No VR on Xbox One? Good! (Premium)

With Microsoft correctly deciding to cancel plans to bring VR/MR to Xbox One, gaming’s more traditional fans are freaking out. Here we go again.

I’m not sure what it is about the video game industry that makes people so adverse to change. But as I’ve observed many times, Microsoft’s strategy for this market isn’t just correct, it’s inspiring because it is so gamer-centric. Losing the console wars is the best thing that ever happened to Xbox.

The results speak for themselves.

Today, Xbox fans enjoy an unbelievable level of cross-platform compatibility. This allows two previous generations of Xbox consoles games to run, sometimes in improved form, on Xbox One. It allows original Xbox One games to run, always in improved form, on Xbox One X. It allows Xbox Play Anywhere titles to work on both Windows 10 and Xbox One. It allows Minecraft fans to play together across multiple platforms. And in the future, this compatibility will be extended to devices all of kinds as Microsoft transitions Xbox to a service.

And there are the services that bind, like Games with Gold, the shining jewel of today’s gamer-centric strategy. And perks, like Games with Gold and Deals with Gold, that reward loyal fans.

Looking back on this month’s E3 presentations—which Microsoft won handily, in my opinion, given Sony’s even heavier case of sequelitis and the inanity of Nintendo’s cartoon culture—I am struck by one oddity: With only a handful of quickly-passing exceptions, Microsoft barely mentioned hardware at all.

This was, of course, by design: Overly-sensitive video game fans had complained in the past when Microsoft’s E3 presentations spent too much time, in their opinions, on hardware, especially new consoles. So Microsoft, ever accommodating, quickly mentioned the Xbox Adaptive Controller and then stuck to the script, delivering on two hours of game demos. Most of which aren’t being released until next year.

And, that’s the thing. Microsoft’s desire to please fans is what’s behind its announcement about five first-party games studios, which it hopes will silence the critics on its perceived lack of exclusives. It’s what’s behind it’s quickie revelation about more Xbox consoles coming down the pike, even though hardware is most decidedly not where its future in gaming lies. And it’s why Microsoft chose to slyly mention its plans to fulfill what was previous my theory about this future, by putting the services idea in fans’ heads. It knows that suddenly showing up with a cross-platform, hardware-agnostic, cloud-based video game service will simply trigger the same doom and gloom pronouncements from the online cabals that are now still spitting about exclusives and E3 being about games, not hardware. You gotta play to the base.

Which is where VR/MR (mixed reality) fits in. Which is to say it does not fit in. Not on video game consoles. Most certainly not on Xbox.

Yes, Sony has a VR solution for its PlayStation 4 consoles. And its even sold reasonably well, though I’ll point out two things: That is due solely to the success of the PS4, and Sony has quietly cut the price of this hardware at least twice.

See, Sony doesn’t have any good options for VR: It’s either part of the PS4 or it’s a standalone, HoloLens-style product. And stealing the processing power from the PS4 that customers already own makes more sense.

Microsoft doesn’t have to go down this path because it created Windows Mixed Reality for Windows 10-based PCs. And because there are already two major platforms in the market, Oculus Rift and Vive. Neither of which, by the way, has set the world on fire.

On Xbox, VR would suffer from what I call a “sub-Kinect” level of success. Which is to say, no success at all. It would be a poorly-selling hardware peripheral backed by almost no content. It is exactly what Microsoft and Xbox do not need right now.

Gamers who do wish to enjoy VR gaming already have options in the Microsoft world. Gamers on Sony did not, so it created one. That made sense, sort of, for Sony. Doing so on Xbox makes no sense—no sense at all—for Microsoft. I’ve always known this. And come on, so have you. It is a monumental sign of maturity that Microsoft did not go down this rabbit hole.

But I do have one issue: They really handled the communication poorly. Microsoft can’t seem to escape that self-made trap. Its plans to skip out on VR were made so quietly that it took over a week for the rest of the world to even notice: They told a website that no one but industry insiders reads.

“We don’t have any plans specific to Xbox consoles in virtual reality or mixed reality,” Xbox chief marketing officer Mike Nichols told the site. “Our perspective on it has been and continues to be that the PC is probably the best platform for more immersive VR and MR. As an open platform, it just allows faster, more rapid iteration. There are plenty of companies investing in it in the hardware side and the content side, or some combination therein. Obviously on phones, augmented reality is a good scenario as well that’s going to grow. But as it relates to Xbox, no. Our focus is primarily on experiences you would play on your TV, and ultimately we’d like to make those experiences more broadly.”

Re-reading that today, I’m struck by how clear the vision is, and how Mr. Nichols so neatly places the Xbox consoles within the context of Microsoft’s broader video game strategy. Consoles are for the TV. It has other solutions for other form factors, and it will have others still when the cloud-based streaming service springs to life. But consoles? Yeah, those are for the TV.

Exactly right.

And this speaks, too, I think, to my contention that, while consoles will continue (at least for one more generation), the real focus is on the cloud. And that’s because tying consoles to the TV is self-limiting. There’s some level of market size there, just as there is some level of market size for PC-based gaming. (And some even smaller market size for VR gaming.)

But the potential addressable market for a hardware-agnostic video game service is, well, almost infinite. And that’s the opportunity Microsoft sees for itself going forward.