With Games, Microsoft Already Has its Head in the Clouds

Rewatching Microsoft’s E3 press conference, I’m struck by how little the firm talked up its hardware advantages. Is this is a sign?

I mean, think about. Microsoft has a decided advantage over Sony when it comes to how powerful its current-generation console lineup is. It has the superior controllers, too, with its high-end Elite controller and accessible Adaptive Controller.

And that’s just the present: Microsoft also confirmed my story that it was working on a next-generation Xbox console generation. And it expanded on that news by revealing that this coming generation would be a “family” of products. Meanwhile, Sony is quietly winding down PS4 production and has nothing to say about the future.

Despite all this, Microsoft’s E3 press conference focused almost exclusively on games. There was no talk about Virtual Reality (VR) or Mixed Reality (MR). Nothing about a second-generation Elite controller. And no real details about whether the next Xbox “family” would be new generation Xbox One hardware or something new and different.

One might argue that Microsoft’s lack of hardware news was informed by past complaints about E3 hardware announcements. Purists, after all, demand tradition, and the tradition at this show is to talk up games.

Bullshit. What E3 is really about is one-upping the competition. About getting gamers excited about your platform. And Microsoft deliberately skipped a chance to tout its current and future hardware advantages over the market leader. And it chose instead to focus on the key reason it is losing in this generation of consoles, games. Come on.

So I can only come to one inescapable conclusion: Microsoft has already started scaling down its Xbox hardware ambitions. Microsoft’s future in gaming, as I had already assumed, is more about delivering games from the cloud than it is about hardware. This is where its real effort lies. And its real chance for success.

Polygon published an interesting piece called Everything Microsoft has said about the next-generation Xbox that focuses largely on the firm’s hardware plans. But there’s not much solid information to work with.

The new Xbox consoles—with an emphasis on the ending “s”—will “set a new benchmark of console gaming,”Xbox chief Phil Spencer said during the press conference. This says to me that a cost-reduced Xbox One X will become the new base unit, replacing the Xbox One S. And that a higher-end Xbox One (X2 or whatever) will deliver more consistent 4K graphics at more consistent frame-rates while being 100 percent backward compatible.

Read between the lines a bit more, however, and you can see that Microsoft’s positioning of the Xbox consoles isn’t changing. That is, future Xboxes will continue to trail gaming PCs from a performance/quality perspective. And will continue to be more powerful than mobile devices and set-top boxes, including those that will be able to stream games over Microsoft’s coming Xbox service.

But that Polygon piece is interesting mostly because of what else Microsoft hints at for the gaming service that is the real future of Xbox.

“When people buy an Xbox, they buy into an ecosystem and they become an Xbox fan,” Spencer told Eurogamer. “Many of the Xbox fans we have today started on the original Xbox, were with us on 360 and they’re with us now on Xbox One. I trust their commitment to our devices and our services as we go through this journey with them. So, I’m going to be open with them.”

In other words, Xbox fans have pretty much had to buy Xbox hardware so far in order to be part of the community. In the current generation, a handful of Xbox Play Anywhere titles have expanded the experience to PCs. But in the near future, Xbox will itself expand as a platform to include a hardware-agnostic game streaming service. This will dramatically expand the platform. And the user base. Being an Xbox fan has never been so easy, or so accessible.

Consider this comment in the same light, meaning with regards to a cloud service instead of a new console.

“What I would say specifically, without announcing anything, is I’m very proud of our track record of compatibility and us respecting the purchase of games you’ve made with us and bringing that to the current generation,” Spencer said. “It is in our core on who we are.”

Yeah it is. And while many reading that will assume that it refers to the next-generation Xbox consoles and how they, too, will be backward compatible, I see that as a sly affirmation that “backward compatible” will be a feature of the Xbox service. It will, in fact, be one of its key features: A new platform that is instantly compatible with most of the software you already own.

“Your purchases today are likely to carry over to the next console,” Polygon concludes. You’re far too short-sighted, guys.

As Spencer describes it to The Guardian, Microsoft “pivoted” about three or four years ago—you know, right when it became obvious it was going to lose in consoles for the third generation in a row—centering its efforts on the gamer instead of the console.

That’s smart. But what no one seems to be noticing is how those hardware defeats were what enabled Microsoft to make something that is legitimately “better” for people who love games. And how that thinking will be applied to the service.

“[Focusing on a console] limits people on the creative side because you have to build games for specific devices,” Spencer noted. See? That’s not about hardware. It’s about building games that don’t care about the hardware.

“Our focus is on bringing console-quality games that you see on TV or PC to any device,” he explicitly explained. “I want to see the [game] creators that I have relationships with reach all two billion people who play games, and not have to turn their studio into something that makes match-3 games rather than story-driven single-player games. Because that’s the only way to reach a bigger platform. That is our goal: to bring high-quality games to every device possible on the planet.”

I couldn’t have said it better myself. And yet that quote is in an article that purports to be about the next Xbox consoles. Folks, don’t get me wrong: I’m as excited about that hardware as any Xbox fan. I can’t wait to buy them. But they’re just a stutter-step to the real future of Xbox. And that future is very firmly in the cloud.

Which is exactly why gaming makes sense to Satya Nadella and to Microsoft. With the software giant declining to sell or spin off Xbox, many have questioned my previous calls for Microsoft to exit this market. Well, surprise. Microsoft is exiting this market. It’s a market it has lost in for three generations, consistently. The only reason it’s even making new Xbox hardware, I bet, is to continue to provide its base with an easier transition to the future. These new consoles will be incremental leaps over what we have now. Just like the Xbox One X was last year.

Sorry, Polygon, but game streaming won’t just be “a larger part of the new Xbox.” It will be the new Xbox.

I’ve said it before, and I’ve said it again: Microsoft already has the most gamer-centric video game platform on earth. It’s making all the right moves. And it can win in a coming generation of gaming in which content is delivered from the cloud to any device. So we’ll see what happens, of course. But Microsoft’s future is very clear.