The Path Ahead for Xbox (Premium)

It’s a new day in the world of Xbox, while Phil Spencer has been running the show for some time now, the fruits of his labor are starting to show their face. And for the upcoming iterations of Xbox, the future looks bright as the company has a solid path for winning the next generation console wars.

Earlier this year, Sony announced that they would not be attending E3 and most agree that this is the company putting all efforts into launching their next generation console which is expected to arrive in 2020. Also expected to arrive in that year, as I scooped a few months back, is Microsoft’s Scarlett family of devices too.

What this means is that we are gearing up for a classic console-wars launch and here is how Microsoft is planning to win the battle.

For one thing, it will have an all-new Xbox architecture. The Xbox One X, while a great design and offers a lot of power under the hood for a console, was really an Xbox One supercharged. The next generation CPU for the console is expected to be a variant of the Zen 2 architecture and also AMD’s next-generation GPU architecture as well, according to those familiar with the company’s plans.

But none of this should be a surprise as Microsoft has been partnering with AMD for consoles for some time. Based on what we see with the X, fully expect that 4k, 60FPS for games is going to be the rule, not the exception. And frankly, that’s what I would expect from Sony as well.

We know that 4k gaming has to be the minimum feature for the next generation gaming but going beyond 60FPS, doesn’t seem like a huge marketing tactic. Sure, I’d love to have 4k with 120FPS but once you start chasing only FPS after 60, the benefits become less important.

The point I’m trying to make here is that I fully expect both consoles will be capable of 4k gaming without any hiccups to performance. Which means to win the generation, each side will need to have a much broader strategy than ‘good hardware’.

And Microsoft has found themselves in a unique position. The company’s Game Pass service, while it has been off to a slow start, is incrementally gaining momentum and offers a unique value proposition. Starting in the spring, the company is going to offer a disc-less console and they are also spinning up a new service that will allow you to ‘attach’ a digital subscription to that console when you buy it.

Imagine you go on Microsoft.com, select the disc-less console, then pick two years of Xbox Live Gold and Game Pass, pay the fee, and when the console arrives, it’s all set up with the service ready to go. This functionality should arrive next year and also be part of the Scarlett business model as well.

And this is key, Microsoft now has the ability to sell you a console, and for as little as $10 a month, have access to over 100 games. For those who don’t want to invest in lots of games that they only play for a month, Game Pass is an excellent value.

But it goes further than that, by building out the streaming service and offloading some of the compute to the cloud with xCloud, the company will be able to offer next-gen gaming with Scarlett quality gaming at a lower upfront price.

This is all part of the company’s multi-pronged approach to gaming. You have the most powerful version of a traditional console available to those who want it. You have a lower-priced version that utilizes the streaming solution for those who want to game but not invest in the high-end hardware, and for your existing fan base, you make everything backward compatible.

To help grow the bottom line, the company’s Game Pass will continue to offer the best value for gaining access to a large library of games as a service, the company’s favorite thing to offer but there is only one major thing missing, IP.

Microsoft has Halo and Gears of War, but those brands are a bit tired and while the company has launched fun new titles like Sea of Thieves, they are looking ahead to the next gen for new IP as well.

We know this because the company has bought a significant number of new studios, two more announced last month, that will be building Xbox exclusive titles for the company. Earlier this year, it was rumored that Microsoft seriously considered purchasing EA, while I don’t think they are still actively pursuing that opportunity, I do know that it was seriously considered.

And the company is not done either. They are still mulling over Discord, as it offers the company a fantastic solution for PC gamers that would help the company take on rival Steam and now Epic. I don’t know if they will actually purchase the app but I wouldn’t be surprised if someone does in the near future like Amazon or Sony.

The challenge ahead for Microsoft is not that they don’t have a good strategy. The company, thanks to Phil Spencer, has turned the Xbox ship in the right direction, even if it was a bit too late to win this generation. But it will be hard to overcome what Sony has built, an incredibly loyal fanbase with a large party of exclusive titles available.

Microsoft’s secret sauce for the next generation will be its cloud platform. Traditional games and performance can all be matched but what Microsoft will do is offer a variety of services like Game pass and cloud capabilities to developers that will make it hard for Sony to compete with this functionality. The goal is flexibility in price points for hardware with services layered on top that add significant value to gamers and developers without charging hefty upfront fees.

Yes, Sony could build out a service on AWS and try to replicate what Microsoft has built but it won’t be easy. The question is, can Microsoft utilize its unique asset in a way that truly makes gaming on Xbox better or will they let Sony steal the show with better IP?