Microsoft’s massive $80 billion investment into its Xbox gaming division, highlighted by the acquisitions of Bethesda and Activision Blizzard, has faced significant challenges. Despite these high-profile purchases, declining Xbox console sales and plateaus in Game Pass subscription growth have pressured the company to adjust its strategy. To recoup its heavy investments and address rising game development costs, Microsoft is transitioning away from strict console exclusivity, choosing instead to publish several of its major first-party titles on competing platforms like the PlayStation 5 and Nintendo Switch.
- Microsoft spent nearly $80 billion on major gaming acquisitions, including Bethesda for $7.5 billion and Activision Blizzard for $69 billion.
- Xbox console sales have lagged significantly behind competitors, with the PlayStation 5 reportedly outselling the Xbox Series X/S by a wide margin.
- Growth for the Xbox Game Pass subscription service has slowed, failing to meet the company’s initial projection targets.
- High budget requirements and multi-year development cycles for AAA games have increased financial pressure on the division.
- In response, Microsoft is pivoting to a multiplatform publishing model, releasing previously exclusive Xbox titles on competitor consoles to maximize revenue.
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Original video here.
This summary has been generated by AI.
The customer acquisition model – is not a good one – that is the executive summary.
(hooking someone on content – then raising the price…. ask netflix).
They did not need an outsider – they needed a business person who is also a gamer.
(I am a successful business consultant – who also happens to be a gamer).
Never let marketing pull the strings – see this all the time in business – yes – you will cannibalize your own sales – but no one wants to admit it, time and time again – either in Tim shifting demand or in other channels.
(in this case it was other channels – subscription vs. retail).
Once they raised the price on the subscription – it was not hard to do the math. I bought a couple of games – then cut the xbox tier drastically.
They got greedy and were shortsighted – and way over spent on acquisitions.
Never put marketing in charge of your forecast.
They missed an important consideration. Companies subsidise adoption cost to reap indirect value from network effects: the difference between Nintendo making profit on console + game sales, Sony losing on console but profit on game sales, and Microsoft losing on both. Why? Because MSFT in 2001 wanted DirectX to be ubiquitous and Xbox ensured Windows was dominant for PC gaming for years; the threat lately has been Linux's gains (thx to Valve) in that consumer division
$9.99 was the most realistic price to keep long term subscriptions. Call of Duty just sucks lately.
Game Pass is essentially a rental service, which is what Blockbuster used to be. No one should feel like they own the games on there. Play it's available catalog all you want, but afterward you should purchase the games you actually want to own (preferably in a physical format).
Can we not pretend that Microsoft doesn't provide some of the worst gaming experiences in the industry? This goes beyond red rings of death on the 360. My xbox series x corrupted my GTA v save data in campaign mode after a few months of normal play time. It was the only game I played and this massive company somehow despite 51 years of industry experience failed to save my game state to a file properly and sent me back to the first mission. I expected better from one of the oldest tech companies out there, never had this experience on any other platform. Microsoft consoles consistently give bad experiences for the customer.
Hire a progressive indian woman to run a company 😂 and change the logo on the startup screen 😅 big moves by MS.
Saying it backfired is crazy ignorant 😂
I came into possession of an Xbox earlier this week and rather than playing it, I sold it for $60. Horrible company.
Unlimited greed killing one industry at a time
Paused the video as soon as I clicked on it to type this-
I'll tell you exactly what happened. All they had to do was keep making good games. But instead, the people in charge of xbox decided they just wanted to build a cash cow and then just sit on it while providing as minimal effort as possible for as long as possible. In short that's what happened.
They wanted to set up gamepass so that you, the consumer, would keep paying your monthly fee in order to keep playing 10+ year old games while they put out small updates. They shifted their entire buisness model from selling you a product, to providing a subscription based experience. And that's where they f%&ked up. That's why games aren't good anymore to also why we're not seeing as many games release. Basically their greed that knows no bounds, wrecked an entire industry just so they could add more billions to their billions.
How's that Blizzard investment treating ya? 😅😂😅
Microsoft is stupid, I solved it
Subscription services for games don't work. End of.
They want a BILLION daily players? That’s absolutely delusional
Gamepass also failed because you're only getting base games, and have to pay more for DLC. Paying extra for DLC that goes away when you stop paying the monthly fee? That's a bad business model. It's kind of predatory. And it's still their current business model. Of course you're going to have long term subscriber retention problems.
Also, Xbox controllers typically break within 6 months of light use. So you have these people who bought an Xbox system for gamepass, but their hardware starts to fail. Not only that, but their controllers are 10 years behind their competition and 3rd party controllers. Their hardware problem was so severe they tried to market Gamepass as a game streaming service you can use on any device… and that campaign also failed. That campaign wasn't even mentioned in this article.
So here you have Microsoft trying sneaky tricks to force people onto their platform. Also relying on upselling to boost the bottom line.
Then you have Valve who provide gamers with a product gamers want, with a seasonal sale cycles that let most gamers purchase the games they want, affordably.
And yet Microsoft still doesn't understand where they went wrong. I doubt CEO Asha Sharma is aware of most of this.
WSJ doesn't even come close to painting the full picture here.
With all the slop games coming out that are not only bad but riddled with bugs I feel like there should have been more people fired….
Biggest loss are the studios they acquired and the games they axed as a result of spending so much money for them. Loss for the industry and games, that's the real story not the subscription BS.
Have purchased close to a dozen Xboxes since 2006.
In my view what's wrong with the Xbox is simple: it's owned and run by Microsoft.
Here's what happened, Microsoft released Halo, World of Warcraft, and Call of Duty…. then didn't do anything new. They made made sequels to squeeze out every last bit of juice or even made "remastered" disguised as the exact same game. My advice would be invest to make a new and quality franchise. We haven't seen anything better than Halo, WOW, and COD since before 2010.
They kept upping the price of the subscription
The relationship people have with video games is fundamentally different than the one they have with music or movies/tv. The subscription model attempts to ignore or disregard that difference. Not to mention all the HR, diversity quotas, and general bloat problems that come with massive corporations like Microsoft.
This is our fault. 30 bucks a month is a steal. It would take me TWO YEARS to save up enough for a console and just one game at that rate. For 30 bucks I get a library of a hundred games that I can play on a smart tv.
The next Gen console is going to be so expensive you'll need a mortgage to buy one. You've doomed us all with your privelege in being able to afford that.
The next Gen is going to be so expensive you'll have to mortgage your house to buy one.
Era quit yer complaining..it was amazing while it lasted.
Gamepass just needs to get it's price right. That's the #1 issue. It's not the service or the catalogue. It's entirely the cost and what people can afford/think is worth paying. If they somehow got the price down to around $12 for EVERYTHING then they would be a lot more successful right now.
Everything…
I knew it was bad… But didn't know it was Halo to PS5 Bad!
nobody watch the same movie for 3000 hours, but there are so many people play the same game for 3000 hours, subs will never crosses these players' mind
"Greed is a curse". Why every company forget about this simple, old yet most wisdomful saying?
Instead of Microsoft Kinect, voice commands, XBOX live subscriptions and all these non-essential, non-fun things… How about just make great, great games, exclusive games, fun games and give the players what they want like Playstation. THE END.
Even a remote starter for a car is a subscription now. Tired of it
We want to own our physical media and be able to play it in 20 yrs without internet connection.
Hahahaha told yall Xbox ain’t profitable and Gamepass AINT THE FUTURE!!! 😂😂😂😂😂
You can still buy games outright just like on PlayStation. I would argue the biggest fumble was the budget series S, which held back developers and cheapened the entire offering.
Game Pass should of stayed at the lower price point ($10) and only had older games and hidden gems that for some reason didn't sell very well. Each for a limited time encouraging people to buy the game on sale after its removed from Gamepass. Kind of like the old Xbox live Gold except its a streaming service.
some of these gamepass games crash all the time.
Greed!! 6.5 billion to 5.7 billion in revenue in 4q’s is still 5.7 billion in revenue. All they see is an arrow going down on a chart. so you have to fire people. Makes sense lol
Real gamers knew this will never work.
Wait… People want to own games!?!?
I swear we have to subscribe to live nowadays. It’s just sad
Should be titled as “Why Microsoft 75B investment to COD backfired”
Hindsight being perfect, Microsoft ended up making A LOT of great games, but its business model has always been abysmal. They wasted BILLIONS of dollars making a hardware platform that the world just didn't need.
4:59 surprisingly her choices are a fresh welcome as she looks like she put some effort to understand gamers
A 50% price hike didn't lead to success? I m shocked!
I can't believe that I purchased Battlefield 6 but I can't play online without a Gamepass subscription…it is a multiplayer game that should be able to be played without any additional forced subscription. Definitely, going back to PC…
You know who doesn't have a credit card for subscription services? Any gamer under 18.
How can you make money off them if the only way to get access to games is to convince an adult to add a subscription to their credit card?
If buying isn't owning, then piracy isn't stealing.
Why would a regular customer pay for their expensive purchases. They bought Blizzard, and many more for what, to destroy gaming industry?