a fire stick or a chomecast they just realized there wasn’t actually any point in them making the hardware because it’s just streaming the big picture I a though is that Xbox is a thing that is everywhere that you can access anywhere and if you want to access it the best way you can buy their console and access it that way now obviously this would all be [ __ ] if your saves were fragmented but the updated play Anywhere system is going to sort that out which basically just means everything is an Xbox nothing is an Xbox but that’s actually their plan because those people arguing that Microsoft are abandoning their console in a way are not wrong take the switch 2 from Nintendo right now it’s actually heavily rumored that Xbox is going to be one of the most prolific Publishers on that thing which again does make sense and take this statement right the era of Xbox having permanent console exclusives is over that is a quote from jez Cordon who is somebody writes for Windows Central he has got inside sources so is Xbox abandoning their console I think the answer is yes it is certainly not plan a anymore but there’s a reason why they’re abandoning it because we all abandoned it first and they still need to grow but actually for gaming growth is Elusive and if you’re an Enthusiast like me this will catch you by surprise take a look at this chart it’s fascinating and it’s from ailon CEO Matthew ball now this is a recent report but it focuses on older data and basically how the industry changed up to this generation but it really does matter so take a look at this line it says high performance and that basically is you know your your Xboxes your PlayStations not your handhelds and between Generations right it’s flat the thing that’s growing console sales basically is the Nintendo switch so essentially as we move from PS3 to PS4 Xbox 360 to Xbox one we didn’t see high performance consoles as a sector grow in a massive way which honestly a lot of people would find quite surprising as for this console generation it’s actually a little bit more Grim so as of 6 months ago the PS5 had sold 61.8 million units the PS4 had sold ever so slightly fewer units in the same amount of time but the lifetime sales of the PS4 are 117 million so with those numbers you can immediately tell that a lot of people did not just by default hop onto the new console generation from Sony but where the big picture becomes clear is taking a look at Xbox this is from Wall Street journals reporting and uh yeah 28.3 million units that is under half under half what Sony have done in this generation and of course if Sony are ever so slightly defeating their past results but Xbox are really doing quite terribly what that basically means is the overall sector hasn’t really grown for high performance consoles so let’s put this together the Nintendo switch is pretty damn massive 146 million sales and PC is on the up as an example PC spending is estimated to be 20% higher than in 2021 and we keep on seeing steam hit like new heights in terms of concurrency and all of those stats so if you’re wondering what the deal here is and why I just assaulted you with loads of facts and numbers and stuff basic basically here’s why they can see the writing on the wall we can all see the writing on the wall it’s probably why we didn’t all go and buy series x’s and because the series in Stall base is so low they’re obviously not doing a competitor to the PS5 Pro they have officially said they’re not going to do that but in a way they see the PS5 Pro as a faster horse they see themselves as Henry Ford so even for them resources are limited why would they waste those resources on the pro version of an already defeated console when they can start investing on winning tomorrow in a new market a market informed by the fact that high performance console growth has been flat maybe even declining and especially when industrywide total engagement across PC and consoles was stagnant in 2023 but was down 10% in 2024 one thing first though because I got to grab us out of this strategic Quagmire to just have a real talk so I’m going to bet that there’s a rumbling dissatisfaction that’s probably been bubbling around your head throughout this video it’s been bubbling around my head throughout this video and that’s because all of this strategic talk does make sense you look at Microsoft you see them completely lose the consoles and then decide right we’ll put our resources into tomorrow and we won’t bother with the thing right now blah blah blah there’s that’ll back it all up but also hold the [ __ ] on a second games are a hobby games are an art form a creative art form which is why we enjoy playing them getting the new experiences that we can get from them so before I bring this home and try to lay out you know what Microsoft is thinking I do want to plant a bit of a flag here as an example right now in the world of streaming you can see the business models of your Amazon primes and your Netflix’s really just now being at the expense of the customer experience and this happens in so many businesses at least in most cases it seems like it’s all this Grand strategy that’s flopping out of the sea Suites perhaps the suits a floor two lower and the legions of product managers who are there to hit their kpis and their okrs and to ship their update in the right quarter but I think that screws developers it certainly screws us as customers we’ve just seen like in many ways in games a lot of things are getting worse and it sucks so all of this talking about big strategy is fun but it’s often I think a sort of self felating fun there a distraction from the actual thing of value which in some sort of Ideal World would be are the games good like what um swen from uh from laran you know said at the game awards we’re like well no we’re laran this is the type of game we make uh we don’t follow the trends we just want to be really good and making the type of game that we’re really good at making and funnily enough people absolutely godamn love that so I think you get the point it’s all this midwit strategic stuff that leads to you know your Star Wars being mishandled or Netflix being so analytical with how they cancel or Greenlight their shows that at this stage nobody bloody trusts them so with that in mind that there’s probably going to be a lot of damage around this let’s bring Xbox’s plan together it’s a plan that by now is actually quite clear Xbox did have plans for a midgen upgrade to fight the PS5 Pro but again per Jaz Cordon they abandon those plans and are going straight to the Next Generation Now Xbox have themselves ruled out exiting the gaming Hardware space right which basically means this by the year 2030 they want to ship a new console and they want to hit 100 million Game Pass subscribers now there are rumors suggesting that they will be publishing heavily in the switch too and as jez said the eror of Xbox having permanent console exclusives is over and we’ve already seen that with Hi-Fi Rush SE of Thieves and now even their big guns like Indiana Jones which is officially targeting a spring launch on the PS5 which is when I’m going to buy it and that’s the only way that Microsoft would ever get my money for it which is what they want they’d probably like that money Microsoft are not betting on Console growth which does actually make sense high performance console growth has actually declined so their plan instead is to not not grow directly against Sony but to grow around Sony by publishing their games on Sony’s platform on Nintendo’s platform and then every screen on Earth through streaming that gets them Revenue it grows their brands more and more people will be playing an Xbox game studios thing such that when the new console generation does actually happen people will be more used to them and they will be aware that game pass is there and that all those games they buy for 50 60 70 maybe 80 dollars are actually just oh 20 bucks a month over there and that I believe is the thin end of the wedge that they want to use against Sony because when you look at Sony’s business model one thing’s pretty damn clear them putting a big new like Naughty Dog game or something from Insomniac on ps+ on launch day is basically Unthinkable and also remember that by the time that happens PS5 users will be used to buying Doom Elder Scroll 6 Indiana Jones stuff from all of those Studios they have acquired where we haven’t really seen the bulk of the in production games yet that is their big long plan and to best serve that plan rather than grow their Hardware share now they want to grow their software share they then want to convert that into subscription and hardware sales in the future but of course that’s just a big strategy and uh it’s Microsoft do you know the history of Microsoft they’re they’re somewhat a company renowned for just unforced errors absolutely all of the time I’m sure you enjoyed the new Microsoft Word and Windows 10 news that was all lovely so um yeah this is a Microsoft that will also as time goes on only care less and less about gaming because being real they’re just going to care more about spinning up their nuclear reactors for their AI data centers we live in interesting times if you think we’ve missed an angle in this analysis let me know down below and uh we really do live