The Future of Xbox is More Games, More People, and More Devices (Premium)

It's fair to say that 2024 has not been the victory lap that fans expected after Microsoft's successful acquisition of Activision Blizzard one year ago. The explosion of new titles on Game Pass never came, with Microsoft instead killing the most popular tier and raising the prices of the remaining tiers, giving us less for more. There were layoffs, and studio closures, and silence when it came to these important and troubling developments. But we've already focused on all the missteps this year--one might say we've obsessed over this--so I'd like to turn the page and look to the future. With a quick acknowledgement that this year's problems aren't isolated to Microsoft and Xbox. Perhaps this downturn caught them by surprise and was simply bad timing.

Perhaps. But where Microsoft has been clear about its plans for Xbox moving forward, it's been less clear about how an integrated Activision Blizzard and all those successful game franchises fits within its broader strategies for the future. So it's perhaps best to remind ourselves of why Microsoft acquired that firm in the first place. And then see what we can come up with.

Acquiring Activision Blizzard was an explicit declaration to the world that Microsoft is serious about games. If you think back to the Xbox One era, especially, when Sony PlayStation decisively out-performed Xbox on ever level, most will recall the silly "submarine" episode and Microsoft's original plans for that console to be online-only. But that's a red herring, a sad episode, yes, but one that obscures the real reason for Microsoft's defeat. Where Sony was successful bringing exclusive games and game franchises to its platform, Microsoft was not. And it never recovered, despite a nice run of improving the original tank of a console with the Xbox One S--which I described as "the perfect thing" at the time--and then the Xbox One X.

The timing here is interesting and important. After seeing blockbuster success with the Xbox 360--a console that sold neck-and-neck with the PlayStation 3--Microsoft released the Xbox One in November 2013, and then its current CEO, Satya Nadella, took control of the company. Nadella is a lot of things, but I've confirmed with multiple sources over several years that his first course was to meet in turn with the company's product group leadership with the specific aim of seeing which could meet his two objectives: They must be successful as a business now or have a plan to become successful in some number of years, and they must fit in with the new corporate strategy, which was entirely cloud-focused.

Those that didn't meet these criteria were told to pack up their bags and seek employment elsewhere, inside the company or not, the most infamous example being the Windows Phone team. But it is still somewhat astonishing to me that Xbox survived this purge: Despite its unit sales success with the Xbox 360, Xbox had never been profitable, and it wasn't clear that it could ever be...