Xbox is Shaping the Future of the Console Ecosystem

Back in October, I wrote about the contrasting approaches Xbox and PlayStation were taking to the new generation of consoles. In the eight months since, I think it’s fair to say that Xbox has been the most progressive in advancing their vision of what a console manufacturer, and in a larger sense a gaming brand, can deliver.

Xbox is evolving their ecosystem from many different angles, with some long-planned initiatives taking shape, and progressive pillars being stood up in other areas. Let’s examine each aspect of the current Xbox ecosystem, the impact each is having today on the broader gaming industry, and what’s to come in the future for the fast-evolving brand.

Content is King

You can’t seem to discuss the gaming industry today without Game Pass entering the conversation, so I might as well begin with it. In terms of pure market disruption and the single largest change in modern game delivery, you simply have to look to Xbox Game Pass.

In late 2019, Game Pass had less than ten million subscribers, and I did an analysis on its growing impact. The early data showed that subscribers not only played more games from more genres, but also bought, and invested, into more games. In short, it was nearly all positives for the service and developers who chose to utilize it. The question many raised at the time though was, “Could this continue as the service grew?“.

As of April, Game Pass has grown to more than twenty-three million subscribers, with five million new subscribers joining in the first quarter alone of 2021 alone. And given the success of Xbox’s E3 conference and the launch of Halo Infinite this holiday, I expect this growth to continue to accelerate into 2022. If there are pillars for the future of Xbox, Game Pass is at the center, and their latest major conference demonstrated that many times over.

At the heart of Xbox’s focus on driving engagement with Game Pass is, now, Bethesda. While it cannot be overstated how much Xbox is investing into their existing first-party studios, which I will elaborate on shortly, the importance of Bethesda to Xbox’s future plans with Game Pass was on full display during E3.

Starfield has the potential to be an industry changing title in how major exclusives from the former third-party developer are viewed. Putting the on-going jokes about Skyrim re-releases aside, the impact that game has had for tens of millions of players is monumental, and keep in mind, it’s one of the top-ten best selling games of all-time and continues to be celebrated a decade after its initial release. Given Starfield’s ambition, scope, and being the first game from Todd Howard’s group on the new Creation Engine 2, expectations are for it to be a showcase title. And, despite some misguided efforts alluding otherwise, it is exclusive to the Xbox ecosystem.

Redfall, another new IP from Bethesda developed by Arkane Austin (Dishonored, Prey), showcased extremely well and arrives in 2022, also. But beyond new IPs, Bethesda represents iconic franchises that have been an integral part of gaming consoles for generations. While it was shocking when the acquisition was first announced, it feels as though the reality is beginning to set in that PlayStation and Nintendo consoles will not be home to Elder Scrolls, Doom, Wolfenstein, Fallout, Dishonored, etc. any longer. In fact, it’s a point that Pete Hines, Executive VP of Bethesda, addressed directly in a post-E3 conversation.

But beyond the Bethesda merger and obvious first-party efforts, Xbox continues to drive larger third-party agreements towards Game Pass as well. Already this year, we’ve seen Outriders from Square-Enix and, perhaps the most surprising, MLB The Show 21 from PlayStation Game Studios (which as a seasoned gamer is strange to even type). But again, given the recent showcases, it’s clear this is only the beginning. As the first-party portfolio takes shape and begins to deliver on the “a major game every quarter” methodology, you will see third-party agreements in parallel to ensure there is notable monthly content delivered to subscribers.

Further rounding out the portfolio for Xbox players are software enhancements. Features such as Auto-HDR and FPS Boost have breathed life into existing titles without any developer effort. While these features may not be the shiniest selling point, when combined with the already excellent backwards compatibility on the platform, they allow players to enjoy their favorite games even more. And again, it creates a robust ecosystem where players can enjoy more of their favorite games in their best possible form.

Game Pass’s impact and potential goes well beyond merely acting as a growing subscription service, however. It will act as the gateway to the Xbox ecosystem and, when combined with the rest of the pillars, is pliable enough to fundamentally change the way the world games. Aspirational? Hyperbolic? Let me state my case by examining its capabilities beyond what we know it as today.

Global Connectivity

I’ve been writing for a few years now about the future of Xbox and the fundamental shifts in vision its leaders were propagating. It’s a vision that is unlike anything we’ve seen in the console space previously, primarily driven by leadership that not only understands the future of connectivity and accessibility, but is also in a position to execute on it. The simple fact is this: There will be a point in the future where gaming is accessible on any device, anywhere in the world, at any time. Whether you like it or plan to access games in that way is irrelevant. The time will come. In the console space, Xbox just happens to be the company driving towards it faster than the others.

Now, just to be clear, this does not mean that local hardware and console gaming is going away (at least not any time soon). In fact, Executive VP of Gaming for Microsoft, Phil Spencer, has stated many times over that Xbox will continue to focus on local hardware. He even recently stated that they are already working on the next line of Xbox consoles.

What it does mean is that there are hundreds of millions, if not billions, of potential gamers in the world that would play games if they were more accessible. For some, buying a console is not feasible. Neither is owning the latest smartphone, buying a smart TV, or consuming the single TV in their household with their hobby. There are many, many situations in which a person would love to experience modern gaming, but is simply unable. Xbox’s solution, therefore, is to come to them.

To accomplish this is no easy task and requires a multi-pronged approach, the first of which is to continue expanding and upgrading xCloud (while it’s named Xbox Game Pass Cloud Streaming…I’m sticking with xCloud for this article). I’ve written many times about the importance of xCloud to Xbox’s future, and for good reason. If Game Pass is the gateway to the Xbox ecosystem, xCloud is the key to the gate.

For many of us, we tend to think of xCloud as that dispensable addition to our console and Game Pass Ultimate subscription. But while it may be that for some, it’s far more important. For the aforementioned potential gamers in the world, xCloud has the capability to extend the Xbox ecosystem to them nearly anywhere. Whether they are on a smartphone, an old laptop, an older TV without any smart capabilities, etc., xCloud can reach them.

“We will unlock the ability for anyone on the planet to enjoy the gaming experiences that relatively few have had the access to before,” said Phil Spencer

Xbox’s focus on rapidly extending the accessibility to the ecosystem is on full display. Game streaming through PC browsers and extended access on IOS (also browser-based) is rolling out through 2021. Cloud gaming through Xbox Game Pass Ultimate is extending to new markets in Australia, Brazil, Japan, and Mexico. Xbox will eventually release a simple Xbox plug-in that will provide app support on devices such as non-smart TVs. And just announced at the Windows 11 event, and yet another sign of how serious Microsoft now is on gaming, game streaming is being built natively into the Xbox PC app. This will allow users to play games directly without the need of a local install, which will (essentially) function the same way as a future Xbox app on TVs.

Supporting all of that remote access for players globally, are Series X hardware upgrades to the xCloud server blades which will provide a higher-fidelity experience. Again, it’s simply another aspect that Xbox is focused on to ensure the best possible experience, regardless of how you choose to play their games.

Removing the barriers of entry is critical and, as noted previously, Xbox Game Pass is the heart of this access. Liz Hamren, Corporate VP Gaming Experiences and Platforms, has made it exceedingly clear that is their focus.

“We need to innovate to bring our games and services to more people around the world. We’re investigating how to introduce new subscription offerings for Xbox Game Pass. The point is we’re being creative and dynamic in thinking about how to deliver the joy and community of gaming to everyone on the planet across devices, geographies and financial realities. And we’re doing all this because Game Pass works. It works for consumers and it works for publishers.”

Earlier this year, Xbox began noting the platforms that Game Pass games would be available on between console, PC, and cloud. While cloud offerings used to be only a small selection, looking at the rest of 2021, nearly every single release will be playable via streaming at launch. And this is certainly the plan for the future, thus aligning with the “remove the barriers of entry and put the player at the center” methodology.

All-In on Gaming

When you look at Xbox’s plans, a broad-reaching, extensive expansion, it is not an easy task for any organization. It requires a tremendous amount of coordination among thousands of employees globally. It requires invested leadership. And it requires a wealth of resources that very few companies possess. Fortunately for us as gamers and Xbox fans, Microsoft’s current leadership has “seen the light” and finally understands the possibilities of the gaming industry.

This was most recently on display just prior to E3 when Microsoft CEO, Satya Nadella, joined Phil Spencer to address Microsoft’s commitment to Xbox and its community. The CEO of Microsoft wearing a Halo hoodie was pure icing on the cake.

While this particular segment was meant as a setup to the week that would follow in E3 2021, Nadella quickly aligned his vision for Xbox and gaming years ago shortly after becoming CEO. Now, over seven years ago, when he had only been CEO for six months, he had the following to say about Microsoft’s focus on gaming.

I wanted to be very, very explicit about how a large company — and a successful, large company — like ourselves can have a core and should, in fact, have a core and also have ambition to do a few other things where we can have high impact. And to me, I’m so glad to have Xbox as a franchise, especially at a time when gaming is becoming even more important — as a digital life category and in the mobile world. The most time spent? Games. The most money spent? Games. Xbox is one of the most revered, loved brands in games. I look at that and say I want that team to be super ambitious about gaming…It doesn’t matter that it’s not core to productivity. In fact, there’s so much technology transfer that actually happens. Take all the speech recognition that we have in Skype. It came because of Kinect on Xbox. But that’s not the reason that I’m in Xbox. We’re in Xbox because we want to win in gaming, delight customers in gaming, and want to grow that fan base. I wanted to make that explicit because I think it’s OK for a large company like ours to be proud of things where we are having a high impact outside of the core.

This shift from some prior Microsoft executive leadership on the Xbox brand was both necessary and important. And as gaming has evolved even further over the past several years, with it being more clear than ever that the industry is still in its infancy, Nadella has been an avid supporter of their efforts to expand Xbox globally.

“But the broader vision we have is to ensure that the three billion gamers out there are able to play their games, anywhere they want with all the content they want and with whom they want to, and that’s really what we are building our strategy around. You’ve seen us double our content portfolio with ZeniMax acquisition, you see us make advances in our community efforts and our subscription offers with Game Pass. And that’s what you can expect from us. We are absolutely very, very much focused on gaming, and ensuring that all the three billion gamers around the world get the best content, best community and the best cloud services to power their gaming experiences going forward,”

Ecosystem and Engagement

I’ve been using the above words when discussing Xbox for a long time now, so much so that it became a running joke on the Bitcast for a time. But it was for good reason, and as Xbox’s vision for their future of gaming has come into clarity, these words have been used far more often. There was a time in the console market where units and game copies sold were all that mattered. While they of course still do, they are far less important today. Look no further than titles like Fortnite, Roblox, Minecraft, and even Call of Duty Warzone generating billions of dollars of revenue on an annual basis, despite being generally free to play on all platforms.

As the barriers of entry into the Xbox ecosystem are brought down, the primary focus for the brand is engagement. The aim will be to keep players in the garden and ensuring that Xbox becomes a part of their daily media consumption in some form. With that in mind, here’s what I believe you can expect in the short-term.

As we are seeing with the launch of Halo Infinite this fall, the multiplayer component is moving to free-to-play for the first time while simultaneously launching on Xbox and PC. Adopting the successful model we’ve seen with the games above will allow Halo to reach more players than ever before, which in-turn will generate both engagement and a long-term, recurring revenue stream. It will also drive up interest in the IP itself, which will lead to new players wanting to experience the entire saga. And what’s the easiest way to do that? You guessed it…Game Pass.

Shifting to total content delivery, as I noted earlier, Matt Booty, Head of Xbox Game Studios, has mentioned their goal of delivering a “first-party game every quarter“. While aggressive as it is, I believe it to be merely another short-term goal (12-18 months), with a longer term vision that’s even more aggressive.

While the Bethesda acquisition will play a large role in that content delivery goal, the continued growth of their existing first-party is just as important. Key studios such as Obsidian, Playground Games, inXile, Rare, Compulsion, and more have continued to build out their studio presence over the past few years. At last count the total development staff of Xbox Game Studios was approaching 5,000, with several hundred more positions in the process of being hired. And, keep in mind, that’s before any further acquisitions, which Microsoft has been very clear will continue.

To keep players engaged in the ecosystem, and in essence, subscribing to Game Pass, Xbox needs to deliver content with regularity. We’ve seen that occur over the past several months, but this is really only just beginning to broaden out. With 23 studios and 35+ projects in the works currently, Xbox will ramp up their first-party delivery while continuing to fill gaps with third-party agreements.

But just as we’ve seen in the video subscription space, I believe that will continue to evolve until we see a first-party game on Game Pass every 4-6 weeks. This is what will keep players continually subscribed, and escalate Game Pass from a “nice to have” to “indispensable”. That is why we are seeing Xbox continue to look at acquisitions while simultaneously hiring new talent for their internal teams. As I always say, it’s simple math.

For the sake of discussion, let’s assume an average of four years of development time per project (a mix of AAA and smaller titles). To deliver a game every quarter would require at least 16 projects being in the works at any given time (at a minimum given the complications with development of course). But to deliver a first-party game every month would require a minimum of 48 projects being in the works simultaneously. This is where Xbox is already heading, and why they continue building out their internal studios with teams capable of developing multiple games in parallel.

It’s an exciting time to be an Xbox fan. The concepts and direction their leadership have been speaking to for a few years now are shaping up, and it is resulting in a far more robust platform than we saw throughout the Xbox One generation. By next year, there will not only be an almost overwhelming amount of new games being delivered, but players will be able to access them unlike ever before.

In that vein, there was a time where cloud gaming was laughed out of the room, and admittedly I believe Xbox began speaking about it far too early. But its validity is unfolding right before our eyes, and soon it will simply be just another way people play their games. So in the end just remember, there is no spoon.