Current Events > A Microsoft shareholder grilled them about their lack of Xbox exclusives

(+) Yeah! (+)

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Keith Weiss -- Morgan Stanley -- Analyst

Excellent. Thank you, guys, for taking the question. Again, a really solid quarter. And, Chris, it's been great working with you. Sorry to see you go from this role.

As to my questions, one question for Satya, and starting a little narrow and maybe running it out from there, gaming in the quarter, you had a good quarter for gaming with the Xbox launch. But more broadly, there's some murmurings out there about Xbox falling behind PlayStation if you look at sort of the bases of those two consoles, there's murmurings about not having enough kind of exclusive games on the console.

I know you sort of mixed up the leadership a little bit there. How do you feel about your positioning in gaming from a narrow focus, and then more broadly how are you guys feeling about your position in the home, if you will? When I go home, I'm talking to Alexa, not talking to Cortana. Is that something that you're comfortable where we are today, is that something we should see improving on a going forward basis?

Satya Nadella -- Chief Executive Officer

Thanks, Keith.

So let me take both of those questions. So on gaming, we feel good about Xbox One X, the premium console launch. We also feel good about the volume we got for Xbox One S, because we always wanted that halo effect of the premium console driving even the lower end console, because that creates the sockets for gaming for us.

But our real strategy going forward is not only to do great work on the console, but to complement that with the work we're doing on the PC. PC gaming is a growth market, and so therefore you see us, whether it's our subscription offer, whether it's our streaming efforts that are increasingly bringing the console plus PC together.

And then not stopping there but going to other devices, for example, mobile. Minecraft on Mobile we just launched, in fact, in the last quarter in China. We are seeing tremendous growth of Minecraft expansion on mobile platform in China. So overall, you'll see us do good work on console. We'll compete there, but more importantly we have a much more broader gaming view in terms of what value we can add with our subscription services, streaming services across all devices.

And one other point I think I made in my remarks earlier is, gaming also is a growth area for Azure. In other words, we have now increasing PaaS services that we are going to reinforce on Azure and attract more game developers. Some of the know-how that we have from Xbox is not just about the Xbox, but it's going to help developers across the board. So that I think will also transcend or lead into even media companies. So we are very excited about some of what we can get out of our investments in gaming. So that's our focus on gaming.

Interesting
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these people don't sound even remotely human
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"Exclusives" will die out with this generation and choosing between XBox and Playstation will be like choosing between Gateway and Dell.
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r4X0r posted...

"Exclusives" will die out with this generation and choosing between XBox and Playstation will be like choosing between Gateway and Dell.

I doubt it. I think Microsoft will be pumping out more exclusives in the next few years because of Game Pass.
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What I get from this is that he seems to have said we dont care about exclusives, we are working towards making Xbox into basically just a subscription platform

Really hope thats not true tbh
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LOL no. There won't even be a next generation of gaming consoles. They'll just be different hardware running the same stuff. Welcome to the future.
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"it's a good time to be a gamer on xbox"
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Sony making good exclusives is due to:

1)their studio acquisitions last Gen and proper utilization of them, unlike what Microsoft did with theirs.

2)japanese support
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r4X0r posted...

LOL no. There won't even be a next generation of gaming consoles. They'll just be different hardware running the same stuff. Welcome to the future.

I don't know why that would be the case since consoles have sold very well this generation.
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flussence posted...

these people don't sound even remotely human

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Romulox28 posted...

What I get from this is that he seems to have said we dont care about exclusives, we are working towards making Xbox into basically just a subscription platform

Really hope thats not true tbh

I don't see that as a bad thing tbh. I wonder if they're prodding Sony and Nintendo about putting it on their platforms.
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Romulox28 posted...

What I get from this is that he seems to have said we dont care about exclusives, we are working towards making Xbox into basically just a subscription platform

Really hope thats not true tbh

It's already where the industry as a whole is headed. We've already seen the pin prick that's going to pop the lootbox/microtransaction bubble so that gravy train isn't going to last forever. "Games as services" is the next AAA gaming assblast carousel we're going to be riding for the next gen of gaming.
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Frolex posted...

Romulox28 posted...

What I get from this is that he seems to have said we dont care about exclusives, we are working towards making Xbox into basically just a subscription platform

Really hope thats not true tbh

It's already where the industry as a whole is headed. We've already seen the pin prick that's going to pop the lootbox/microtransaction bubble so that gravy train isn't going to last forever. "Games as services" is the next AAA gaming assblast carousel we're going to be riding for the next gen of gaming.

Yep pretty much. Sadly.
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r4X0r posted...

LOL no. There won't even be a next generation of gaming consoles. They'll just be different hardware running the same stuff. Welcome to the future.

They're already basically the same hardware running 95% of the same games. I dont see why next gen would be any more homogenized though. There is little to nothing to gain from them doing that, but they would lose an awful lot(proprietary services, peripherals and licensing fees). Microsoft might be ok with Windows and Xbox becoming the same thing but there is no fucking chance that Sony allows any kind of interoperability between the brands.
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Two people who likely have never played video games in their lives having serious discussion about video games
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While I still enjoy gaming, with the direction it's heading, this is probably the last Gen I play. I'll still game on older stuff, but not get into new games, if this is where we are going.
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it's like ballmer never left
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Some of the know-how that we have from Xbox is not just about the Xbox, but it's going to help developers across the board. So that I think will also transcend or lead into even media companies. So we are very excited about some of what we can get out of our investments in gaming. So that's our focus on gaming.

Guy should get into politics with the amount of words he used to say exactly nothing.
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If I'm being honest I totally would prefer a Netflix style subscription for a whole bunch of games instead of season passes and microtransactions out the wazoo. Both EA Access and Xbox Games Pass are already good services.
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Darmik posted...

If I'm being honest I totally would prefer a Netflix style subscription for a whole bunch of games instead of season passes and microtransactions out the wazoo. Both EA Access and Xbox Games Pass are already good services.

The problem with releasing games on a subscription service is that there's absolutely no incentive to make an expensive AAA title. It's the same reason why Games With Gold and PS+ usually have really old major titles and are otherwise mostly indie titles.

Nobody's going to invest in something like Gears of War and just give it away with a subscription. And even if they do, those titles will be very few and far between.
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r4X0r posted...

"Exclusives" will die out with this generation and choosing between XBox and Playstation will be like choosing between Gateway and Dell.

Eventually we'll reach a point of subscription based gaming from low powered/cheap devices much like Netflix. And when that happens exclusives will get more important if anything, just like how arguably the primary reason to even have Netflix anymore is the originals or at the very least it's inarguably a huge part of their model at least.
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pres_madagascar posted...

While I still enjoy gaming, with the direction it's heading, this is probably the last Gen I play. I'll still game on older stuff, but not get into new games, if this is where we are going.

same

Coffeebeanz posted...

Some of the know-how that we have from Xbox is not just about the Xbox, but it's going to help developers across the board. So that I think will also transcend or lead into even media companies. So we are very excited about some of what we can get out of our investments in gaming. So that's our focus on gaming.

Guy should get into politics with the amount of words he used to say exactly nothing.

the impression im getting from this is that he keeps mentioning xbox beyond the platform, as just a sort of brand. expanding it to developers, media companies, etc. once again seems to confirm my subscription/launcher theory
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Darmik posted...

If I'm being honest I totally would prefer a Netflix style subscription for a whole bunch of games instead of season passes and microtransactions out the wazoo. Both EA Access and Xbox Games Pass are already good services.

It'll be all fine and good until we reach the point where games start requiring you to pay for subscription plans for access to full services on top of the subscription price you're already paying to play the game. The game industry has continually proven that once you give them an inch, they'll take a mile or two or ten.
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My biggest fear with a games as a subscription service is that eventually they will strip away any way to actually own the game. This is why I couldn't stand Office 365 when it first came out. I want to own the damn product.
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Coffeebeanz posted...

Darmik posted...

If I'm being honest I totally would prefer a Netflix style subscription for a whole bunch of games instead of season passes and microtransactions out the wazoo. Both EA Access and Xbox Games Pass are already good services.

The problem with releasing games on a subscription service is that there's absolutely no incentive to make an expensive AAA title. It's the same reason why Games With Gold and PS+ usually have really old major titles and are otherwise mostly indie titles.

Nobody's going to invest in something like Gears of War and just give it away with a subscription. And even if they do, those titles will be very few and far between.

Yes there is. To keep people subscribed to the service every single month. It's not being given away.

Games with Gold and PS+ don't charge anywhere near as much and are also used as a justification to charge you to play online.

Frolex posted...

It'll be all fine and good until we reach the point where games start requiring you to pay for subscription plans for access to full services on top of the subscription price you're already paying to play the game. The game industry has continually proven that once you give them an inch, they'll take a mile or two or ten.

Services like what?
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As long as it's not a trojan horse way to exert DRM control to the point where gamers no longer actually own the game. That's really what Microsoft tried to do with the Xbox One initially - you literally had to go to specific stores to trade in disc-based X1 games because they were really just digital purchases on discs.

Game publishers have made it exceptionally clear that they don't support sharing games and have been going to great lengths to restrict it (remember EA's "online passes?")

Just seems like a way to get a nail in the coffin while the gamer is distracted by the sweets. Once you've eliminated consumer ownership rights, you don't have to worry about brick and mortar stores having sales or people trading games between each other.
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There will still be the option to buy the games on their own. That's just tossing away money if they don't. Even Netflix release their shows on DVD. But yes these purchases will gradually be the minority. Not sure how this can be avoided at this point.
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Also, Sony had an entire game platform dedicated to draconic DRM with the PSP Go.

Removing the disc drive meant all games had to be purchased from PSN, and pretty much every game was grotesquely more expensive on PSN than it was on UMD Disc.
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Darmik posted...

There will still be the option to buy the games on their own. That's just tossing away money if they don't. Even Netflix release their shows on DVD.

You'd think so, Microsoft attempted to do exactly that with the original X1 digital rights platform. The disc was really just a plastic coaster that couldn't even be played unless the one-time-use code it came with was registered online to your account.

Point being - that disc was a formality. It really was just an illusion of consumer ownership. I'm sure Sony was planning on something equally as asinine prior to E3 2013.

Now if you extract that to Xbox being transitioned from a console to a sort of service platform in the future, they can eliminate the disc entirely and have much more control over price and ownership.
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Lmao the reply didnt say anything about exclusive games at all
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Darmik posted...

Services like what?

"Love playing with your friends? Access party support for Battlefield: Grenada with the Reaganomics package for only 2.99 a month! Got an eye for creativity? Unlock the character creator in Dragon Age: Nug Rancher by purchasing the Grey Warden membership package for the low low price of 5.99 a month!"
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The market rejected the original Xbox One pitch because it was too much hassle. The convenience was lost.

But the difference is Netflix style subscriptions give away ownership for convenience. I don't think most people actually care about owning the content. Look at how both Netflix and Spotify has changed those industries. They just want the convenience. There's also the factor that paying $10 a month for hundreds of games seems like less of a hit than buying a few games every year. Even if in the long run most people are probably spending more.

Frolex posted...

Darmik posted...

Services like what?

"Love playing with your friends? Access party support for Battlefield: Grenada with the Reaganomics package for only 2.99 a month! Got an eye for creativity? Unlock the character creator in Dragon Age: Nug Rancher by purchasing the Grey Warden membership package for the low low price of 5.99 a month!"

I don't think that would work. The entire point of this stuff is that you have one subscription that covers everything in the catalogue.
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I don't think that would work. The entire point of this stuff is that you have one subscription that covers everything in the catalogue.

There's no way that companies won't try to add "premium" subscriptions within it.
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Coffeebeanz posted...

I don't think that would work. The entire point of this stuff is that you have one subscription that covers everything in the catalogue.

There's no way that companies won't try to add "premium" subscriptions within it.

Neither EA or Microsoft have. EA's had their service for years now. Unless you mean stuff like how Netflix charges more for 4k and more accounts accessing it at once.
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Darmik posted...

I don't think that would work. The entire point of this stuff is that you have one subscription that covers everything in the catalogue.

And the point of DLC was that it would allow developers to significantly expand the player experience beyond the original release. And the point behind microtransactions was that it would allow developers to monetize their games while still providing a robust and enjoyable free to play experience. Whatever the game industry wants to work will work as long as there are people willing to buy into it.
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I mean, you're nuts if you think all gaming isnt moving towards an account-based system. That's been the reality for PC gaming for the better part of the last decade and consoles have been creeping that way for a long time. The original XB1 DRM was basically a copy-paste of what Steam does, with the addition of a moronic mandatory "check in" every 24 hours. And even on modern consoles, how much of a given users library is physical? Even on GameFAQs(which is stuck in the past on most of this), over half of users buy more digital games than physical. As long as digital is convenient and competitive in price(and makes more profit for game publishers), it'll keep taking over the gaming market.

Also the XB1 DRM was horribly convoluted in an era before console gamers moved into the "always online" world we're in now. Reveal a similar DRM scheme on the next console(ideally without the moronic mandatory 24hr check-in) and there would be significantly less consumer outrage now that so many people already lead a primarily-digital gaming life.
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Frolex posted...

Darmik posted...

I don't think that would work. The entire point of this stuff is that you have one subscription that covers everything in the catalogue.

And the point of DLC was that it would allow developers to significantly expand the player experience beyond the original release. And the point behind microtransactions was that it would allow developers to monetize their games while still providing a robust and enjoyable free to play experience. Whatever the game industry wants to work will work as long as there are people willing to buy into it.

I'm talking about it from a business perspective though. Adding several subscriptions to the one service complicates it too much and would turn people off.

Their goal is to get the largest group possible to spend $10 a month. The goal isn't to get people to spend more for DLC on a $60 purchase. Their goal isn't to get people to spend $10 a month and then try to trick them into spending $30 a month.
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Darmik posted...

I'm talking about it from a business perspective though. Adding several subscriptions to the one service complicates it too much and would turn people off.

Their goal is to get the largest group possible to spend $10 a month. The goal isn't to get people to spend more for DLC on a $60 purchase. Their goal isn't to get people to spend $10 a month and then try to trick them into spending $30 a month.

Their goal is to extract as much revenue from their customers as possible, period. They've already mastered the art of tacking on insidious surcharges to game releases: tiered packages, on top of multiple season passes, on top of on-disk day one dlc, on top of retailer exclusive pre-order bonuses, on top of microtransactions, on top of lootboxes. They aren't going to shy away from getting consumers to shell out for additional services just because it would be inconvenient for them- it certainly isn't stopping them now
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Frolex posted...

They aren't going to shy away from getting consumers to shell out for additional services just because it would be inconvenient for them- it certainly isn't stopping them now

If it costs them subscribers yes they most certainly would.

They don't care about a one time $60 purchase. They've got their money. DLC is a bonus.

Keeping people constantly subscribed for $10 a month is a completely different story. They want to make it seem like that service has value. Like you're getting a benefit. That it would be a waste for you to not be subscribed every month. This is a necessity for any subscription service. Especially when competition like Sony and Nintendo jump on board.

Besides why would they bother doing that when they can gradually increase the price as the service grows in popularity?
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Darmik posted...

If it costs them subscribers yes they most certainly would.

They don't care about a one time $60 purchase. They've got their money. DLC is a bonus.

Keeping people constantly subscribed for $10 a month is a completely different story. They want to make it seem like that service has value. Like you're getting a benefit. That it would be a waste for you to not be subscribed every month. This is a necessity for any subscription service. Especially when competition like Sony and Nintendo jump on board.

Besides why would they bother doing that when they can gradually increase the price as the service grows in popularity?

It doesn't really matter if it ends up costing them some customers as long as the customers that remain are spending disproportionate amount on their monetization schemes. And that's exactly the situation we're looking at now. They probably wouldn't be able to get away with it now, but once consumers accept subscription services as their primary or even only source of games purchases, publishers will be free to push it as far was they want. Just like consumers would never have accepted pay to win microtransaction schemes in 60 dollar games. Until they were in every AAA game and there was no choice.
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Darmik posted...

Their goal is to get the largest group possible to spend $10 a month. The goal isn't to get people to spend more for DLC on a $60 purchase.

With Microsoft's first-party titles joining gamepass, I do think they're partly hoping people will pay extra for DLC. EA Access I know only gets you standard edition games.
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Gettin' ready for the EA acquisition!
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Antifar posted...

Darmik posted...

Their goal is to get the largest group possible to spend $10 a month. The goal isn't to get people to spend more for DLC on a $60 purchase.

With Microsoft's first-party titles joining gamepass, I do think they're partly hoping people will pay extra for DLC. EA Access I know only gets you standard edition games.

This is the most likely scenario. Which really doesn't change much.

Frolex posted...

It doesn't really matter if it ends up costing them some customers as long as the customers that remain are spending disproportionate amount on their monetization schemes. And that's exactly the situation we're looking at now. They probably wouldn't be able to get away with it now, but once consumers accept subscription services as their primary or even only source of games purchases, publishers will be free to push it as far was they want. Just like consumers would never have accepted pay to win microtransaction schemes in 60 dollar games. Until they were in every AAA game and there was no choice.

There's always a choice. A subscription service has a lot more to prove. If you lose a million subscribers because something was pushed too far that's a sudden $10 million lost in a month. It goes both ways.
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r4X0r posted...

LOL no. There won't even be a next generation of gaming consoles. They'll just be different hardware running the same stuff. Welcome to the future.

You're basically proving why exclusives will always exist.
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Darmik posted...

There's always a choice. A subscription service has a lot more to prove. If you lose a million subscribers because something was pushed too far that's a sudden $10 million lost in a month. It goes both ways.

How much of choice is there really when it becomes the norm in the industry? You overestimate consumers' willingness to reject anti-consumer practices. Remember Battlefront 2, the game that had the most vocal, vicious, universal backlash to lootboxes we've yet seen? It came in only barely under its projected sales figures. Losing the odd customer is meaningless when you've set your game up so that players will spend the price of entry to the game two to three times over during their time with the game.
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Darmik posted...

If I'm being honest I totally would prefer a Netflix style subscription for a whole bunch of games instead of season passes and microtransactions out the wazoo. Both EA Access and Xbox Games Pass are already good services.

If only the playstation one was good.
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Frolex posted...

Darmik posted...

There's always a choice. A subscription service has a lot more to prove. If you lose a million subscribers because something was pushed too far that's a sudden $10 million lost in a month. It goes both ways.

How much of choice is there really when it becomes the norm in the industry? You overestimate consumers' willingness to reject anti-consumer practices. Remember Battlefront 2, the game that had the most vocal, vicious, universal backlash to lootboxes we've yet seen? It came in only barely under its projected sales figures. Losing the odd customer is meaningless when you've set your game up so that players will spend the price of entry to the game two to three times over during their time with the game.

The thing is that backlash clearly did lose them a whole bunch of sales. If that happened to a subscription service? That would be disastrous. The backlash would be instant for them to see. You gave them $10 last month and now you stopped. They don't know how many BF2 sales they lost.

You do not have that option for retail games. Specific games selling for $60 and an entire subscription service is a vastly different ball game. It's gotta be compared to similar models like Netflix and Spotify. It's new territory for video games. Those are also companies who try and get every possible dollar from consumers. They are no different.
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Xbox One X

Jesus Christ who comes up with these names?
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But our real strategy going forward is not only to do great work on the console, but to complement that with the work we're doing on the PC. PC gaming is a growth market, and so therefore you see us, whether it's our subscription offer, whether it's our streaming efforts that are increasingly bringing the console plus PC together.

Combine that with all the buyout speculation from Polygon lately, and the plan becomes pretty obvious:
1. Buy every PC gaming marketplace.
2. Start mandating Xbox Live Gold for PCs.
3. Steal Underpants
4. ?
5. Profit!

Microsoft would buy Valve if they could. But I don't think Gabe Newell will sell.
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