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Microsoft May Have Lost This Console Generation, But That Might Not Matter

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Looking strictly at the numbers, Microsoft’s Xbox One didn’t do as well as the company likely hoped. The PlayStation 4 sold significantly better than the Xbox One, likely due to a combination of aggressive ad pushes and top-tier exclusive titles. However, Microsoft is far from throwing in the towel as we step into the next console generation.

Instead, it appears that the House that Windows Built is simply approaching the market from a different angle than Sony is. And that likely has a lot to do with each company’s non-gaming ventures.

Sony relies heavily on the PlayStation brand to stay profitable, while Microsoft could operate Xbox at a loss for years before it ever impacted their overall bottom line.

Microsoft’s Position

Microsoft is in a weird position. They didn’t sell nearly as many consoles as Sony did this generation, and they seem to be poised to tackle the next generation in a new way.

Their Game Pass service has been a huge success, bringing in tons of players to their ecosystem, even if those players don’t own an Xbox. That’s because Game Pass, and many first-party Microsoft titles, are available on Windows PCs.

After all, every Windows PC is effectively a successful sale for Microsoft, in much the same way that Xbox is a successful sale. The stroke of genius on Microsoft’s part, midway through the Xbox One’s life cycle, was to realize that people’s gaming PCs could easily be their “Xbox”, instead of a branded console. This allows Microsoft to make moves that Sony can’t.

Those moves include buying up smaller studios and creating a constant stream of new games to play on Game Pass. Microsoft is positioning itself as the “Netflix of Video Games,” offering a huge sampling of games for a low monthly cost.

This is also seen in their “Smart Delivery” system, which allows Xbox One games to be upgraded to Xbox Series X for free. After all, Microsoft’s current strategy is largely platform-agnostic.

Sony’s Position

Sony, meanwhile, is in a bit more strict position with the PlayStation 5. Due to their corporate structure, much of the company’s video game division profitability comes from sales of the PlayStation and its first-party games. As such, it’s vital that the company sell consoles and keeps people in that exact console’s ecosystem.

This could be why the company hasn’t commented on next-gen upgrades for cross-platform games and has been cagey about whether they’ll allow for cross-generational save transfers.

Sony doesn’t just want you to buy a PlayStation 5 and then use it casually. For their business model to work, they need engaged players who are buying full retail versions of all of their marquee games. When a new God of War or Horizon game comes out, Sony fully expects a huge percentage of their player base to rush out and get those games.

This is why the two companies seem to have such differing approaches. Sony is doing something that has been the norm for decades in the gaming industry. Meanwhile, Microsoft is forging a path unique to their own ecosystem. Time will tell which of them has the upper hand.