Microsoft's identity and future in the gaming industry hinge on Sunday's pivotal showcase
In theory, Microsoft approaches this week’s Summer Game Fest and the annual Xbox showcase on June 9 from a position of fantastic strength. Microsoft’s acquisition of Activision Blizzard has supercharged the revenues of its gaming division and turned it into a super-publisher the likes of which the game industry has never seen. It now owns an astonishing war chest of hall-of-fame gaming properties that include Call of Duty, Minecraft, Warcraft, Halo, Fallout, Diablo, The Elder Scrolls, Doom, Gears of War, Forza, and much more.
Microsoft gaming chief Phil Spencer and his team are also well poised to make a strong impression in what is shaping up to be a fallow year for the rest of the industry. Sony, having already confessed that PlayStation won’t see any major exclusive releases this year, went early with a short, low-key showcase last week. Nintendo has delayed its successor console to the Switch into 2025; at its own showcase later in June, it will be forced to lean on whatever games it’s been able to scrape together for the Switch’s last holiday season. And Summer Game Fest MC Geoff Keighley has moved to temper expectations for his roundup showcase on June 7.
Microsoft has faced similar lulls in its release schedule in the recent past, but on this count it is now simply too big to fail. On the Activision Blizzard side, Microsoft will trumpet its ownership of Call of Duty with a special showcase highlighting this year’s Black Ops 6 and can point to big expansions coming this year to both World of Warcraft and Diablo 4. Bethesda has Indiana Jones and the Great Circle to show, plus a possible Starfield expansion, and a strongly rumored new game in the Doom series. Meanwhile, Xbox Game Studios is reportedly ready to unveil a new Gears of War, as well as show more of Microsoft Flight Simulator 2024 and Obsidian’s fantasy role-playing game Avowed.
That one of these three powerhouse gaming brands also happens to appear on game consoles almost seems like an afterthought. But this is precisely Microsoft’s problem — or one of them, anyway — as it prepares to deliver this crucial address to fans. In 2024, Xbox finds itself in the grip of a profound identity crisis.
Microsoft's Identity Crisis
The Xbox fandom and the wider gaming community have been shaken over the last few months by reports that Microsoft (which already publishes all its games simultaneously on Xbox and Windows PC) was planning to push deeper into multiplatform publishing by putting previously console-exclusive titles on Nintendo Switch and PlayStation 5. Microsoft eventually did just that with Pentiment, Hi-Fi Rush, Sea of Thieves, and Grounded, but reports persist that much bigger properties — including Starfield, the Indiana Jones game, and franchise jewels like Halo — are also on the table. Windows Central reports that there is “no red line” for this initiative, codenamed Latitude, and that more PlayStation versions of Xbox-owned games are in development.
The move has a simple business goal: to increase the profit margins on Microsoft’s in-house games in a challenging market. However, it completely upends a foundational marketing strategy for console gaming, where the worth and desirability of a platform are deeply linked to its exclusive games. This has become a tenet of almost religious faith for gamers, and the suggestion that it might be abandoned is head-spinning.
The context for Microsoft’s decision is important, too. With its push into PC, cloud gaming, mobile, and subscription services with Game Pass, and by buying Minecraft, Microsoft has been clearly signaling that it was thinking beyond the boundaries of Xbox consoles for a decade now. But the acquisition of Activision Blizzard went further by turning the company into a huge multiplatform publisher overnight.
Strategic Shifts and Challenges
Thanks to regulators, Microsoft couldn’t make Call of Duty an Xbox exclusive even if it made sense to do so (it doesn’t). It isn’t any more likely that it would do the same to Blizzard’s games. A massive chunk of Microsoft’s gaming business now lies on PlayStation, Nintendo, and PC, and that’s bound to change the strategic thinking of Xbox leadership.
But while Microsoft’s gaming horizons have broadened, the same can’t be said for the Xbox platform itself. According to analysts quoted in the Financial Times, the Xbox Series X and Series S were outsold 3-to-1 by the PlayStation 5 in 2023. Microsoft does not report console sales figures, arguing that they don’t present an accurate picture of the overall health of its games business. It does report figures for Game Pass, but only intermittently; after a period of rapid growth, the service seems to have plateaued somewhat at 34 million subscribers.
There are more troubling signs still. In early 2024, Microsoft laid off 1,900 workers across its gaming division. This was very bad, though in line with the rest of the game industry, and arguably not the worst of it. That came in May, when the company shuttered several Bethesda studios, including Arkane Austin (Prey, Redfall) and Tango Gameworks (The Evil Within, Hi-Fi Rush). The closures stirred uncomfortable memories of Microsoft’s botched management of other studios in the past — especially Fable developer Lionhead, which was shut down in 2016.
The Task at Hand for Phil Spencer
The cumulative effect of all this is to raise huge existential questions for Xbox and for Microsoft’s ambitions in gaming. What is Xbox now? Do the consoles matter at all? Is Microsoft now just a massive third-party publisher — a bigger Electronic Arts? Is the Game Pass strategy working? How does owning Call of Duty help any of this? How has Halo, Xbox’s flagship franchise, been allowed to fall into disrepair? And, perhaps most worryingly for players beyond the Xbox community: Can Microsoft be trusted to keep tabs on this vast empire and manage all these beloved properties and storied studios responsibly, without doing irreparable damage like we saw with Fable and Lionhead?
On Sunday, Spencer and his team need to do something much more nuanced, and challenging, than just unleash a megaton of game announcements. They need to organize all this bigness into a coherent vision for Xbox’s place in the industry, its relationship to fans, and its strategy for the future. They need to be extremely clear in their messaging about exclusivity on all upcoming games. They need to show commitment to Game Pass. (This is where Call of Duty comes in — with regulators insisting that the series remain available on rival cloud services and consoles, Game Pass is the only strategic play open to Microsoft.) And they need to show commitment to console hardware; unveiling a new handheld would go a long way here.
To be fair to Xbox management, these are uncharted waters. No one has ever attempted to combine the roles of platform holder and third-party publisher before, and whether the move makes sense at all remains an open question. On Sunday, Microsoft needs to show the gaming community why it was worth doing, and how it will make for a brighter future for both the industry and the art form — rather than just eating them up and running them down.
As the gaming community eagerly awaits the upcoming Xbox showcase, it's clear that Microsoft stands at a crossroads. The decisions made now will define the future of Xbox, its identity, and its role within the gaming industry.
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Source: Polygon
Photo Credits: Microsoft
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