Compulsion Games was also a strange acquisition / team to decide to put $100M + 7 years of trust into. They had two games by that point, neither with amazing reviews.
> I think some of these game studios got so content with Microsoft constantly paying that they forgot to make games that would actually sell.
I mean, if you're assuming that Microsoft had a fully hands-off approach to managing these companies after buying them, then sure. It's not clear to me that you can make a compelling claim about whether the issues were from the bottom or the top just by looking at the final outputs.
Plus there's plenty of evidence that Microsoft hasn't been hands off across that time period. At the very least we've seen them cancel a Rare game and layoff a bunch of Rare staff because of it, The Initiative shut down for not meeting game development goals, 343 Industries stripped apart for low results versus expectations with Halo Infinite and the "new" Halo Studios is basically just a shell and an outsourcing venture in direct line with ActiVision's old Call of Duty tactics.
I agree; I mostly just didn't want to spend time trying to cite a bunch of evidence of the alternate interpretation when it seemed sufficient to point out that they didn't really provide enough to form a conclusion one way or another.
Microsoft's executives lacked time to be hands-on with every acquisition. They were very involved in the decision process at the big studios, and the favoured children, but left the smaller studios without enough input.
They will just continue smash thru exactly what is killing them because they do not know how to reset. More micro transactions, Halo 14-39, games launching before they're ready, price increases, etc. All of that looks good on paper, so they will take no action against. The XBOX is hitting icebergs, and instead of slowing down, they will just call for more speed.
Microsoft laid off most of its Halo talent in a previous lay off cycle, stripping 343 Industries of most of its staff and rebooting it as Halo Studios as a shell to mostly outsource development to other companies in the way that Call of Duty was built on the game development equivalent of sweat shops. They've already shown that they don't have the guts to make Halo 14-39, they seem to be only doing yet another remake of Halos 1-3 and maybe Reach, this time in Unreal and with "AI" to help "upscale" everything. Just four Halo games endlessly remade until people forget why they were ever originally popular.
>They will just continue smash thru exactly what is killing them
Well, not exactly. Maybe partially, but definitely not entirely. They got a shit return on a lot of money they spent which drove down margins now they are cutting that. They lost 64 cents per 1 dollar invested so they are investing less.
Game Pass has caused a lot of direct sales losses to game developers in favor of Microsoft trying to find a Netflix-like cash cow for itself. The numbers never added up, but it is not a surprise everyone nodded and went along with it. I wonder what the career repercussions would be for speaking up - but it doesn’t matter because they are getting fired anyway.
Game Pass' finances ignored the one true thing about streaming services: they weren't going after the people buying DVDs, they were going after the people paying for cable.
Cable subscribers did not exist in gaming, and so Game Pass is stuck stealing Xbox's own customers. It just doesn't add up.
Any details about the studio spin-outs? The rumors were that Double Fine etc. would be closed, but all we know now is that some of them are being sold to management and others are being sold to other investors. Nothing about any commensurate restructurings.
At some point, the games industry decided it wanted to be interactive Hollywood, and the consequences are entirely predictable. Meanwhile, Nintendo just quietly shipped 3.8 million units of Tomodachi Life in two weeks, and 4 million of Pokopia in five. They're making actual games. Sony's obsession with prestige cinematic bloat, like Xbox, has also put them in a slow-motion death spiral that's going to become painfully obvious in a few years.
My kids begged for me to buy Tomodachi Life and Pokemon Pokopia and they’ve been absolute smash hits in the house. Pokemon got me hooked for a month or two until I mostly beat it, and the kids play Tomodachi Life every day and have funny little stories to tell. So many modern games just aren’t fun, it doesn’t matter what the graphics look like if the game is boring.
Sandboxes. Minecraft was one. Now it’s getting called a platform, at least in the submitted article. That’s good for engagement and monetization I guess, but sounds way less fun.
Minecraft, Roblox, Fortnite, MMOs, Second Life, there's heaps of sandbox games where people can just hang out and do their own thing. It's the metaverse that Facebook / zucc just completely misunderstood.
They could've just bought any one of these titles and they'd have a better metaverse than whatever it was they pumped billions into.
Pokopia and Tomodatchi only look like sandboxes at first glance. They are far more directed. They're not a perfect square with you in the middle. They're a star shape with you in the middle.
That is encouraging, but my stock portfolio paints a different picture. Nintendo is unfortunately doing terribly this year. I still believe in their core mission, even if some of their litigiousness and anti consumer practices have put me off
Nintendo is also a Japanese company and japanese stocks aren't doing great due to their economy and the weak yen. Also, stock price does not correlate with good games or a healthy business.
Weak yen should be great for Nintendo, most of their costs are Japanese staff which are now cheaper. Maybe the local Japanese market is softer. More likely the trouble is the increasing memory pricing is eating their margins
Basing an art form on your stock portfolio is a good half of everything wrong with the industry.
And it's not surprising Nintendo isn't doing well in this clown market. They are taking a hit because they resisted pressures from shareholders who wanted them to raise prices on its new system. Nintendo eventually gave in, but with a much smaller price increase and a delayed effect from announcement to implementation (~4 months forewarning). And on top of all that they are not hyping AI to the moon.
And I haven't even gotten to the overall economic climate of Japan yet. Nintendo's stock falls would happen regardless of if they followed the above.
These are good, pro-consumer moves. It shows that more companies need to think past next quarter and resist the whims of people who don't have your company's long term interests in mind. You're the expert here, not them.
I'm glad Nintendo does a bit of everything. Taking the time to try out new IPs, give older ones a chance to rise, and go truly off in the weeds with series no one else can really do (the Fit series and Labo being some of the biggest examples). It really feels like there's something for you there, no matter what kind of games you like (unless you only play the GTAs/CODs/Maddens of the industry). Even if you're not actually someone who games. My mom loves the Fit games.
Nintendo does family-friendly games. Which have their place.
However if for example movie industry had its crisis, and someone were to point out how Pixar is doing great, and latest Toy Story is a big hit (it is btw), I'd say "And what if I want to watch anything that is not a family-friendly movie?".
Could Nintendo ever make Baldur's Gate 3? Not in a million years. Doesn't fall into children-friendly bucket and so would completely run against Nintendo brand image.
Baldur's Gate 3 and other games would them just release on a nintendo console, i don't think nintendo would outright refuse to take a whole sect of kinds of titles, the companies making the console and setting the ecosystem do make a difference but you exaggerate a bit.
I find it really sad that the GameCube and N64 were where they were the most innovative and also happens to be where they floundered the most in sales.
I don't know how you can say that when some of their most recent well received games include Tomodachi life and Rhythm Heaven. Those aren't the kinds of games made from those maximizing bean counters.
Huh? They are trying a lot of things and when they want to establish a new franchise they are often successful, see e.g. Splatoon. Innovation also does not correlate with new IPs.
Sony has been pretty successful with that though, and there was a time where they pushed many fan favourites in the cinematic genre. They aren’t arcadey games like Nintendo ones of course, but something like The Last of Us has its own value and audience. It sells too.
Sony's had to bet the house on those types of blockbuster, crowd-pleasing experiences. The PS5 has yet to crest the cinematic peaks of the PS4 (PT, Bloodborne, Uncharted, etc), so people are rightfully getting a little worried that this gamble won't pan out. The bestselling PS5 exclusive is currently Ghost of Yōtei, behind eight better-selling crossplatform titles.
Nintendo's exclusives outsell Sony's by a significant margin, and they're usually simpler games that are broadly accessible. They leaned the right lessons from the indie gaming boom, and didn't try to resist it by pumping billions into making the next Overwatch killer or whatever.
I played TLoU and while the story was interesting, the feeling of being steered, forcefully and constantly, was very frustrating.
"Press this button exactly when the game tells you" and "as soon as you cross this exact point, this exact enemy will appear" - that's year-2000-ish (or worse) gaming tech.
The final confrontation was essentially ruined because the designers apparently never thought you'd use a sniper rifle, so you can set off a deafening shot that kills an enemy and the other enemies don't even notice the shot because it apparently happened outside their detection range.
sony's cinematic games sold well and are well regarded, but when was the last time they released any such game or even just a single player game? when they rerereleased the last of us?
If the game industry managed to come even close to the top writing and cinematography from Hollywood then it would already be much better than it is now. Instead the part of Hollywood they are chasing seems to be the big budget wide appeal movies that will be forgotten in a decade.
Yeah, I kind of loathe the cinematic direction Sony and others have taken. Their games aren't really innovative or fun but people lap them up for being B tier movies. It makes no sense to me. They don't bother making Bloodborne anymore, just more open world cinematic slop like Horizon.
It is neither possible nor desirable to own every great independent studio. We have also learned that we are not the best home for every type of studio
Yes, but only because the bar is so low. "We can't commodotize innovation" is not an especially subtle insight, and pretty much everyone other than executives at companies like this understand it without having to spend billions to try it out.
They say that only after they buy up like half of the IP in the entire gaming industry without a plan and it doesn't end up being a fast enough money printer. Activisions back catalog is the result of hundreds of acquisitions and IP purchases.
also board and man. that approved all acq. got lots of 8-9 figure bonuses in total, so they say that after all TOC and years. They will never say these acq. made our man. teams and some board members great ROI and personal wealth, lmao. Corp. games are sometimes flat for corp and amazing for the groups that decide them.
It also means they must have started with the assumption that they were the best home for every type of studio, which, when you say it out loud, sounds very stupid.
Second, how can a studio be "independent" anymore when owned by MS? Doesn't make sense. It's all just corpo speak for "we fucked up but we're still getting paid to fire you".
Good read. A studio can be both good and not good enough for Microsoft. They’ve never made a secret of the fact that they are in it for huge numbers. A studio can do well and still make little enough that it’s a management headache for Microsoft.
It was pretty rich seeing armchair video game industry analysts act like the new CEO was gonna usher in a new age for Microsoft's gaming division because she got to announce the updated logo and some games that would have obviously been in development long before she became CEO.
Microsoft is never going to figure out gaming. It's more art than engineering and they can barely manage the engineering with all the intervention from marketing and HR in their products.
To me it's mostly unfortunate that this has left PlayStation with no direct competition because they've noticed and leaned into the not-giving-a-shit attitude after they had such a great console generation with the PS4. It's kinda crazy that we're already almost due for a new console generation and there's very little appetite for new consoles after this generation where it feels like it barely got started. And between graphics almost certainly at the point of diminishing returns, and hardware prices like they are right now, I can't imagine there's a market to sell something more capable than current gen consoles. The industry is in a very strange state.
> And between graphics almost certainly at the point of diminishing returns, and hardware prices like they are right now, I can't imagine there's a market to sell something more capable than current gen consoles.
I haven't bought a console since the Xbox360 and Wii. But I have a friend who still games pretty heavily and is low income. He can not afford the latest PS5 and is still on a PS4. We were talking the other day and he said "I love consoles because they are simpler and cheaper than a PC but now I can't afford either. The graphics aren't getting much better so what am I paying for? What happened to $400-$500 consoles? Remember when consoles were 200-300?" Of course those last few prices were 90/00's but I agree, the cost of a new console is quite insane for not much gain.
$200 in 1985 (NES launch price/date), adjusted for inflation is just shy of $600 in 2026. RAM and GPU prices are really hurting the consoles right now, but compared to inflation benchmarks up until about 2020 they were considerably below inflation.
At those prices consoles would no longer make sense. I don't think there would be enough people who could afford them to have a good enough install base for AAA games. And non-AAA games don't need any more hardware than what we already had last gen.
Two years ago, you could get an XBOX/Switch for 300, or a PS/Steam Deck for 400. Granted, the PS and XBOX were digital only. But now the cheapest XBOX is 500, the Switch 2 will soon also be 500, the PS5 starts at 600, and the Steam Deck is 789. Things have been going up slowly, but the last year has been absolutely killer.
I read that when they designed the Xbox Series S and X they knew it was going to be difficult to lower prices down the road because wafer costs were increasing every year. Which is why they launched with 2 models from the get go, one cheaper than the other. And even so they were losing between 100 and 200 dollars per console.
Now things are even worse with the RAM and SSD components crisis. The Series S has now the price of the Series X when it launched.
I'm in software and I do alright, but I'm still on a PS4 too. Just can't justify the upgrade when there's still so many great old games available. Maybe when the next Horizon Zero Dawn comes out, I'll be forced to upgrade, but I'm taking my time about it.
Same here. At no point has the PS5 held more than 3 total exclusives I wanted. Mostly by virtue of them constantly de-exclusivating them. Right now, only Astrobot and Demon's Souls (which was there since the start) could even convince me.
I don't think I'll need a PS6 honestly, I am okay with waiting or going without titles sony is releasing.
To me, the graphics abilities have been there for a decade... what we need are better games and gameplay. More fun games without gotcha, pay to win, loot box efforts. Too much effort is going for dazzling graphics at the expense of overall gameplay. How many people are still playing CoD, WoW and so many other games from over a decade ago? How many refreshes of Final Fantasy have we seen?
The graphics can only carry you so far. There's indy adventure games with SNES level graphics that have millions of daily users.
This is where Nintendo is at. It’s hilarious how much fun me and my kids are having playing games like Animal Crossing, Super Smash Bros, Mario Party, Pokemon Pokopia, and the surprise smash hit has been Tomodachi Life: Living the Dream. My kids make all the neighbors and have them get married and laugh about it and it’s just such a goofy concept. The graphics are good enough that you no longer notice there’s graphics, just the art.
Switch 2 is a fantastic console with an astonishingly fun first party library, and Nintendo just over there doing their own thing like they’ve always done.
Nintendo are basically the only people who held out against in game spending, for which I salute them.
I spent a few years in and around the industry and there was so much insanity around the need for in game monetization that it just made things much worse.
And because the game studios didn't care about it, none of the money stuff worked, making executives even more upset.
All to catch some vision of F2P money which is an entirely different business that these companies couldn't possibly support.
It's very sad for the industry overall (this particular decision is MS killing stuff off because the margins aren't good enough to funnel more cash into GPU gods).
There's a lot I don't like about Nintendo, but the one thing I admire about them is they understand that fancy cinematic graphics aren't what make a great game.
Absolutely... They've been able to make a lot of games just fun even if the graphics aren't stellar. To this day, I wish they'd have released a Wii Sports Golf as a separate title with several courses.
There are many great quotes by Nintendo folks about this approach. One of my favorites:
> I like to think of it like buying a car. Admit it. Your left brain looks at a vehicle in terms of the numbers. What's the horsepower? The towing capacity? The 0-60? That's our competitor's approach. But your right brain is different. There's only one question out there: sitting behind the wheel, where will this baby take me? In other words, do you want to go just a little bit faster, down the same streets you've always driven, or down a new road, to places you've never seen before? That's the difference with Nintendo DS.
There's a bit of Mad Libs in there as well, you can for example add your own conversation topics or draw your own food items or pets which the characters will then talk to each other about.
Yeah, I don't mean "mature" in the sense of the rating system, which does in fact mean "made for 14-year-old boys."
I don't like or understand David Lynch, but you get what I'm trying to say. There is no one in the video game landscape doing something similar to what Welles or Kurosawa did in cinema, or what Yorgos Lanthimos and Ari Aster are doing now (or Matt Reeves and Guillermo del Toro, if you're not into arthouse stuff).
Every time someone argues about this, they cite the same old examples (Disco Elysium, Outer Wilds, some narrative indie game)... but those examples usually lack in gameplay, which is, in my opinion, the most important part of what makes a video game its own medium.
I hope to see in my lifetime someone do to video games what the French did to cinema in the 50s and the Americans did in the 60s: graduating the medium from a disposable entertainment artifact into an art form for the ages. The medium is still young, it's not impossible.
I feel like these games exist- they just aren't popular, or are typically subpar in one way or another. The problem is that I feel like video games have become like music- there is innovation happening in genres, but there are so many and have fragmented off so much that I cant really recommend to you a game I find to be genius because there's a good chance that you can't appreciate the gameplay. That's not a knock on you or anyone else as a gamer.
like story driven games that Sony is famous for. Imagine a Spiderman, a last of us, or Uncharted. Large story driven games largely for older 30-40 year old market
Also dazzling graphics has been mostly visual instead of experiential, that is, with the advances in GPU capabilities, we do get beautiful effects, but the intractability with the said infra is seems to be stagnant (and in some cases regressed)
The way things interact in the game world peaked around mid 2000s, just in time when CPUs started to not follow moors law.
As of now, interactive environments are still almost as good as half life 2 from 2004. Gaming is all about the feel of it, which also includes the visual component.
I think graphics peaked ~2015. But interaction still leaves a lot to be desired; we still have slipping and characters who can't walk stairs in AAA games to this day. Making characters more physically grounded and present seems like the obvious thing to improve to me.
This is something audiences are clearly desperate for today. I think it's obvious when looking at the huge success of Helldivers, Bodycam, Ready Or Not, Arc Raiders, (none of which are particularly innovative) players appreciate high quality, tactile and grounded world interaction.
Counterpoint is Roblox, which had one of the most innovative game engines ever. It could multiplayer simulate thousands of blocks of destructible terrain in 2006.
This feature was mostly ignored by the playerbase because developers found it easier to create static setups and focus on iterating on other parts of their gameplay.
The technological innovation still needs to be fun, though. Red Faction: Guerilla (2009) had destructible buildings to the point that they were constructed by laying down blocks in a physically correct way and letting the physics engine handle the rest, and blasting the hell out of them in the middle of open combat was incredibly fun.
It was very fun. Brick Battle, Galleons, the game with many towers. The explodey terrain put Roblox on the map initially.
The problem is the opportunity cost of destructible terrain was too high. Developers could get fun for lower effort by creating linear levels with better design/graphics/etc as destructible terrain makes everything "blocky" without significant developer work.
It is sort of hard to describe but I would say specifically the animation system.
Everything has weight and flows spectacularly. They used a combination of key framed animations and procedural to have limbs conform to surfaces and have additional physics applied when needed. Combined with the physics system on the characters feathers and clothing, it all just ties together very well. It had a long development time of 9 years, before that became almost a standard, and it was basically just spent perfecting that system.
It also helps that they threw the bulk of the GPU time on the giant character to give it highwaulity shadow and highlights to ground it in the environment so well.
But the environment is a little bit of a let down in that the assets are clearly from the original Ps3 version they were working on. They cleaned it all up well enough with decent enough AA with everything being well 'grounded' but there was only so much they could do. There are a lot of assets that show the original memory limitations.
The problem was that the frame rate would drop terribly due to a lot of their decisions. And this is after they reportedly they had to significantly reduce the animations system capabilities over the Ps3 version because it was original designed to work with the Cell's strengths. Also took over a year just to port from the Ps3 to Ps4 due to the hyper specific tech they had built. Probably one of the few titles where the Cell's strengths shone well over the Ps4's architecture. If feels like if it was done today with modern GPU tech, they could do something amazing with this. But I think it is going to be permanently stuck on Ps4.
If you haven't played it, I wouldn't give it a hard recommendation because the gameplay is very fiddley in trying to conform to the animation system and most people just don't really get into the vibe of it all. But do check out a few minutes of it in action on Youtube and just to see how it all flows.
It is an wonderfully flawed ambitiously frustrating masterpiece. The vision is strong, some of the tech is strong, but the gameplay is a little weak and some parts of the tech is weaker.
I do see that the creator Fumito Ueda with Gen Design has a new title being funded by Epic called "Gen Altus" and it looks like they are taking all their skills over to UE5, it is going to be fun to see.
> Too much effort is going for dazzling graphics at the expense of overall gameplay.
Yes, 100%. I love good graphics, but game play is the most important thing. If you don't have good gameplay the graphics mean nothing. A game with great game play and great graphics is something to behold.
I recently finished Split Fiction and they really nailed it. I hope studios take notice!
This has been a recurring theme since the dawn of video games: Everyone talks about graphics (devs and gamers), but ultimately the good and beloved games are the ones with great gameplay.
It was more interesting when there were real tangible improvements. Game graphics has been like smartphones for a good long time now. Performance and feel (low latency and high consistency) still matters though, that is not solved, but it's also never marketed.
Split Fiction is fantastic. My wife, about 0% gamer when rounded down, is still talking about it months later. I had a blast too - the game manages to be extremely fun and a decent challenge for both gamers and non-gamers alike. We'll be replaying it, but swapping characters next time.
When we played it, we had just finished It Takes Two, which was also great, but Split Fiction immediately dethroned it. I can't wait to see what Hazelight comes up with next.
Is Split Fiction easier? While I thought the platforming in It Takes Two was fairly pedestrian, it was challenging enough that I was unable to get the other half to tough it out to the end.
Split Fiction has a couple of mechanisms that make it accessible for people who are not experienced gamers. There is a general "reduce damage done by enemies" setting that make dodging attacks unnecessary. If you get stuck on something, there is a "skip to next checkpoint" button. This is very helpfully for the one or two really oboxiously hard parts. This is an improvement in accessibility over the developer's previous game It Takes Two.
I'd highly recommend Split Fiction, both for its game play and story. It is also superior to It Takes Two in that there is no part where the games "to continue playing, press X to dismember your daughter's anthropomorphic stuffed animal to make her cry". That was a jarring and unpleasant shift in tone for an otherwise mostly light-hearted game.
TBH, the whole of It Takes Two made me think 'these people are pretty terrible, I'm not sure I want to help them'. The stuffed toy bit was just the cherry on the cake. Good gameplay, not very good writing IMO (Split fiction is better but still... irritating at times)
To me that was kind of the point of the story - people that entirely forgot why they ever did any of the things they did, their kid included, slowly realizing it was their damn fault all along.
Some spots were a bit hard with Split Fiction too. There is a third-person shooter styled section my wife got pretty frustrated with at one point. But the overall game was good enough that she got over it.
I’ve been saying this for 20 years. I care much less if the game is visually stunning than if the core game is fun. It could be a paintball themed FPS for all I care as long as the core mechanics are fun and the story is engaging, I care very little. Also, good graphics don’t have to be hardware intensive—not everything needs to seem photorealistic.
you don't get the insane profit margins they want without those predatory practices, not in this industry and if you do it's a one-off and not something you can do every fiscal year
We are well into the diminishing returns era now. It not done via better art designs, now you have to push significantly significantly harder to get improved results via brute forcing it.
I am very cautiously optimistic about this. It seems there has been a lot of tooling change over to integrate ray/path tracing into systems.
Once this becomes a little more ubiquitous we might start to see some decent stuff but so far it has been 7-8 years since the first ray tracing hardware came along and it is still far from implemented consistently.
I think there's a lot of room to grow in terms of ray/path tracing, etc... but I think it's studios and not real-time gaming that will really see the benefits near term. Bamers Nexus did an interview with a new Graphics MFG that's working more into that direction, but their near term focus is the professional space.
There's improvement in tech - check out the Unreal Engine's tech demos for example - but that doesn't really translate into visible end results because one, modern hardware can't handle all the bells and whistles, and two, when you're playing it all just blends into the background, and composition/art direction trumps details and fidelity every day of the week.
That said, the tech isn't wasted, it's also used in film graphics and animations and the like. And photo mode, where games can open up all the registers because framerate isn't as important then.
But yeah. Unreal tech demos, or if you have a PS5, there's a free tech demo called The Matrix Awakens that showcases advancements from a few years ago (heck it's been 4 years already).
It's... odd that while Steam is the biggest PC gaming platform and the biggest platform for new, unique, interesting games ever, Microsoft isn't investing more in the people developing games for it. Microsoft can use it to filter out the slop, make offers to the best games, offer help with porting to consoles, and (probably most importantly) offer to put them into the xbox live program, because the xbox live subscription is xbox's biggest source of recurring revenue.
Access to Steam's library for a fixed monthly price would be huge. Actually I'm surprised Steam/Valve isn't offering that yet, it'd be huge, and for their new consoles it would be a perfect fit.
> Access to Steam's library for a fixed monthly price would be huge. Actually I'm surprised Steam/Valve isn't offering that yet, it'd be huge, and for their new consoles it would be a perfect fit.
As a consumer, I really hope they never do that. I hate subscriptions and strongly prefer to just buy games. Once there's a subscription option, I would imagine the great sales would get significanty watered down. If you're a game seller and you can get that sweet sweet recurring revenue, it's too strong a temptation. We've seen that story play out time and time again in SaaS (and even some desktop applications now).
I do still play a good bit of Black Ops II Zombies... which came out in 2012. Treyarch took notice, and the last CoD was a crappy attempt to cash in on the fact that the last good CoD game was over a decade ago.
A few great games I've played in the last 8 years, about the span of a generation, a mix of AAA and indie:
If you want to see what modern AAA gaming should be and haven't already played it, I highly recommend Cyberpunk 2077. It's not perfect, mostly due to time constraints, but it excels in most categories, and it looks and plays great. No microtransactions, no DRM and the one DLC is very good. It's on sale for $18 on GOG. No DRM should be enough reason to signal to the market to produce more games like this. Also, the developer owns the GOG storefront and so 100% of your profits go directly to them.
I also cannot recommend Supraworld enough to anyone who likes classic 3D platforming and puzzle games such as Portal or Antichamber. Supraworld has ruined other platformers for me. The developer, David Munich, is a puzzle maestro who has already put out other successful games such as notpron MYEUHD↗
> Also, the [Cyberpunk 2077] developer owns the GOG storefront and so 100% of your profits go directly to them.
Thanks for sharing that, I had no idea Michał bought it out! Before clicking your link I was worried it was going to be private equity.
I can live with the cut just going to Michał, but it was cool that for a while you could purchase a AAA game with no microtransactions or DRM on a storefront where 100% of proceeds fed back into the same studio not just publishing the game, but developing it. To me that was a huge selling point of CP77 among all the others.
When she was announced it was broadly assumed that she was being brought in to kill the division.
But then she did some minor, pandering actions and suddenly everyone was "oh boy! A new era of xbox!" Only it was all a ruse to ensure people didn't jump ship too quickly and make the bleeding too heavy. They want people to keep pumping money into a platform heading to the graveyard.
> Microsoft is never going to figure out gaming. It's more art than engineering and they can barely manage the engineering with all the intervention from marketing and HR in their products.
Gaming is like cuisine. Can it be art? Sure. But most people will never visit a Michelin starred restaurant in their whole lives. They go to McDonald's and their local equivalent. Mainstream games have been like McDonald's for a long time. It's not about being a thought provoking artistic expression. It's about engineering a predictable entertainment experience that the average Joe can enjoy while being half checked out after a day of work the same way he enjoys a Budweiser or a Big Mac.
Of course, no critic will ever be caught praising McDonald's for its culinary artistry. But it doesn't matter. People will keep spending money on it, and the business continues. Same deal for gaming.
That's the thing -- for a while they had figured out gaming. The xbox and 360 were solid consoles with lots of great internal and external games. Halo was incredible.
Then the company did the thing that Amazon did, Blizzard is doing, and all the big tech companies do -- they thought their big war chest meant they should make bigger games. Budgets ballooned, game timelines extended. Now they are stuck with games and studios with 10 year dev cycles trying to create the biggest, the most incredible, the most expensive games.
There's SO many devs out there making incredible games for fractions of the cost. It's a shame Microsoft (and others) keep thinking that reaching for bigger means better outcomes. No one wants "the game only Microsoft can make", everyone wants another great Zelda. Or Gears of War. Or Satisfactory. Or Mina the Hollower. Or UFO 50. Or Animal Well.
Hell, people want a game about shelving 3000 books in an Arcane library. Let games be smaller, more exploratory, more creative experiences. Let your studios get weird with it. Let them explore spaces and take risks. Stop sinking tens of billions into games. Start sinking tens of millions into them.
I think another big issue they have is their insistence that most (ideally all?) of the people working on their games should be temporary employees. When your most valuable studios get out of the business of providing secure and sustainable employment, you lose the ability to build institutional expertise. When you treat your creatives like a commodity, you'll get generic assets and writing regardless of budget. When you focus on everything but the games themselves, it shouldn't come as a surprise that your big franchises degenerate into undifferentiated revenuemaxxing slop and unique new projects that might get people excited die on the vine.
Overall I think western AAA game development is dead. The executive class killed it with their greed and incompetence, and as long as these huge corporations are allowed to keep buying smaller studios/publishers and shutting them down a few years later, nothing is going to change.
> No one wants "the game only Microsoft can make", everyone wants another great Zelda. Or Gears of War. Or Satisfactory. Or Mina the Hollower. Or UFO 50. Or Animal Well.
This IMO is a display of what is wrong with a lot of online gaming discourse — it is dominated by people who spend more time playing and critiquing games than 99% of the population and has a tendency to overemphasize indie darlings and ignore the massive commercial success of mainstream titles. Forza 6 released in May and is wildly popular among normie gamers. So is your yearly call of duty instalment which is now a Microsoft property. Go ask people coming out of a Walmart if they know what is Animal Well and they will probably think you are soliciting donations for a local animal shelter.
I'm not saying you can't criticize mainstream AAA games. I get they are boring, formulaic and increasingly rely on predatory business models. But if you want to talk about business and what kind of games companies should invest into, you can't just ignore the massive commercial success AAA already enjoys or the fact that most indie games flop anyway.
And yes, people will play games that can only be made in an established franchise by a major company. Forza is able to license real world car models from companies like Porsche because it is a well known and safe brand backed by a big company. Not to mention games like Microsoft flight simulator or GTA.
Sure, I love a Forza Horizons (I'm not much for mainline Forza), but those games aren't really experiencing the same scope creep as the the rest of the industry.
Call of Duty is, but it's also noteworthy that sales of CoD are slumping. Hard. Like down-by-60% hard. And the gamepass numbers aren't really boosting it back up.
Also, I think you'll find my list absolutely included big games. Gears of War? Zelda? These are not "indie darlings".
It was once the Wii with anemic hardware and waggle ended up outselling the 360 that MS changed. They went from pushing forwards to chasing trends.
I agree, they need to be focusing on smaller projects that take risks. Maximum 24 month dev times but with modern tooling could do some special things. Maybe if after 6-12 months they see something that is gold, they can give it more resources but that would be on a case by case basis.
I might be looking at the Kinect with rose-tinted glasses, but bringing depth and camera-based pose tracking to the masses in 2010 is pretty impressive.
Sure they were chasing the Wii, but they did try to innovate on the hardware and capability front, and back then VR was nascent, but investing in this area for gaming made sense then (it was very easy to imagine VR games being the 'next big thing').
Unlike Nintendo, Microsoft couldn't really figure out good and fun gameplay for Kinect. Basically only dancing games took advantage of it well IMO?
I feel they kind of did in the Xbox 360 era. Maybe it was just down to luck because Sony dropped the ball in the early years of the PS3 and Microsoft got the jump on them a bit.
The 360 was amazing looking back on it, Xbox Live, trying out innovative ideas like 1vs100, attracting lots of publishers to the platform for games, Xbox Summer of Arcade.
I was a big OG Xbox fan but even then I knew deep down it was never going to catch up to Sony with the PS2. Then the 360 came out and it was brilliant.
Sadly they threw it all away with the Xbox One and while recovered some credibility somewhat with the Series X, it's definitely not the same as those golden years of the 360.
Maybe the 360 was an aberration in Microsoft's history and the years since then have just been a regression
Xbox Live Arcade, and the accessibility it bought for smaller studios and indie developers was massive.
You could say it's just a response to Steam and the PC gaming indie scene, sure, but the 360 era is definitely one where Microsoft hit all their strides. Then they ruined it with the Xbox One.
More capable than current gen consoles is going to be local AI. Calling it now. It won't be as much about graphics as it is about selling some notion of human like NPCs and smarter enemies and some other use case they can sell to the masses.
> human like NPCs and smarter enemies and some other use case they can sell to the masses.
npc ai has been capable of being much more realistic for a long time, and smarter enemies as well; if enemies in a game are too smart it stops being fun which is to say enemy ai being too stupid or not realistic enough is a non-problem and current-gen hardware is in no way a blocker to such aims anyway
>It's more art than engineering and they can barely manage the engineering with all the intervention from marketing and HR in their products.
truth. far too many MBAs in that company. "Let's monetize Solitaire!!!!" Only an idiot would even come up with that idea, never mind follow through on it.
Microsoft is not an engineering company any more. Just look at their products. They placed ads in the start menu and file explorer. Azure is one of the worst clouds when it comes to features and reliability.
Microsoft is a dying company, and they are trying not to end up like IBM, but their fate is inevitable.
I'd say games can be either art or hype. Call of Duty is not art, really, it's hype. In the same way that no one thinks Marvel films are moving film forward, but they are hugely popular. GTA is somewhere in the middle, being mostly hype driven, but based on solid "art" in good gameplay. Indie games tend to be art over hype.
Microsoft can't do the art because it's too big, too safe, and it can't do the hype because it's not cool.
It can be art even if you don't consider it artistic. CoD is an example of military art. Marvel is American blockbuster art translating American comic book art to the screen. They are their own kind of artistic expression and achievement, even if you personally don't consider them art.
I mean, here you are too declaring a XBOX defeat. You are no better than those armchair industry analysts. The 10th gen hasn's even properly started, we don't even have rumors of WHEN it will be.
Not saying that I disagree. I absolutely agree. I think Xbox is downright moronic to buy Bethesday on a promise of Starfield being a massive hit, and after it hilariously fails, they throw out a bunch of studios just so they can focus on their next thing even more.
It's just, come one. You have to see how ironic and conceited your opening paragraph was.
They had it figured out perfectly in the Xbox360 generation (and for PC games by the late 90s), but I guess that the MS Games and Xbox divisions had a lot more freedom and were more decoupled from the Microsoft org chart back then.
Console generations are a cultural construct. And just like the bit wars of the 90s, they are cultural constructs that cannot explain the current situation.
We have not left the PS4 era. Both Sony and Microsoft use modern CPU and GPU in the PS5/Xbox Series that can 100% replicate the previous console. They use the exact same online store, ushering in a modern era where old devices will lose access to the store, but the store's never gonna close. All of this makes the use of generations to describe console gaming obsolete. We don't talk about generations in phones, or laptops. Same thing with gaming.
On one hand, the idea of using Microsoft’s crazy amounts of money to try to build a subscription gaming business feels like it should have been more successful than it has been. On the other, I think gaming has some distinct qualities vs TV/Movies/Music or other types of software that makes the idea seem way less appealing. Curious to see what the new direction looks like
This is incredibly sad for a lot of my friends who are finding themselves out of work despite delivering well received products.
But at the same time I appreciate the candor of Asha saying that the corporate management are to blame and letting studios go back to being independent where possible.
Phil Spencer really messed up. Everyone in the industry knew Microsoft were making bad calls trying to dig themselves a hole with gamepass and simultaneously digging a hole with their acquisition spree. I’m glad that Asha is laying this bare even though it sucks to be brought in as the hatchet person.
This is an example of the glass cliff and I’m hoping she can help right the ship. I think they need to split to a wholly owned subsidiary rather than be in Microsoft proper, and I expect that to be announced at the Q1 investor meetings.
Phil really dug their hole deep. Microsoft themselves encouraged it. It’s been a decade of sheer incompetence at the highest level so I’m hoping they can right this without taking out half the industry in their wake.
Anyone who's been paying attention to Halo for the past 15 years knew there was bad management the entire time. (Halo used to be the game that everyone wanted to have and to be; now it's an also-ran due to self-sabotage.) The first step is admitting you have a problem, so good job there, keep following through.
Halo Infinite was the moment I knew Xbox was gone. The core game engine was the best Halo has ever felt, but everything around it reeked of incompetent management.
Giving a player a reward for putting in effort is one of the fundamental principles of game design. If you remove all the rewards, what incentive do they have to play?
Their response to player backlash which was essentially “deny, defer, gaslight and ignore” killed the online community for it within a couple of months, and I think they dropped what little content support it had within two years as well, after initially marketing it as a long-term “live service game”.
Blatant incompetence, how Microsoft ever let itself get in this state I’ll never understand.
Also I can’t even remember the campaign story. Was there an angel or something? It was a cliffhanger about some new enemy, as if they’ll ever make another game?
I just remembered the monstrosity that is the Halo TV series as well now, ah god… it’s been a rough decade.
I don’t think Phil had any other options while existing under Satya and a relentless push to services revenue. If Windows can’t make a case for itself without moving heavily to services (advertising and pushing 365, primarily), how could Xbox?
I’m not really sure how the C-suite is escaping blame here.
Young attractive female division boss, who doesn’t use the consumer product she’s the head of, is a stooge of the BOD in their ambition to wind operations down, to no one’s surprise.
- The make around 5 billion in revenue per quarter
- The problem according to them is profit margin - around 150-160 million
So first of all, they are big! Secondly they are not at a loss. They just have a "thin, non-growing margin". So to fix all this they are trimming down, so they can "return to growth" (which I think is ridiculous).
Some points -
- They are huge business even now - 5 billion per quarter revenue is no joke
- They did not have to buy all those studios
- They looked at Netflix, and wanted the sweet monthly subscription cash stream
- Then they did not have to give away popular games day one on Game Pass
- And finally, they did not have to raise Game Pass prices to improve the profit margins. Of course, consumers pulled out.
- Once again, short term vision, crazy decisions, bad spending spree and a constant need to "make numbers go up" and who has to pay for all this?
> - The make around 5 billion in revenue per quarter - The problem according to them is profit margin - around 150-160 million
> So first of all, they are big! Secondly they are not at a loss. They just have a "thin, non-growing margin". So to fix all this they are trimming down, so they can "return to growth" (which I think is ridiculous).
How is that profit margin distributed though? King (Candy Crush etc) and Mojang (Minecraft) are specifically called out as money-makers, it's possible that they're carrying the majority of profits while everything else is a dud:
> We have also learned that we are not the best home for every type of studio; in a typical year, we lost 64 cents for every dollar we invested.
As an example, Double Fine (one of the studios being chopped) has released 2 games since 2021, Keeper (191 peak player count on steam) and Kiln (163 peak players); these would be flops even for a normal indie game, for a studio getting Microsoft salaries those are enormous flops.
On the margins, that's crazy thin for the size of the org... One bad quarter could turn from a few million in profits to hundreds of millions in losses. It's too close, and there's no way to build/store funds for any kind of storm at that level.
Now, I think the vast majority of the pain is more than self-inflicted... I think actual business, marketing and focus need to start taking priority over idealistic political PoV. Let the games target their natural audiences and have the broadest appeal... at a certain point, trying to gain 1% of audience means alienating 25% or more.
If you're a grocery chain you know exactly how much an item costs and exactly how much you sell it for. You also simply order more or less stock of the item depending on how it's selling.
If you're a video game company, you invest millions of dollars in a project up front, for years, and you don't know until after release whether you:
- Make back all the money you spent plus a healthy profit on top.
- Just break even, but you lost the opportunity cost of all the other things that money could have been spent on with better utility.
- Your game flops and you wasted all the money you spent developing it.
It's also highly uneven. Extremely likely that King (Candy Crush) and Mojang (Minecraft) are making a ton of money, and everything else is a money pit where you pour in millions of dollars and you don't even make your money back.
The stores themselves aren't losing money if there's a natural disaster.. the farm does, the distributor likely does.. but not the store. The store just raises prices against future inventory pricing, often ahead of the inventory itself.
food demand is pretty inelastic their margins are low but they're fairly consistent. modern games can have budgets of a few hundred million dollars with absolutely no guarantee of sales. at those margins 1 failed triple ai have could wipe out several years of profits.
This is the industry in general though, and why you see so many historical AAA studios go bankrupt after one bad game.
The problem was that if you kept a studio small and lean, you were often at the mercy of predatory publishers who controlled the distribution channels (pre-network, physical media).
So most studios tried to vertically and horizontally integrate into conglomerates: own their own publishing + have a diversified enough pipeline of games that one flop wouldn't take down the entire works.
Unfortunately, that works at Activision (pre-Blizzard) and EA (00s) scale, but not Microsoft scale (where you essentially own a large chunk of all studios).
This was a reckoning long in coming, as MS XBOX leadership, after some initially brilliant ideas, got high on their own supply and forgot they couldn't endlessly acquire more studio with their parents' cash.
Tbh, they probably should have lured away one of Berkshire Hathaway's acquisition people and put them in a go / no-go decision role.
It's the acquisition price, product, and financials that make something a good deal or not, but XBOX spent the last 10 years valuing potential acquisitions on intangibles (synergy, strategy, if we don't they will, etc).
Keeper needs an optimization pass so badly. Once I finished the first zone the framerate dropped to the floor on my Steam Deck. Presumably it runs okay on the current XBox, but it sure feels like Double Fine's attention has moved on and will never return.
Absolutely drop-dead gorgeous but I don't think I am going to ever finish it until I get a Deck 3/4 in like 5-7 years.
Yes, apologies for the misspelling. Very likely another game that wouldn't "succeed" in a traditional release, but would potentially get people into a subscription service.
Despite that loss leading strategy, Obsidian has had quite a few other releases that did to make up for that side project. So the studio would overall be in the green despite that.
Psychonauts 2 was funded we-got-kickstarter-at-home and already well into development before MS acquired DF. If anything this exemplifies that DF did not function under MS if they couldn't replicate that post-acquisition.
Ehh, Microsoft still got to reap the profits of it.
And yes, no one expects a brand new IP to have the same odds of success as a old IP that's become a cult classic. DF's strategy and directions were not to make the most profitable, safe release because that's not why you buy a studio like DF.
DF basically got paid to goof off an a very expensive city. MS basically bankrolled their hangout and chill lifestyle. Day to day was basically them having mildly interesting discussions about their personal lives and easily solvable creative/ technical stuff that went round and round.
Double Fine has been an indie studio for longer than Xbox has been invested in games. And as far as I know they've been situated on San Francisco for that entire time. They didn't just bumble into a trillionaire company and lounge on the job security.
Those kinds of statements show a misunderstanding of both the studio and how the games industry works. Any one of those engineers could have gotten into a FAANG the traditional way and doubled, if not tripled, their salary on arguably less involved problems than what they go through creating a real time game.
Its also likely why Schafer chose to take the studio back rather than go the route of finding a new publisher to work under. He still wants to work on games for a little longer rather than get a last paycheck and retire early.
The split is usually not a multiple. There are people with computers, and people with xboxes. If there are that few people on steam, there are probably a similar number on Xbox. Not 10x or 100x, and at least 100X would be what you need for that game to be worth further investment.
What evidence do you have for this? It doesn't pass the sniff test: why would anyone buy a game for full price when they can get it for far less by just grabbing a cheaper subscription? (that they can cancel any time)
> Only people without GamePass subscription and no desire to get it for even a month or two would buy the game on Steam
So the majority of people?
I jest, but I honestly don't know anyone who consults the GamePass offerings before making a decision on whether or not to buy a game. It's Steam or pirate.
Completely anecdotal (which i think both of us are guilty of) but i generally keep my PC game pass subscription active, and will check if games are on there before getting them elsewhere. I don’t really know how to measure how many people are doing that though.
You can easily compare to the figures for other games that are also on GamePass. Another Crab's Treasure, for example, had 4.7k Steam players on launch, of a similar nicheness stratum.
50 years ago, publicly listed companies understood that chasing short-term growth targets undermined long-term sustainability. The current failure mode is not an inherent property of being a publicly listed company, it's a consequence of incompetent leadership and bad regulatory policy.
"Chasing the highest margins" is almost the entire point of a market based economy, and is the main selling point for capitalism. I get your complaint, but if you reframe it I think it isn't the real problem here.
The whole point of a market-based economy is to allocate resources to making things people actually want. How does the market figure out what people want more of? Well, profit margin. If someone is making a lot of profit selling something, that is a really good sign that people want more of that thing. Other people see the high profit margin, and move to get into that business. More of that thing is created, and people's demand is satisfied.
The high profit margin is the signal (and the incentive) to get more of that thing.
In other words "Compulsively chasing only the highest margins" can be rephrased as "investing in things that people want more of"
>"Chasing the highest margins" is almost the entire point of a market based economy, and is the main selling point for capitalism
That's news to the ALDI brothers and Henry Ford. Capitalism used to be about the exact opposite. We moved from low volume - high margin, extractive feudal-like economics to consumer capitalism, high volume low margin. You create wealth by churning out commodities at low margins that the average worker could buy.
The tech industry is trying to exactly reverse this, as Varoufakis appropriately points out, by returning to techno-feudalism where you're not a consumer but a sort of platform serf. High volume commodity markets is exactly what these people try to eliminate to return to a kind of direct resource extraction.
I don't think those previous capitalists were any different than the ones today, they just didn't have the same opportunity. It wasn't possible to build a company the size of modern ones with the technology at the time.
Look, I am not saying there aren't horrible flaws with capitalism. There are a ton, and we should, as a society, work to mitigate them.
I just don't think the solution to the problem is for us to ask capitalists to not seek the highest margin. This is not a problem that is fixed by people just being more moral.
Xbox around 2021 had around a 12% profit margin and the gaming industry as a whole was around 17-22% . In 2023 the target for the division was put to 30% . We see this new restructuring because the target was put this high. Microsoft really wanted Game Pass to be a steam competitor which is pretty much what everyone in the industry tries to do and fails. The push for Game Pass prices to be higher was to get the 30% margin and that didn't work out. They aren't operating at a loss they are operating at a goal and they failed the goal. From other child comments many studios they bought probably were below average. We can see this restructuring basically is that they failed the target, the old guard went out as the new guard came in.
>Microsoft really wanted Game Pass to be a steam competitor which is pretty much what everyone in the industry tries to do and fails.
Gamepass is quite literally the most anti-steam strategy ever. It's a massive loss leading (or rather, low margin leading) service relying on a pseudo-rental service to provide value. Steam got to where it is by keeping all its costs lean and developing a service around taking a cut from premium digital goods.
>From other child comments many studios they bought probably were below average.
In revenue, maybe. That's the fault of Microsoft in two fronts. One for purchasing game studios who always operated at low margins, and two for directing them to focus on quality over budget. Double Fine and Ninja Theory aren't studios you buy with an expectation of 30% ROI in 6 years (ignoring the pandemic in the middle of that). Let alone when you explicitly tell them not to worry about finances.
On an artistic level, Hellblade was an insutry darling and about as close as you can get to an "oscar-bait" of a game. It's something you buy for prestige. Double Fine is a very seasoned indie studio who delivered several cult classics. You buy that for a brand that gives you variety from the current "online FPS juggernaut". Those strategies changed dramatically over the decade.
I wrote a while ago about how companies seem to have gotten the idea into their head that subscriptions are unconditionally good, rather than a contingent good based on the exact circumstances of the subscription: https://jerf.org/iri/post/2023/streampocalypse-and-first-pri...
Gamepass as a subscription to make sure you always have something to play, that has a lot of old games or indie games and other games that have no commercial value makes sense to me. The back catalog for any of the current consoles is plenty deep with games that have lost their ability to move units independently but still have a lot of value and can also give that perception of value. Such a plan is picking up pennies, but it's a lot of pennies.
I've never understood putting your new releases out on gamepass and bragging about that as your primary value proposition. Many new games are, say, 20-30 hour experiences, assuming you play them from start to finish once. One does not need to spend too much time with "this % of other players got this achievement" to see how many players tend to drop off of a game even that long. So if you put your new game that you would have sold for $60-80 dollars to me directly and it translates to three weeks of engagement on your $15-ish/month (depending on level) subscription, it's hard to see how that is an economic win. Put that game on Gamepass in a year or two, sure, that can make sense, but on release? And that not as a mistake, but a deliberate strategy? I can not fathom the mindset that leads to that.
As a deal for customers it seems to have been pretty good but I've never understood how Microsoft expected to make money on that plan. The streaming-video proposition of making a high-budget release to keep your subscribers makes quite a bit more sense, you could never have counted on getting $70 out of a customer for those anyhow, and even that economic proposition I think has proved more complicated than the streaming companies expected. The Gamepass model has just seemed insane.
I expect it to move to more like what I described at the beginning. As a way to turn a lot of old and hard-to-monetize content into a subscription stream it's brilliant. As a way of releasing new AAA titles it's crazy. Movie studios played with that model and I don't think they liked it at all.
The logic of day 1 releases, at least how it seemed to me, was that a % of those people who get gamepass just to play the game for cheaper would stick around. That’s potentially worth way more than 1x $60 (now $70-$80) sale. That didn’t happen I guess
It’s funny how a strategy like this would work on me, but I am a busy adult who doesn’t really game.
Compare that to my nephews who have a lot of time for gaming, but they’re always fighting to scrounge up the money for another month of Nintendo online or Xbox online and go without it for at least half the year
I _think_ the thinking is that not everyone is going to buy more than a couple full priced new releases per year (in general). $80 or whatever is just too much for most people to drop on a game they "might" like. On the other hand, most people would have few reservations being perpetually subscribed to a service that lets them play every new game "for free" (so long as they keep rolling in on a monthly basis). Theoretically, the subscription money would exceed what they'd normally collect from the average person buying the usual 2 or 3 full priced games per year.
Where I think it breaks down is quite a number of gamers are hopelessly addicted to playing all the latest games, all day every day. MS is surely losing money when those guys substitute buying physical games for a subscription.
I agree that's what they seem to have been thinking.
I don't entirely understand... well... from a rational perspective anyhow, of course companies are not entirely rational... why it didn't become clear that this was a silly idea and not working. It's easy to make Gamepass stop cannibalizing your main game sales. You don't need a big announcement, you don't need to advertise your plans. You don't need a huge internal political fight. You just... stop. You just stop putting your brand new AAA games on your cheap subscription service plan. You don't even have to remove the old ones, they turn into your old AAA games naturally in the fullness of time. Nobody has to lose face. It's easy. It's like falling off a log.
> So if you put your new game that you would have sold for $60-80 dollars to me directly and it translates to three weeks of engagement on your $15-ish/month (depending on level) subscription, it's hard to see how that is an economic win. Put that game on Gamepass in a year or two, sure, that can make sense, but on release?
I think that's what I thought it would be, too. XboX has a really good track record of backwards compatibility. I can (and do, occasionally) play 360 games on my series X.
A model where people can buy the latest games, can not only keep them but play them forever on future consoles, and can have access to an increasingly vast back catalogue of older games, seems like a huge win. And maybe each full price new game gets them a bit of a discount on their next month's game pass, to make it slightly better value than the playstation equivalent full priced game.
But they didn't seem to want to do anything like that.
Being a Steam competitor involves making a store that's actually good. All the other major stores/platforms don't really seem to give a shit, to be frank. Steam has like 20x their feature set, and the gap appears to be still growing.
If anything, it should be easier to make cool new features when you own the hardware side of the platform experience too, but no, it's Steam that has stuff like remote play together, not PSN or Xbox.
I don't know if I care about the features, what I do care about is the games and a lean-back experience which is not sweaty. I play games to escape the drudgery of software development and the last thing I want to do is mess with an .INI file.
I love the Steam Deck because it feels like a consumer electronics device: it has the reliability of Linux but not the sweat. The Steam Deck is the only device I've seen that works 100% perfectly with Airpods, for instance, including Apple devices.
I was at Best Buy the other day and saw an ASUS device that looked pretty cool until I picked it up and saw a Windows desktop with fonts not scaled appropriately for the size of the device. Like, wazzup? Steam Big Picture turns my big Windows machine at home into a game console and does the same for my Mac Mini. How is it you can have the back of frickin' Microsoft and not be able to do the same?
Not to say that Steam isn't packed with features that are valuable to many gamers, but just having a great selection of games that "just work" and knowing I can enjoy my investment on the devices I have now and devices I get in the future is worth a lot.
I think it's one of those things where people only care about a small percentage of the features, but which small percentage varies.
For example, I used the example of remote play together, which is very neat and a lot of people love it, but I personally don't use it.
On the other hand, I make extensive use of Steam's gifting feature, including its ability to handle multiple gifts to multiple people in a single transaction, and to schedule exactly when those gifts will land. And this is something that the other major stores don't seem to support at all, a big advantage for Steam for me, but I'm sure there's many people who don't care at all about gifting.
It used to be that you could get gift keys/links that worked just like any steam key you can buy outside Steam and you could gift those to people in whatever manner and on whatever schedule you wanted. I liked that a lot more than a gifting feature built into the store no matter how well designed it is.
Microsoft is focused on AI and enterprise sales. I don't think they're institutionally capable of making a good end-user experience. You might just as well ask why SAP makes bad UIs - it's because the executives just don't really care.
I still love developing for the .NET Framework using C#. However, the number of reasons to keep using anything made by Microsoft continues to dwindle with each passing year.
As you already said, Azure is awful and only in second place behind AWS because of how much worse Google Cloud Platform is. Windows is back to sucking again, this time so hard that I'm seriously considering learning Linux and/or switching to macOS on my home system, & playing games on SteamOS instead. I almost never use Microsoft Office anymore, outside of household budgeting spreadsheets that I could easily work with LibreOffice instead.
> As you already said, Azure is awful and only in second place behind AWS because of how much worse Google Cloud Platform is.
I expect Azure is in second place because Windows-only shops use it because of the Official Microsoft Active Directory integration (which might be called Entra now?).
For basic "Create a VM, attach disks and networking, and use it as a computer." tasks, it is my professional experience that Azure is the worst of the Big Three US "cloud" providers by far. Their "control plane" is flaky and unreliable, so it's something that you'll probably only notice if you create, destroy, or modify VMs a lot. [0]
If you have a support contract, Azure makes it much easier to talk to a human than GCP does, but I never encountered an issue that they were able to solve. "File a ticket, but don't expect support to be able to help because they won't understand the problem, and it will eventually go away." was the lesson I eventually learned.
[0] And the word on the street is that a huge chunk of Github's reliability problems are caused because of the move from AWS to Azure. Having used all three pretty extensively, I believe the rumors.
> Steam Big Picture turns my big Windows machine at home into a game console and does the same for my Mac Mini.
Well it turned mine into a 2000s linux/wine debugfest flashback when I wanted to play GTA IV: Ballad of Gay Tony... Also don't get me started on having to keep the poweroff button pushed on the xbox controller for mouse emulation for games not having controller support in the menus. It is far from the polished experience you had, but possibly I just held it wrong.
GTA IV: Ballad of Gay Tony is listed as silver on protondb, meaning 'works with tweaks', so that sounds about right. Things obviously aren't perfect. That last 10% of games is a massive pain, since every game is different (all the ones that are well behaved are in the first 90% that already work).
> The Steam Deck is the only device I've seen that works 100% perfectly with Airpods, for instance, including Apple devices.
Oh weird, mine have always made weird clicks and dropped audio here and there and shit like that when using them with my Deck.
They don’t do that when I use them with my Franken-PC bazzite machine. Instead, that one disconnects my BT mouse a couple times an hour and sometimes seems to stop processing BT keyboard input and “queue up” my presses instead, to be processed at random intervals over the next minute or so. Both of which are fun when playing games.
yeah like i assume this is better by now, but when gamepass was relatively new i got a free month with my laptop but just installing games would frequently fail, same with updating them. same with epic games for that matter, though not that bad. also at the time the xbox app would install everything in this readonly directory that you couldnt even access with admin rights, which ofc made modding impossible and also after reinstalling windows left me with an external harddrive where i wasnt allowed to delete a huge folder of games... fixed this by mounting it in linux.....
A lot of games are less latency-constrained than you'd expect. FPSes are obviously rough with input lag, but stuff that's turn based and even many platformers feel "good enough" up to like 150ms
Play anywhere is a killer feature for me (that's a game license that works on multiple platforms). Before steam deck came out it meant I could swap between PC and TV seamlessly. Should've been on every game they sold.
I can share nearly my entire steam library (~23 years worth) with my kids. There is no way in hell Sony or Microsoft will ever allow that. In fact, I've had to re-buy Minecraft because their account migration was such a shit show. They cannot and will not ever come anywhere close to competing with Steam on this feature.
If they want to be Steam competitor, then at least they should have more clear branding. Currently they put xbox to anything game related, but it's not cross platform. At least when I had xbox, they had separate gamepass subscription for different platforms with different set of games. Games that you buy on xbox store on console in most cases also are not shared with your PC. And all their first party games are available on steam, while a lot of indie games probably are not in their store.
They really should make a choice between xbox as separate platform and xbox as windows pc. I has been like 10 years where they were kept advertising it as some kind of single ecosystem, while it was not
Steam is competent at what it does and has been for decades. No other online game store is as good as what it does: Nintendo, Epic, Microsoft, & Sony have all failed to do well what Steam has gotten better at over the course of 2+ decades.
People would likely juggle the use of two stores if the value proposition was great enough. But it isn't, which is why Steam dominates and all their competitors operate in comparatively tiny fiefdoms.
Steam has problems but it also has a vast feature set. The family sharing and refund policy are both seriously great, for example. Personal calendar is also really, really cool (and bad for my wallet).
Yeah, there's lots of stuff in Steam that I never use and don't even understand. Like the Steam Points and the Trading Cards and Steam Level and so on.
But the purchasing experience is top notch and they even have a generous refund policy. It's just lightyears ahead of the competition.
The Xbox can't even reliably play video trailers of the games MS in theory want to sell you. They don't even require every game to have a video. They don't even require every game to have a screenshot, as I've encountered some that don't even do that! Fundamentally unserious about making a good experience.
Completely agree. Their problem is that corporate wants more money to funnel back into AI and it is really inconvenient that Xbox provides only a couple billion dollars per month whereas Office and Cloud provide many more billions. What a complete joke.
> Then they did not have to give away popular games day one on Game Pass
A company that sells consoles complaining about not having enough games after 25 years in business and acquiring most popular game studios is hilarious.
They keep cutting game studios, killing games and then set ambitious profit margins. At some point you have to question, do the people in charge understand their own business at all?
They just gutted bungee and basically killed Destiny 2, not because the game won’t sell, but because it won’t generate the profits they unrealistically set.
While Bungie had historically been tied to Xbox / Microsoft during the Halo era, Bungie spun out to be its own company in 2007, and then was bought by Sony in 2022. It was Sony, not Microsoft, driving the most recent layoffs at Bungie.
It seems like a simple fact is often overlooked: you can't just throw money at art and expect it to be good, no matter the form. Netflix tried it and ended up with a lot of weak stuff, Microsoft did the same with similar results. Most games these days are just copies or rehashes of others, not original, full of clichés or old-fashioned mechanics. Acquired studios tried to mash up different ideas, hoping it would stick, often with really bad results, like Redfall. It's like the E.T. game disaster, but forty years later and spanned across the whole company. Hardware is great, GamePass is great, but Microsoft can't produce games.
One thing money can do is enable polish - you might not be able to directly force the next great game, but you can make your games excellently coded and polished.
Polish and Microsoft is a funny pairing over the last few years. More and more things are coming apart at the seams as the vibe-coded duct tape is failing.
Edit: even though i inaccurately associated Bungee with MS, they are not. However, the comment stands when you replace it with any of the other successful studios like Bethesda, Id software, Blizzard etc. A bunch of studios and their ips were gutted not because their games sucked, but because they didn’t meet the profits Microsoft expected, which is ridiculous.
With due fairness, these are two different sets of leaders and two different strategies.
A lot of the strategy you outlined -- buying all these studios, replicating netflix, giving away day one games, raising game pass -- was a strategy put in place by Phil Spencer. Phil pushed for this investment with the promise it would pay off later for MS. He's talked publicly about having to convince Nadella to put up ungodly amounts of cash for these investments and about how the bar for expected return was very very high. It seems like it clearly hasn't worked out to Microsoft's expectations or they've lost patience for waiting, and Phil has now "retired to spend more time with his family" (i.e. been fired).
Now Asha is here and presumably has a mandate to fix this and get back the profit margins that were expected from xbox. Sarah Bond, the xbox president, has resigned, and with this letter it seems the previous Xbox COO is out too. There is clearly a huge shift in Xbox leadership happening and it shouldn't be surprising that Asha -- who is known as a business-driven executive and not a 'gamer' -- is going to be reverting a lot of previous strategy decisions.
I certainly enjoyed gaming their rewards system for years on a series S. $300 for the box, maybe spent $40 over roughly 4 years for gamepass. It was nice while it lasted!
Phil and the likes were too hands-off on these studios post-acquisition. They got too complacent enjoying steady paychecks over years of delays while working on their niche games that only highlight their artistic vision over generally fun gameplay. That's where they failed. The Activision/Blizzard acquisition and GamePass fumble were just a nail on the coffin
Yes, I agree. I empathize with Phil in spirit on it. He's a real gamer and tried to create a space for the developers to do their own thing and create what they want. But it doesn't seem to have been great business.
I remember the glowing praise at the time for the policy of being hands off and allowing studios to cook. Gamers all over the world were very happy about that approach. Unfortunately it looks like many studios do in fact require hands-on management to make tough calls and keep things moving. I'll remember this next time studios complain about management interference.
We already saw this during the Kickstarter era where all the temporarily confused AAA studios sold themselves as having been held back by unreasonable publishers all this time only to produce the most bland and still unfinished games now that they were funded directly by fans.
You need two different types of management. You need the creative type who understands what customers want and ensures that is what you deliver. You need the financial type that understands profit margins.
If the company lacks either, or either gets too much power they are in trouble. Creative types will spend too much money on things that are nice but won't deliver enough value and so the company goes bankrupt. Financial types don't understand what customers want and optimize away all the expensive creative value the customers buy.
Note that the above applies to every type of company. Exactly what "creative" means is different for different industries, and some need it more than other (how much innovation do you need in soap?...). It always applies though so you need to ensure you get both types in leadership positions even though they don't like or understand each other.
Now with all these layoffs, most likely the numbers will change, but how many are aware that Microsoft actually owns a big chunck of well known studios?
One reason is that from the public eyes they kept their names and independence from Microsoft/XBox branding.
Yeah, cool, but right now they're axing idsoft, which was anything but "artistic vision over fun gameplay". What they did also pretty much kills idtech as a viable engine.
It was a risky bet that became even higher risk when MSFT spent ~$80 billion dollars rolling up game studios near the peak of the historic COVID gaming bubble. They bet it would greatly increase Game Pass sub growth. Instead, Game Pass sub growth slowed down. At the time I thought it was a reasonable plan - but not at the prices MSFT was paying for content. Then the DRAM drought killed hardware sales to gamers forcing the issue.
They were the cheapest DVD player you could buy for a while, and they were also the most available DVD player. That changed fairly quick, but at launch they were your best value. (though dedicated DVD players generally had better controls)
I never understood the esteem Phil Spencer was held in, seemingly both by fans and industry insiders. I never understood Phil’s strategy.
Buy a plethora of studios. Pay an order of magnitude over the odds for the big ones - just to be sure you get them! ‘Rescue’ smaller ones of questionable financial value - as part of Xbox they’d somehow be successful enough to justify the price paid. Heavily manage the studio heads - but, uh, also give them total creative freedom - and allow them to make niche games. Sell hardware at a loss - but also make the games available on all platforms. Don’t allow any software that takes advantage of your most powerful hardware, because it also has to run on the other, less powerful console you are also selling. Also, the future is streaming! But, uh, maybe not!
Not just the strategy, but almost every aspect of the ‘strategy’, was incoherent - as current management is very close to outright saying.
To be fair to Phil Spencer, this was the strategy across the industry right after COVID. Remember the shopping spree Embracer Group went on between 2020 and 2022? I think we were in an e-sports & live service bubble that has now popped.
IIRC Xbox had been criticized for quite a while at that point for having very few exclusive/first-party games worth buying an Xbox for. I always assumed this move was to try and fix that problem.
The (an?) incoherency with that is that this was happening at the same time as the ‘everything’s an Xbox’ strategy that saw them produce games for other platforms too.
That was a side effect from ABK acquisition, they bought studios that traditionally were cross platform, the year long acquisition discussion always promised not to touch them in that regard.
So you end up with this schizophrenic way that XBox became more of a publisher than a console brand, with a leadership used to cross platform (Sarah Bond), thus ‘everything’s an Xbox’ pivot for the "curve must always go up".
I’ll admit to being ‘out of gaming’ for that era (I’m a pandemic gaming-returner), but I wasn’t aware of that. Was his reach bigger than his official title?
Wikipedia doesn’t show him in an ‘overall leader’ role until 2014, a year into the relatively disastrous Xbox One era.
He was very visible, giving interviews to the mainstream press and presenting games on stage at E3 as early as 2010. I'd also argue that while he wasn't the top dog of all things Xbox from 2009 to 2013, Head of Microsoft Studios is still a pretty big deal and arguably the quality of games matters more than the hardware. Also keep in mind that he rolled back a lot of the - from the perspective of the core gaming audience - disastrous Xbox One launch (TV focus, Kinect bundle) after taking over. There's an argument to be made that Xbox the console wouldn't have survived this long without him. That said, he caught a lot more flak in recent years and IMHO deservedly so.
Which games of their output were Xbox exclusive? They were basically transitioning into a publishing house with no real hardware impact. In fact what did Phil in finally was trying to sabotage the hardware brand itself with the 'This is an Xbox' campaign. I said out loud when I saw the first ad, 'Phil will get shitcanned for this.'
Acquiring a game studio only makes sense if you see a way to make it grow either by providing capital or better management. E.g. Activision acquired Treyarch in 2001 for $20M, which was probably 4-5x of its annual profit at the time. Seeing that very few people played (or even heard of) Die By The Sword or Draconus you could imagine that there was still a room to grow so there was a good chance you break even on your investment even sooner than 5 years and start making profit for yourself. Treyarch, who did not need to do the sports games contracts anymore and could hire more people, proceeded to making Spiderman and, later, CoD. I believe Spiderman alone made way more than $20M spent in the acquisition.
Buying Activision for 20x of its annual profit, on the other hand, makes zero sense. ABK was not lacking capital, had the same MBA management Microsoft has and did not have much room to grow, Blizzard alone had 5K employees. Their IPs had long time since plateaued or had been in decline already. What was Microsoft plan to increase profit? Switch everyone to Teams? Put more people to work on CoD and release 2-3 CoDs per year, hoping they all will sell as well as the annual CoD? The more realistic path to return of the investment could come from increasing Xbox's share of the market by making their newly acquired IPs Xbox exclusive. But they did not do even that.
IMO, at the time, it was to buy ABK and make CoD an Xbox exclusive. That clearly didn't play out when everyone screamed about it being (rightly!) anticompetitive, and so they had to resign themselves to accepting that day 1 gamepass exclusive was going to be their way to get people to switch over from PS. That also didn't work.
The 'K' part of ABK was also probably going to be their way to drive mobile into Xbox as well with their 'everything is an Xbox' push at the time.
Even if they had made it exclusive, $70B is too much for this. CoD sales would fall - not everyone buying it would go out and buy an Xbox, Xbox hardware sales would raise. Let's be optimistic and say every CoD player (including ones who already bought Xbox ) goes out and buys another Xbox and then buys 2 xboxes in the next generation. So it's ~20M more Xboxes sold. To break even on this investment in 10 years MS has to make ~$2400 from each console sold over lifetime ($68B - 10*$2B annual profit = $48B over 20M extra units). Of course, if each sold Xbox made that much money they would not sell them for $400, they'd pay you to get one.
Yeah, they could have spent the money on founding new studios. With that sheer amount of money you could pretty much poach any talent you wanted too, but it wouldn't be as obviously anticompetitive.
Instead, they paid way over the odds for IPs that seem past their prime.
IMHO, there is no room for a 70B investment in games at this time. The industry is mature and won't be growing any time soon, at least in the West. There had been a rush of investors founding new studios and propping old ones in the past decade but the vast majority of those had already been wiped out. And all of those were probably just a fraction of what Microsoft had spent just in this acquisition.
Another crazy deal like this is the EA's buyout, I wonder if it will come through or the investors will eventually realize that they are not going to see their money ever again.
Undead Labs has shipped nothing
Compulsion shipped South of Midnight topping at ~1600 players on Steam
Ninja Theory has shipped Bleeding Edge and Hellblade 2
and
Double Fine shipped Keeper and Kiln.
It's a net positive that these studios and this culture is gone.
I am sure that food was amazing.
It's on the publisher and owner to guide studios in a direction that makes money. That's literally their purpose. If these studios aren't releasing anything and they aren't making money, that's on Microsoft. So things aren't better if these studios are gone. The same people who managed this mess for ten years are still there. If you're not going to do anything to ensure these studios actually do what you need them to, I don't understand what the point was of acquisitions.
So, Phil gets a golden parachute, and all the studios that got bough up because of him will be "set free" if they're lucky and disbanded if they're not. Yay for capitalism...
It comes across to me as a really honest letter. At least they are talking about spinning out studios instead of shutting them down, I think that plays better than previous announcements. (e.g. make a hit game like Hi-Fi Rush and get shut down!)
150M at 5B revenue is not great: that's 3% margin!
The bigger issue is that console manufacturer revenue is highly cyclical. This is hard to see in e.g. Xbox and Sony since they are both part of a larger conglomerate, but really obvious for nintendo.
You generally have a cycle of
- "Launch": high marketing costs, low/negative HW margins
- "Mid-cycle": lowering manufacturing costs, large game sales, high margin DLCs
- "end-of-cycle": falling HW sales, fewer exclusives (-> preparation for next gen), fewer consumers (-> waiting for next gen). Here you usually have maximum profits since you don't subsidize HW and marketing is minimal (platforms are already locked in)
Generally you have to establish a big userbase during the mid-cycle such that you can levarage it during the late-cycle to be able to afford next-gen. Xbox has the big issue that their mid-cycle was catastrophic, which means they now don't have the console base to get into the next generation:
If they have 3% margin _right now_ in the end-of-cycle where marketing and development costs are at their lowest, this does not bode well for the overall health of the business.
That was true historically but is no longer the case. Even last gen manufacturing costs didn't go down as much as they used to. This current gen they actually increased multiple times.
The cheapest xbox should cost 129. Instead it is $399. That is how consoles work. It gets cheaper, the back catalog grows and now you have a mass market item that ideally could source games from anywhere.
Consoles losing physical media and not allowing 3rd party app stores, or gasp, the ability to run user programs is going to kill the consoles. Expensive and marginal future utility.
Exactly, it seems their only way to make money is charging for online play which used to be $5/m and now $10/m for Game Pass Essential. Now that their high console prices aren't getting new players, the only play is to squeeze the existing ones and increasing the cost to play online.
They actually tried this a few months back when Game Pass Ultimate went from $20/m to $30/m. I cancelled my sub and went to essential. Then Asha backtracks and reduces it to $22/m and people are like wow, she will save Xbox. No, it just shows me they probably saw so much churn, especially from long-time subs, that they backtracked.
Considered as a raw percentage in a vacuum, sure, I guess, but we're talking about...
- A company which has undertaken a concerted, long-term effort to consolidate the industry under its umbrella (something they themselves call out as a problem in this post), reducing consumer choice
- A company which has captured a significant chunk of the console market. They're one of the big three (alongside Sony and Nintendo), and have been since the early 2000s, arguably, for crying out loud.
At a certain size (typically as measured by market capture) the expectation for growth needs to be reality checked. This is still $150M of pure gravy every single year. Sure, this is going to a corporation, but that's more money than most people could possibly dream of earning in ten lifetimes.
Every year. For a company that's already putting money towards opex in the form of developing new games and new content for existing ones, for a ridiculously broad portfolio.
To be clear: it is Microsoft's and Xbox's prerogative to pursue more profit, but I reserve the right to call this out as absurd under the circumstances.
If you want to make the argument that Xbox has suffered from a lack of focus in the past decade (... or even longer), or that there's been mismanagement (I would say since around the time 343 got created), then those are fair arguments, though I don't think those are justifications, on their own, for cutting thousands in headcount.
Allowing this org to balloon to fourteen levels of management on any vertical is a joke. Allowing the absorption of so much of the game dev industry and still being unhappy with $150M in annual profit after being such an active participant in the oligolpolization of console gaming is just a bit unserious.
> This is still $150M of pure gravy every single year. Sure, this is going to a corporation, but that's more money than most people could possibly dream of earning in ten lifetimes.
That actually seems... tiny? Xbox is nearly 17,000 employees. That's like $8k in profit per employee. That's worse than big box retailers and like 1/100th of what is common in big tech and (to the letter's point) far worse than their biggest competitor.
Like sure at least you can say they aren't losing money, but Nadella can't be looking at that after just spending 75 billion on Activision Blizzard and be happy with it as the status quo.
> This is still $150M of pure gravy every single year
You're neglecting to consider that any time they acquire a studio or have a flop or two -- poof goes that $150M and probably more. It's not a risk-free venture. Entertainment is all about hits, and misses hurt.
Would you put up $5K to win $150 on a hypothetical roulette wheel that hits 90% of the time? The math's not perfect obviously but Xbox is a somewhat similar situation. Microsoft is putting up nearly $5B a year to make $150M. They'd be better off stuffing the $5B into bonds or something. There is a point where the returns aren't high enough to justify the expenses when risk is taken into consideration.
ROI lags. If they laid off 90% of the Xbox division and left only enough to keep the lights on (they don't run their own factories I guess), then they'd still get nearly the same amount of income the next year with far lower costs. Of course revenue would start to sharply decline as the number of games produced was much lower, as the tech became obsolete. But it's not like revenue would evaporate instantly.
So they could do that and invest the income they still get into bonds, and then that would be where the returns come from.
They don't want to do that obviously, hence why Xbox needs reform.
>> 150M at 5B revenue is not great: that's 3% margin!
and yet everybody - including Microsoft - is in a big rush to sell us AI services, which could look an awful lot like a historical utility business. 3% will be a dream return in that scenario!
most utilities are natural monopolies. The cost to run wires/pipes to my house are a significant portion of the cost to serving me, so you wouldn't run wires to my house in hopes that I buy from you later.
AWS isn't a utility because utilities sell commodities for which you can switch to a competitor easily, as you're buying the same thing. There are companies selling similar products to AWS but none that sell AWS itself.
Early utilities tend to not be built on standards. See how early electric utilities within a country or even a city couldn't agree on voltage, frequency, phase, or even AC vs DC.
Still, there is a difference of degree. The engineering cost of making one city's electrical grid compatible with the consumers of a different city's grid were much lower (even if one grid was AC and the other DC) than the engineering cost of moving from AWS to a competitor.
Sure, 3% is terrible. But the point is you spent a fortune buying all these studios-- aka key strategic intellectual properties-- and then you manage them badly. Then you just sell or shut them down at their absolute bottom and you end up just destroying value.
Older forms of media understand this. WB loses money and its still really valuable because people see the potential of Batman, Harry Potter etc.
IP studios are really valuable because they can drive attention to your platforms. Try starting a premium streaming service or a console without IP. But you can't manage it like tech. It's not going to grow all the time and returns are uncertain.
MSFT could be in the XBox as a platform business. They could have a few in house studios to prime the platform pump. Once it started being a content business they got lost.
The mismanagement here was actually Microsoft giving studios free reign and they flopped with projects like Starfield. This needs to be understood really within the larger industry trend of quality decline of AAA, which I suspect has to do with changes in overall dev culture and discourse than corporate decisions. There hasn't been a time when developers have been more disconnected from their audience than now.
> There hasn't been a time when developers have been more disconnected from their audience than now.
I'm curious what you mean by this. It seems like gamers have never been more vocal and there have never been more avenues (social media, short form video platforms, etc.) for them to voice their opinions than we have now.
How exactly do you know that developers have never been more disconnected from their audience? And how would that be relevant to declining AAA game quality when it's the responsibility of management and leadership to ensure the quality of the final product?
I think developers = studio in this case, management included. It’s the same issue as Hollywood really, making content for a loud minority will not generate revenue.
Compare how Marvel Rival performs to any Marvel Hollywood content after Endgame.
One way is developers making game for far left silicon valley ideologes when their audience is full of horny young males. I.e. the game is primarily designed to push an agenda rather than be fun.
This is a trope that's more than a few years out of date. Silicon Valley is run by Mark Zuckerberg, Peter Thiel, Marc Andreessen, Elon Musk, and many other executives who are completely devoted to the current administration; even Tim Cook bent the knee and donated $1 million to Trump's inauguration.
And what does "far left" mean in this context? Is it the abolition of private property and the creation of a communist utopia? Or are we talking about basic equal rights and a slightly more progressive tax system?
Without a bit more clarity, comments like yours come off as being uninformed at best, ignorant at worst.
> There hasn't been a time when developers have been more disconnected from their audience than now.
There are studios that routinely put out games that people love. For example, my wife and I will happily pre-order the next co-op game from Hazelight Studios. FromSoftware, Ghost Ship Games, and others fall into the same boat for many people.
The difference, in my opinion, is that games from these studios don't focus on creating an "always on" service, microtransactions, day-1 DLC, MRR, etc. Those things that blight games made by corporate studios are evidence of corporate executives putting their thumb on the scale.
There's only so much you can do, as a developer, to polish a turd.
At one point you could have said the same thing about Blizzard, that everything they did was gold. It’s hard to pinpoint where they went wrong, but it’s not clear to me that it was business model or game format related. Like, WoW was a fabulous success from day 1 and it was a live service game.
With the obvious exception of Elden Ring, most of the games from these studios are quite modest small to medium sized projects.
I wish devs would stop trying to make every game an uber-game. They need all the monetization because they've already blown the budget before work even started.
Nintendo figured this out. When will the other big players?
For games like Starfield, monetization isn't even the main issue but rather political ideology. You can only do so much ESG-approved preaching before customers go elsewhere.
Free rein is bad management by definition. You don’t need a manager to have free rein.
I’d be curious what you think the changes in dev culture are. I have worked for or with a lot of these studios and to me they have different cultures. But I could be missing the forest for the trees. MSFT has one culture that imo lacks a creative vision.
I just don’t know how great the IPs at Xbox game studios are. They have a few staples but most studios they bought have struggled to put out any major successes in the last 5+ years. There’s only a few Pokémon’s and Harry potters out there. They even ran Halo to the ground ffs
I assume a bunch of them print pretty reliably, like Call of Duty, when you're not using them as a loss leader on an expensive subscription that nobody wants.
Depends, Tesco (the UKs largest supermarket chain - one of the largest in the world) on average net about 2.5-3% profit on a given year and they have to do a lot more than pump out a game or two every few years.
The thing to understand here is the risk premium. Tesco is less risky on many levels. It also does not live inside a tech company that has really high gross margins.
> The bigger issue is that console manufacturer revenue is highly cyclical. This is hard to see in e.g. Xbox and Sony since they are both part of a larger conglomerate, but really obvious for nintendo.
There is absolutely no reason to be in sync with Sony on their console release date. They could have effectively released consoles bit more frequently. But they choose not to do so. Their acquisition has been questionable - Activision/Blizzard.
At the end of the day, the employee pay the price for bad management decision which they keep on making.
As a Blizzard and Overwatch fan, the acquisition has not been ideal. Activision nearly ended competitive professional Overwatch and significantly scaled back their big esports events to look more profitable. Lately, they seem to be chasing Marvel Rivals for no good reason, but at least in the younger competitive leagues, Rivals is picking up steam and Overwatch no longer looks like a contender, despite being significantly more balanced competitive play.
It’s possible stadium sized esports wasn’t directly profitable or was break-even, but seems like it could have had the potential to catapult the idea into the mainstream when there are 7 figure prize pots, and the games are accurate to anyone with equipment.
Overwatch released in 2016, but the merger took place in 2008. I feel like overwatch was always more of an Activision game than a Blizzard game. Or at least, pre-World of Warcraft Blizzard would never have entered that genre of gaming.
You do need to be somewhat in sync. Too early and you get Dreamcast effect where the customer isn’t ready for a new console. Too late and your customers bought the competition (I’ll call this the PS3 effect).
Nintendo get a pass because Switch is a very different console, closer to Game Boy.
The awareness of a poor return on investment is a good thing for society. We want to do more with fewer resources.
Making terrible decisions, such as investing in distractions for your company and consumers, and then letting your workforce pay the tab.. is the thing that is not great for society.
Who is the "we" here? Because the profit margin not being high enough is certainly not a problem for consumers. The only people who should care about that are the company's shareholders and "shareholders" certainly isn't synonymous with "society".
Making crazy changes like squeezing out every last dollar out of your existing, loyal customers (looking at any PE firm ever) certainly affects the wind I'd wager.
Absolutely, and plenty of companies have made that mistake.
But the point is locking up money in a 3% margin business doesn’t impress investors.
So you either need to improve the margin with lower costs or higher price (or both). Or bail from the market entirely and put your money in something that makes more money.
Shareholders serve an important purpose in that they try to predict how valuable this or that project or this or that business process will prove to consumers, and we are all consumers.
Our society has a finite capacity to do projects and to run industrial processes. We want that finite capacity to provide as much quality of life as possible (and as much expansion of our capacity to do projects and run processes as possible), and achieving that is a thorny intellectual problem, which for many centuries in our society has been solved mostly by lawyers and judges knowledgeable about corporate law, stock markets, corporate managers, accountants and investors.
One of those terrible decisions was probably hiring too many developers, how do you suggest they fix that issue, besides changing leadership?
Many of those developers may not have the job elsewhere, or job paying much less. They now have the experience working in a proper software engineering environment.
But doesn't that make situation even worse? They likely would be 100B+ market cap/total asset value if spun off into independent company, but not able to generate even 1B in annual profit? Activision Blizzard managed 1.5B income/20% margin by themselves before being bought by Xbox -- and somehow whole of Xbox now earns less?
It didn't destroy itself, it was intentionally harvested and the husk was sold to the highest bidder. The original leadership is long gone, the shareholders got their money back long ago, and the staff has turned over significantly. The Blizzard of yore is long gone, and that's ok.
Not exactly - stocks are already sold, you don't run out of cash from the stock price going down. You only run out of cash if you want to sell more stock to raise more cash (this happens, but it is somewhat rare).
However the owners are still going to be mad because their cash is down and they will demand changes to fix that.
> Oy vey maybe this kind of money grubbery is not good for our society.
No, it's a signal from the market that the product being sold is not wanted by the market.
They've mismanaged all their IP pursuing that yummy subscription revenue. Turns out gamers really don't like to buy subscriptions. As a poster downthread pointed out, the games that are not always-on and subscription-based are doing fine. It's the recent AAA model of subscription that is bleeding money.
> Oh yeah I forgot 5 BILLION dollar in revenue is a signal that the market does not want your product
Doesn't matter how big the revenue is if the market is not interested at the price you are selling.
I mean, by your logic, if I sell a dollar for 64c, and do $5b revenue, that's an indication that the market does indeed want the product, but not an indication that the market wants the product at the price you need to sell at to stay in business.
It's a lot more than $1.07 future money, a mortgage is more like $2 or these days $5
If you're offering even 25 year 75% LTV mortgages at such a low interest rate it's $1.07 future money you're going bankrupt. And these days people are taking 30 year, 95% LTV or even asking for 40 year 100% LTV which is fully batshit.
They are not selling at a loss though. The real issue here is that businesses such as Microsoft do not exist to serve a market or make enough money to survive and pay their employees. They exist to increase the value of their owner's shares. This is predicated on an unsustainable model of continual growth, with the expectation that every market they operate in can produce high margins and endless expansion. But demand is not infinite and persistent high margins are the exception, not the norm.
Overall they are not selling at a loss, but parts of what they're selling are being sold at a loss. The market is telling them to slim the f- down and get rid of those money-losing parts.
This is all normal and justifiable. Where is the logic that corporations need to preserve dysfunctional parts of their operations?
Corporations don’t need to, no. But they are systems, and it’s a beginner mistake to assume changing one part is going to affect the whole in some simple, predictable, logical way.
That sounds like an extremely lame excuse to preserve money losing activities.
I'll counter by saying that pruning off failing things is not only good, it's the core of capitalism. Creative destruction, as Schumpeter called it. You get efficiency by hunting down and eliminating inefficiency, redeploying the resources elsewhere.
Error is rampant. I saw a quote saying the difference between a good business and bad one is the good one makes the right decision 60% of time, the bad one 40% of the time.
So errors abound, and have to be subsequently corrected. This correction process is as natural to capitalism as breathing is to you being alive. Without it, things would rapidly grind to a halt. We see this in sclerotic centrally planned economies where errors persist for much longer.
> pruning off failing things is not only good, it's the core of capitalism
It's quite serious that you see "being good" as something inferior to "the core of capitalism".
Also, the core of capitalism is making money for private individuals, nothing more, nothing less. Whether that's done with or without "failing things", is really beside the point.
The core of capitalism is about where ownership of capital (value producing assets) resides, that is, by private individuals.
What private individuals choose to do with their capital, chase infinite growth and profit or sit on it, is up to them. This is as opposed to say, state ownership of capital.
People confuse the stock market with capitalism. You don't need a stock market for capitalism to function. Publicly traded companies in the United States are legally bound to maximize profit (Dodge vs. Ford Motor Co.)
Maybe it isn't a loss, but as an investor (never directly in them), I consider 3% profit margin a bad sign - at that return I'd prefer a savings account: FDIC insurance means that after accounting for risks the savings account is better. I know stock returns don't directly track profit margin, but that is one input into the complex consideration of stocks.
You are right, and this is why not everything should be a stock. Whatever they will cut to avoid emitting "a bad sign", may involve:
* firing people
* making services worse
* sacrificing their own future
Whether it actually does involve those things is effectively arbitrary, because the consideration of the "bad sign" is also arbitrary. If there is no objective value judgement of their operation there is no objective value judgement in their streamlining either, so all bets are off.
Why is it that every person who tries to make these dumb arguments in favor of destructive capitalistic greed always attempts to make it look like the multi-billion dollar profitable business is somehow self-sacrificing or a force of good? "If I sell a dollar for 64 cents!", yea, as if that's even close to what's happening.
If capitalistic greed is so destructive than why are you living in the most successful and highest quality of life society in history? You can find a cave somewhere to camp in if you want, or go to North Korea, etc.
I'm sadly not living in one of the very nice-to-live Nordic countries.
This level of greed is also relatively new, and was pretty well managed by previous (30~ years ago?) administrations. There's an obvious direct correlation between the rapid growth in wealth of the top 1%, businesses becoming increasingly anti-consumer, degrading quality of life amongst the average person, etc. It isn't something inherent to capitalism, it's something inherent to unmanaged 'trickle down economics' capitalism and societies built on individualism above all else.
The issue is both. They're inefficient in that they hire too many people to work on things people don't want. They collate all of their workforce and capital into projects that will perform poorly, rather than splitting that up between different projects that will individually vary but have a much healthier release and lifetime. The thing that people very high up in the organization lose a view on is that while there are operating costs to running multiple individual small projects, overall they balance themselves out because the risk isn't concentrated and each budget is an entity unto itself that doesn't affect the others. A supermassive failure like Concord however takes everyone's budgets and puts it into one giant project that has to succeed well beyond reasonable or even sustainable returns because now you have the costs of the core developers, the half dozen assistant studios, and the dozens to hundreds of asset producers on contract. And because of that you have to target as many demographics as possible, which for marketers means shaving off as many of the pieces that are necessary for complex mechanisms functioning within their niche but are incongruous with the other complex mechanisms that have been deemed as appealing. In other words, they're gambling their entire income on the equivalent of a spaceship boat plane car that can't land on water, can't re-enter the atmosphere, can't drive on the roads because it's too big, and is awful to fly because it's all of those other things.
What's not to understand that when you're having to spend 4.85B in order to get 5B in revenue makes your business quite risky. You want to be operating on larger margins than that
Pretty normal margin in some kinds of businesses, like supermarkets. Then again, supermarkets aren’t likely to see all their customers leave at the drop of a hat.
The scale is also very different. Costco earned $70.53 billion in a recent quarter (not 5B here). Their operating margin is 3.93%, which is also healthier.
Our society uses return on investment (which is correlated with profit margin) to decide what projects and what processes our society's workers will focus on.
So for example, if I can make twice as much money as a software developer as I can as a musician, that is strong evidence that my doing the former kind of work will benefit society about twice as much as my doing the latter kind of work.
I disagree. "Benefit society" means something that can't be defined or tracked so easily. And consumer behavior is heavily biased by things that aren't optimized to benefit society. I have in mind this book, Hooked by Nir Eyal: https://www.nirandfar.com/hooked/
I agree with you that benefit to society is definitely not the same thing as economic efficiency, but that does not mean it is a good idea to completely ignore economic efficiency when we contemplate making some change to our society.
HackerNews is where I find informed commentary on tech stuff because places like reddit are hollowed out and useless for it. I don't care one bit about cretins like VCs.
Development costs are far from their lowest at end-of-cycle.
That's exactly when the prototype development kits come out of small scale testing (maybe tens of units, all incredibly expensive bespoke units, probably hand soldered and assembled), production ramped up a little and the evaluation kits are produced and distributed to first party studios and large third party studios, with thousands of consoles produced with the expectation that their lifespan is likely only going to be 6-12 months. These are then extensively tested by developers, both to see what needs to be done to get their launch titles actually working on the machine, but often very serious hardware bugs are found in this period that may require fixes to the chips themselves or software workarounds that affect performance. For some of the recent console launches there have been 2 or 3 rounds of evaluation kits in a year, and the previous consoles are effectively bricked.
After the evaluation kits seem to have converged on a final product, the development kits are produced to ideally match the final version of the evaluation kits, but again these are tested before production is ramped up because some things do change (most trivially the case, even if the board is fine). At this point tens of thousands of dev kits are produced, each different enough to retail kits (more memory, maybe extra ports, etc), usually at least 6 months to a year before console launch so studios can make a final push on the launch day or first quarter titles, and in the background the same evaluation process for retail kits (usually just stripped down from the development kits, but usually different cases etc) starts, and eventually a final design for the retail product is produced that's good enough for manufacture.
This time is definitely not just when the console manufacturers kick back and rake in their profits, this is when they're already spending big on the final push to get to the point where they even have a new console to start a new cycle with.
Separate to the console manufacturing side, the years before release are when big money is spent getting studios on board to produce launch titles, because without those, the console will be dead on arrival.
TLDR: revenues at the end of the console cycle aren't funding the next generation, because it's probably already been in development since the launch of the current console, rather those end-of-cycle revenues are hopefully paying off the gamble they took funding development for the current generation.
Reads to me like multiplayer and server-side games incur a hefty infrastructure cost that eats into their profits, subscriptions notwithstanding. Maybe XBox should focus more on single-player exclusives. They certainly have enough studios to do it.
It has been really really long since I read anything on HN with someone that has some basic understanding of business. May be all is not lost.
Yes. 3% margin is lower than inflation of US treasury rate. As some business would even call it borderline charity. It is also not a commodity market, which means it is not healthy. And any headwind is going to be damaging.
> - Then they did not have to give away popular games day one on Game Pass
> - And finally, they did not have to raise Game Pass prices to improve the profit margins. Of course, consumers pulled out.
I saw this coming from day one. The instant they did Netflix for Games, it was going to gut their margins. And then the inevitable pullback, either holding new games for months or raising the price, was going to kill the value proposition.
They said "This will make us a mint" and celebrated the victory years too early.
Those metrics are hugely misleading because they account for current fiscal year revenue and margins.
For Xbox being what it is today, which is mostly about the subscription and not the hardware console or the exclusives, you have to compound their acquisition frenzy of 2018-2020 or so, which totals about 75 billion+.
They didn't want the developers nor the catalog. What Microsoft wanted is to change the economics and dynamics of the entire games industry, to make it Netflix-like (play what's in the catalog today, pay monthly even if you don't play anything) vs. what Steam offers (purchase once, own "forever", even if it's de-listed).
But that didn't play out. Optimistic estimates put total revenue for Xbox since then in the 20B ballpark. At a ~5% margin (as other commenters have pointed out) the profit is about 1B dollars.
It means that after almost a decade, the entirety of Xbox is in the red for about 74 billion dollars, which is 74 billion away from breaking even.
Steam still dominates PC gaming. Xbox consoles can't be more irrelevant today.
This isn't about over-hiring or AI. It was a bet at the executive level that went horribly wrong. They can still do things like selling IPs at a bargain to compensate, but still. Horribly wrong.
Note: Microsoft doesn't publish hard factual data so the numbers above are somewhat speculative (e.g. "analysts data")
It seems really odd to have a Netflix consumption model for games. Generally people want to play a few favourite games for a long time and get very skilled at them. You just don't need to churn through content like movies.
You see 10 hours for indies and art games maybe. For big budget full price games people expect at least 60+ hours, which is why they tend to be full of padding.
The vast majority of "gamers" play freemium "games" on their phone. The next largest likely buy a console for one or two games, and maybe pick up another now and then (back in college one person's lamecube was permanently playing smash bros; another was on golden-eye - the two xboxes were for halo and madden respectively).
You also missed the part where they positioned themselves as the value offering. That's gonna be hard to beat whilst still achieving "return to growth".
That's a 3% margin which is unsustainable. It's less return than you can get from buying treasuries, which means that if they don't improve it they will go out of business.
This is the frustrating thing reading these comments, where people seem to assume that any profit margin is good enough to sustain a business.
People see a 3% return and think, "Well, they aren't losing money so there is no reason they can't just keep doing business as usual." What this idea is missing is that the investors in a company aren't choosing between "keep my money in this company" and "sit on the cash", they are choosing between "keep my money in this company" and "invest my money somewhere else"
In other words, you aren't just looking at direct returns on an investment, you also have to think of the OPPORTUNITY COST of the investment. By keeping their money invested in a business making 3% returns, they can't invest that money somewhere else.
It's more like evolution through natural selection. If you can buy a treasury that returns 3.6%, you will NOT invest money in a business that has more risk, is only returning 3%, and has not believable growth story. Even worse, if you own shares in that company, you will sell them and shift the investment dollars to something with better returns or better chance for growth.
It's this competition that leads to prosperity, the alternative is central planning which leads to poverty.
I agree with the mess part. I also feel like a reset is necessary and they are messing it up more right from the start. Fourteen layers of management? That's insane. But 3200 layoffs is a hell of a lot more than middle management cruft. Asha certainly has her hands full over there and the honeymoon period - if there even was one - is definitely over.
I wonder how are they taking in 5 billion per quarter when their latest console barely outsold the first Xbox. I doubt it was making a bit less than 5 billion per quarter with quotes like "Ultimately, Microsoft lost an accumulative total of $4 billion from the Xbox, only managing to turn a profit at the end of 2004." on wikipedia.
So how are two consoles with roughly the same sales numbers so far apart in revenue?
> And finally, they did not have to raise Game Pass prices to improve the profit margins. Of course, consumers pulled out.
Myself and 2 of my friends stopped our subscriptions the day that happened and never went back. I know it’s anecdotal but I’m happy to see others did the same.
Another thing that is crazy to me (and maybe this is a premonition) is that if you play MS games online on Xbox, you have to have a subscription, but if you play on other platforms you can play for free. They are literally punishing their own users with additional fees. I thought this was just Minecraft, which is why my kids and I always play Minecraft on our iPads instead of on the Xbox, but when I recently bought Forza Horizon 6 I was amazed to see that I could play online with other players for free, whereas on Xbox I had to pay to play online in Forza Horizon 4 and 5. So they are basically saying "you gave us a bunch of money for hardware? Cool, now give us more money every month to use it online!" It's absurd, and it's one of the things that drove me away from Xbox. I also have friends who have been lifelong Xbox fans who have had enough and are leaving for Steam.
Yeah, I forgot to mention that the pay-to-play even applies to multiplayer within your own LAN. I just verified that nothing had changed since I last played: you are unable to join LAN games unless you buy a monthly xbox pass. Complete BS.
If everyone thinks like that, no jobs are created. Xbox hires a ton of people and creates genuine value for consumers. Okay, that last part you can question, but I’m an original Xbox-er so I believe in it.
3% profit should be totally fine for any business. The planet is cooked, I think we can live with the shareholders making a bit less.
> - The make around 5 billion in revenue per quarter - The problem according to them is profit margin - around 150-160 million
How are they still doing 5 billions in revenue per quarter? Are Xbox and games still sold? In my area they seem to have disappeared from the physical stores alley. I realized that a few weeks ago there were Playstation and Nintendo products in the video game area but no Xbox anything.
Might work if you don’t: out-price your hardware, get rid of disc trays, make GamePass expensive, force Microsoft accounts and online mandates, buy up every studio and force them to out out crappy updates,… ahm, no it’s the users, they’re getting old and cranky.
Yikes, I bought every Xbox console and plenty of day-1 releases, but skipped the last gen when it became clear that the platform isn’t about gamers anymore.
Triple-As are also getting tiresome, so I think plenty of people are happy to get a cheaper title on Steam that feels like better value.
Yeah, we had every playstation since the original, and a vast library of games. Admittedly I ended up with a digital PS5 (gift), so I ended up in the digital ecosystem. This will hurry me up into buying a disc drive for it I suppose.
I tend to agree about the lackluster AAA industry, but I don't think that's the gamers 'fault' for wanting indie games, more private equity and the share market environment forcing developers to generate slop as opposed to good titles. It's a sad way that the broader economy is going in that regard.
I didn’t mean to go with the easy, default criticism of AAAs as slop and repetitive; it’s just that _lots_ of smaller devs/studios are putting out excellent gameplay and/or narratives.
The times when companies only restructured when they were actually making losses are long gone. Today, if they "underperform" (i.e. they're not as profitable as the stock market thinks they should be), investors want to see blood today rather that tomorrow.
xbox is not a startup and neither m$ a vc. the board is not in love with gaming to continue sponsoring it. but if the solution is to make it even worse to game in their platform, then i hope this crashes and burns for good.
Revenue is just not a useful concept to understand the state of a company. I can easily generate revenue by simply exploding costs. Blockbuster had huge revenue.
If we talked about costs as much as we talk about revenue (which carries roughly the same amount of information) people would judge theses reports very differently.
> We will deliver success through a flatter organization that is built around makers (individual contributors focused on building), player-coaches (leaders who remain deeply involved in the work while developing their teams), and directly responsible individuals (DRIs) who own key decisions and outcomes.
xbox-specific issues aside, this proposes an interesting view of the future of work.
As someone who works in big tech with a partner at a similar big tech company _but with player coaches, DRIs, etc_ it is basically the same thing except messier.
Your manager who used to just focus on motivating and unblocking their people? Now they have to ship code too since they’re a player coaches! You’re a DRI who needs management to get your project unblocked? Too bad your player coach who has to ship code now also has 20 direct reports because the hierarchy was flattened so you can’t get time with them until next week and are blocked until at least then.
It is the hot new trend from the “thought leaders” who have all consistently copied each other’s bad ideas for the past 10 years.
I also notice the growing trend to have EM carry individual contributor duties, I thought it was mostly a consequence of using coding agents but perhaps it's not: the EM figure as we know might just be a consequence of the golden zirp times (do you remember the endless technical EM vs non-technical EM debates?)
I think non-technical EMs are fine, but they need to manage an appropriate headcount. I see EMs who manage 2-3 ICs and have no other responsibilities, those EMs need to either take on more ICs or start coding.
"Today, in some parts of the company, work passes through as many as 14 layers of management. Our platform teams are 40% larger than they were at the start of this generation, even as our player base and playtime have declined. "
Xbox has an interesting opportunity going forward, that I expect they'll fumble.
Interest in physical media has actually been on the upswing, and, with Sony announcing their plans to abandon physical media, it feels like MS has a chance be the "good guys" like what Sony did to MS when MS threatened to ruin physical media prior to the Xbox One release.
However, I'm expecting Microsoft to simply follow Sony's path, because I think they are already going down a path that favors digital-only, and I also think they just don't care to distinguish themselves. It seems like Xbox's claim to fame for the past few years is "It has game pass, and it can play a lot of the same games PlayStation can."
> Interest in physical media has actually been on the upswing, and, with Sony announcing their plans to abandon physical media, it feels like MS has a chance be the "good guys" like what Sony did to MS when MS threatened to ruin physical media prior to the l One release.
Not only that, but RAM/GPU/SSD prices going up so much recently (which is especially jarring for SSDs, which for like a decade had been getting more affordable; I bought a 120 GB SATA SSD in 2012 for around $100, and I was able to buy a 1 TB m.2 one for around the same price a few years ago) is starting to equalize pricing for PC gaming. In 2022, the initial Steam Deck launched for just $400, and it continued to be offered at that price for a few years, which made it cheaper than the Switch 2 launch price.
I feel like if I were a console manufacturer, I would be trying to figure out a way to take advantage of that. Other than price (previously), the other obvious selling point of PC gaming is more control over your system, so there could be an opening to try to lure away wayward PC gamers with some changes that give them a bit more control on the console. I agree with you that I can't really imagine Microsoft doing this though.
The problem with the physical media for today's consoles is that it is the game in name only. The version on the disc is quickly outdated by launch day patches, follow-up patches, add-on content, etc.
I do think there is a market for a return to an XBox 360 model where the tech behind the games is artificially constrained to allow for games to be published solely on DVDs again. No installation required, no patches required, smaller budgets, quicker release time lines. But Microsoft is not the company to pursue that approach
anyone who has the disk can download the patches and extra content. there is no way to block a specific copy or prevent transfers like with a digital purchase. the point of physical media is sharing and resale, not the piece of plastic sitting on your shelf.
i agree that mandatory downloads are a big problem (thats why willitplay is a thing) but offline installs from disk are the biggest change that made ps5 games load so much faster than ps4 and opened up a lot of new options for devs. reading data from ssd will always be faster than a blu ray. the only downside is you have to manage space a bit more but its worth it. if you want straight from disk get ready for slower uglier harder to develop games.
You’re certainly right, especially for the AAA games coming off the presses, but it’s not always true with certain indie games, especially if they’re doing a physical print run long after publishing.
You can occasionally get one where a very final version copies straight off a PS5 disc.
You know sorta feels to me like some new physical tech would be warranted here. Something with a good amount of storage, very quick I/O, and read/writable. More like a fancy thumb drive than a disk. Let the version on it be updated by the system to stay current, gain add on content, etc.
If you want to see it outside the context of tech forums, you can look up the industry reports and see the numbers yourself. There are some media types that are dropping, obviously, but there are multiple types of physical media that have seen notable growth recently.
Impacted non-studio dev here. It's a bloodbath like some of the leaks in the past few weeks have said. Many important platform/infra teams getting gutted, even in areas where there's supposedly a ton of future investment.
I think the Xbox Series X will be my last Xbox after owning Xbox, Xbox 360, Xbox One, and the Xbox Series X. I was all-in on their platform and I even paid for Game Pass for many years.
But they kept increasing the cost of Game Pass with no new features, the platform has seemed stagnant, and honestly I can't tell you why my Series X is better than my Xbox One. Literally I don't see a difference. I'm sure there is one but as a user I really didn't feel like it was a big step up. I bought it because I had every other Xbox and it seemed like the next logical step.
That coupled with most games feeling like lootboxes wrapped in just enough of a game to justify calling it one, at higher and higher price points, all while trying to get more money after they've taken your $70/$80 for the base game. Oh wait, you bought the poor-person $70 version? You really need to the Ultra Collectors Edition Gold Special Release Version for $120. Oh also, make sure you are buying the season pass...
Meanwhile I buy games on my steam deck and/or from indie developers for a max of $30 and get way more gameplay/fun that the "AAA" games (which have largely sucked IMHO).
I'm over here playing Mass Effect 1-3, Skyrim, Fallout 4, and other games OVER A DECADE AGO. They are the only games not completely ruined by lootboxes, always-online BS, or trying to sell you a shell of a game with extras you have to buy [0]. I was excited for Starfield (Skyrim in space!!) but it was a complete bust. After spending, quite literally, 1000's of hours in Skyrim (and buying and rebuying the Anniversary/Special/Collector's edition enough times to be embarrassing) I could not get excited about Starfield and stopped playing after a few hours. The new Halo was meh, I played through it and the open world was somewhat cool but I guess they wanted to do seasons of new content and I have zero interest in that. Give me a solid single player game, that's all I want. I cancelled Game Pass after realizing I was paying an absurd amount of money to play a single game (Deep Rock Galactic).
I think I'll stick to my Steam Deck which I enjoy way more than my Series X.
[0] Yes, Skyrim/Fallout had expansion content but it's tame compared to most games today.
I cancelled Game Pass when the recent price hikes quit.
Then realised just how few games I'd actually bought this generation. Game Pass was a mistake, or at least putting big AAA releases on there on day one was.
You need the right products and services. If you know what those are, then you need employees to build them. Until you figure out what those are, you are (sadly) better off with fewer people.
Yeah this lightweight startup could really use some guidance on how to make products with global reach it's a pity they don't have any experience with that.
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[ 1.7 ms ] story [ 141 ms ] threadMicrosoft cuts 4,800 Jobs, Half from Xbox division
https://news.ycombinator.com/item?id=48804401
Expedition 33 was on game pass and still sold 8 million copies.
SoM was an Xbox/PC/Game Pass exclusive for a year.
It's not a perfect comparison.
Let's be honest here.
I mean, if you're assuming that Microsoft had a fully hands-off approach to managing these companies after buying them, then sure. It's not clear to me that you can make a compelling claim about whether the issues were from the bottom or the top just by looking at the final outputs.
1. https://www.mobygames.com/game/240054/south-of-midnight/cred...
Well, not exactly. Maybe partially, but definitely not entirely. They got a shit return on a lot of money they spent which drove down margins now they are cutting that. They lost 64 cents per 1 dollar invested so they are investing less.
Call of Duty alone lost $300 million: https://arstechnica.com/gaming/2026/04/microsofts-game-pass-...
I look forward to the source code leaks.
Cable subscribers did not exist in gaming, and so Game Pass is stuck stealing Xbox's own customers. It just doesn't add up.
They could've just bought any one of these titles and they'd have a better metaverse than whatever it was they pumped billions into.
A square means total freedom. A star means freedom to choose guarded experiences with internal choices.
And it's not surprising Nintendo isn't doing well in this clown market. They are taking a hit because they resisted pressures from shareholders who wanted them to raise prices on its new system. Nintendo eventually gave in, but with a much smaller price increase and a delayed effect from announcement to implementation (~4 months forewarning). And on top of all that they are not hyping AI to the moon.
And I haven't even gotten to the overall economic climate of Japan yet. Nintendo's stock falls would happen regardless of if they followed the above.
These are good, pro-consumer moves. It shows that more companies need to think past next quarter and resist the whims of people who don't have your company's long term interests in mind. You're the expert here, not them.
However if for example movie industry had its crisis, and someone were to point out how Pixar is doing great, and latest Toy Story is a big hit (it is btw), I'd say "And what if I want to watch anything that is not a family-friendly movie?".
Could Nintendo ever make Baldur's Gate 3? Not in a million years. Doesn't fall into children-friendly bucket and so would completely run against Nintendo brand image.
however for Xbox they were not really good at story driven games, but good at Live Games such as Halo.
with Live Games - you iterate on game play, maps, skins - live events i.e community building without alienating people by dabbing in social justice.
End of day - these are all marketing problems & lack of capable leadership who knows their core audience.
Sony has been pretty successful with that though, and there was a time where they pushed many fan favourites in the cinematic genre. They aren’t arcadey games like Nintendo ones of course, but something like The Last of Us has its own value and audience. It sells too.
Nintendo's exclusives outsell Sony's by a significant margin, and they're usually simpler games that are broadly accessible. They leaned the right lessons from the indie gaming boom, and didn't try to resist it by pumping billions into making the next Overwatch killer or whatever.
"Press this button exactly when the game tells you" and "as soon as you cross this exact point, this exact enemy will appear" - that's year-2000-ish (or worse) gaming tech.
The final confrontation was essentially ruined because the designers apparently never thought you'd use a sniper rifle, so you can set off a deafening shot that kills an enemy and the other enemies don't even notice the shot because it apparently happened outside their detection range.
14 layers of management :-P
This is Microsoft politely saying that not all studios are good enough for them.
And by good enough they mean enough of a money printer.
Microsoft is never going to figure out gaming. It's more art than engineering and they can barely manage the engineering with all the intervention from marketing and HR in their products.
To me it's mostly unfortunate that this has left PlayStation with no direct competition because they've noticed and leaned into the not-giving-a-shit attitude after they had such a great console generation with the PS4. It's kinda crazy that we're already almost due for a new console generation and there's very little appetite for new consoles after this generation where it feels like it barely got started. And between graphics almost certainly at the point of diminishing returns, and hardware prices like they are right now, I can't imagine there's a market to sell something more capable than current gen consoles. The industry is in a very strange state.
I haven't bought a console since the Xbox360 and Wii. But I have a friend who still games pretty heavily and is low income. He can not afford the latest PS5 and is still on a PS4. We were talking the other day and he said "I love consoles because they are simpler and cheaper than a PC but now I can't afford either. The graphics aren't getting much better so what am I paying for? What happened to $400-$500 consoles? Remember when consoles were 200-300?" Of course those last few prices were 90/00's but I agree, the cost of a new console is quite insane for not much gain.
Two years ago, you could get an XBOX/Switch for 300, or a PS/Steam Deck for 400. Granted, the PS and XBOX were digital only. But now the cheapest XBOX is 500, the Switch 2 will soon also be 500, the PS5 starts at 600, and the Steam Deck is 789. Things have been going up slowly, but the last year has been absolutely killer.
Now things are even worse with the RAM and SSD components crisis. The Series S has now the price of the Series X when it launched.
I don't think I'll need a PS6 honestly, I am okay with waiting or going without titles sony is releasing.
The graphics can only carry you so far. There's indy adventure games with SNES level graphics that have millions of daily users.
Switch 2 is a fantastic console with an astonishingly fun first party library, and Nintendo just over there doing their own thing like they’ve always done.
I spent a few years in and around the industry and there was so much insanity around the need for in game monetization that it just made things much worse.
And because the game studios didn't care about it, none of the money stuff worked, making executives even more upset.
All to catch some vision of F2P money which is an entirely different business that these companies couldn't possibly support.
It's very sad for the industry overall (this particular decision is MS killing stuff off because the margins aren't good enough to funnel more cash into GPU gods).
> I like to think of it like buying a car. Admit it. Your left brain looks at a vehicle in terms of the numbers. What's the horsepower? The towing capacity? The 0-60? That's our competitor's approach. But your right brain is different. There's only one question out there: sitting behind the wheel, where will this baby take me? In other words, do you want to go just a little bit faster, down the same streets you've always driven, or down a new road, to places you've never seen before? That's the difference with Nintendo DS.
Are you referring to some kind of David Lynch of gaming?
I don't like or understand David Lynch, but you get what I'm trying to say. There is no one in the video game landscape doing something similar to what Welles or Kurosawa did in cinema, or what Yorgos Lanthimos and Ari Aster are doing now (or Matt Reeves and Guillermo del Toro, if you're not into arthouse stuff).
Every time someone argues about this, they cite the same old examples (Disco Elysium, Outer Wilds, some narrative indie game)... but those examples usually lack in gameplay, which is, in my opinion, the most important part of what makes a video game its own medium.
I hope to see in my lifetime someone do to video games what the French did to cinema in the 50s and the Americans did in the 60s: graduating the medium from a disposable entertainment artifact into an art form for the ages. The medium is still young, it's not impossible.
The way things interact in the game world peaked around mid 2000s, just in time when CPUs started to not follow moors law.
As of now, interactive environments are still almost as good as half life 2 from 2004. Gaming is all about the feel of it, which also includes the visual component.
This feature was mostly ignored by the playerbase because developers found it easier to create static setups and focus on iterating on other parts of their gameplay.
The problem is the opportunity cost of destructible terrain was too high. Developers could get fun for lower effort by creating linear levels with better design/graphics/etc as destructible terrain makes everything "blocky" without significant developer work.
Yes, as a game it had a lot of flaws that many other games also had, but the things it excelled at were absolutely unique.
Everything has weight and flows spectacularly. They used a combination of key framed animations and procedural to have limbs conform to surfaces and have additional physics applied when needed. Combined with the physics system on the characters feathers and clothing, it all just ties together very well. It had a long development time of 9 years, before that became almost a standard, and it was basically just spent perfecting that system.
It also helps that they threw the bulk of the GPU time on the giant character to give it highwaulity shadow and highlights to ground it in the environment so well.
But the environment is a little bit of a let down in that the assets are clearly from the original Ps3 version they were working on. They cleaned it all up well enough with decent enough AA with everything being well 'grounded' but there was only so much they could do. There are a lot of assets that show the original memory limitations.
The problem was that the frame rate would drop terribly due to a lot of their decisions. And this is after they reportedly they had to significantly reduce the animations system capabilities over the Ps3 version because it was original designed to work with the Cell's strengths. Also took over a year just to port from the Ps3 to Ps4 due to the hyper specific tech they had built. Probably one of the few titles where the Cell's strengths shone well over the Ps4's architecture. If feels like if it was done today with modern GPU tech, they could do something amazing with this. But I think it is going to be permanently stuck on Ps4.
If you haven't played it, I wouldn't give it a hard recommendation because the gameplay is very fiddley in trying to conform to the animation system and most people just don't really get into the vibe of it all. But do check out a few minutes of it in action on Youtube and just to see how it all flows.
It is an wonderfully flawed ambitiously frustrating masterpiece. The vision is strong, some of the tech is strong, but the gameplay is a little weak and some parts of the tech is weaker.
I do see that the creator Fumito Ueda with Gen Design has a new title being funded by Epic called "Gen Altus" and it looks like they are taking all their skills over to UE5, it is going to be fun to see.
Yes, 100%. I love good graphics, but game play is the most important thing. If you don't have good gameplay the graphics mean nothing. A game with great game play and great graphics is something to behold.
I recently finished Split Fiction and they really nailed it. I hope studios take notice!
When we played it, we had just finished It Takes Two, which was also great, but Split Fiction immediately dethroned it. I can't wait to see what Hazelight comes up with next.
I'd highly recommend Split Fiction, both for its game play and story. It is also superior to It Takes Two in that there is no part where the games "to continue playing, press X to dismember your daughter's anthropomorphic stuffed animal to make her cry". That was a jarring and unpleasant shift in tone for an otherwise mostly light-hearted game.
Could have fooled me. I haven't seen a meaningful improvement in game graphics for at least a decade.
I am very cautiously optimistic about this. It seems there has been a lot of tooling change over to integrate ray/path tracing into systems.
Once this becomes a little more ubiquitous we might start to see some decent stuff but so far it has been 7-8 years since the first ray tracing hardware came along and it is still far from implemented consistently.
That said, the tech isn't wasted, it's also used in film graphics and animations and the like. And photo mode, where games can open up all the registers because framerate isn't as important then.
But yeah. Unreal tech demos, or if you have a PS5, there's a free tech demo called The Matrix Awakens that showcases advancements from a few years ago (heck it's been 4 years already).
Gacha?
https://en.wikipedia.org/wiki/Gacha_game
Access to Steam's library for a fixed monthly price would be huge. Actually I'm surprised Steam/Valve isn't offering that yet, it'd be huge, and for their new consoles it would be a perfect fit.
As a consumer, I really hope they never do that. I hate subscriptions and strongly prefer to just buy games. Once there's a subscription option, I would imagine the great sales would get significanty watered down. If you're a game seller and you can get that sweet sweet recurring revenue, it's too strong a temptation. We've seen that story play out time and time again in SaaS (and even some desktop applications now).
It's what RPG players have been saying all this time about voice-overs.
It is sold as an accomplishment, but it limits the scope and writing of a game.
A few great games I've played in the last 8 years, about the span of a generation, a mix of AAA and indie:
- Red Dead Redemption 2 https://store.steampowered.com/app/1174180/Red_Dead_Redempti...
- Cyberpunk 2077 https://www.gog.com/en/game/cyberpunk_2077
- Supraworld https://store.steampowered.com/app/1869290/Supraworld/
- Mini the Hollower https://www.gog.com/en/game/mina_the_hollower
- Pipistrello and the Cursed Yoyo https://store.steampowered.com/app/2870350/Pipistrello_and_t...
- Shadows over Loathing https://store.steampowered.com/app/1939160/Shadows_Over_Loat...
- Animal Well https://store.steampowered.com/app/813230/ANIMAL_WELL/
- Dwarf Fortress https://store.steampowered.com/app/975370/Dwarf_Fortress/
- EMUUROM https://store.steampowered.com/app/1634360/EMUUROM/
- Dispatch https://store.steampowered.com/app/2592160/Dispatch/
- MOUSE: P.I. For Hire https://store.steampowered.com/app/2416450/MOUSE_PI_For_Hire...
- Split Fiction https://store.steampowered.com/app/2001120/Split_Fiction/
- Final Fantasy Tactics - The Ivalice Chronicles https://store.steampowered.com/app/1004640/FINAL_FANTASY_TAC...
If you want to see what modern AAA gaming should be and haven't already played it, I highly recommend Cyberpunk 2077. It's not perfect, mostly due to time constraints, but it excels in most categories, and it looks and plays great. No microtransactions, no DRM and the one DLC is very good. It's on sale for $18 on GOG. No DRM should be enough reason to signal to the market to produce more games like this. Also, the developer owns the GOG storefront and so 100% of your profits go directly to them.
I also cannot recommend Supraworld enough to anyone who likes classic 3D platforming and puzzle games such as Portal or Antichamber. Supraworld has ruined other platformers for me. The developer, David Munich, is a puzzle maestro who has already put out other successful games such as notpron MYEUHD ↗ > Also, the [Cyberpunk 2077] developer owns the GOG storefront and so 100% of your profits go directly to them. soulofmischief ↗ Thanks for sharing that, I had no idea Michał bought it out! Before clicking your link I was worried it was going to be private equity.
That's no longer the case since a few months: https://news.ycombinator.com/item?id=46422412
I can live with the cut just going to Michał, but it was cool that for a while you could purchase a AAA game with no microtransactions or DRM on a storefront where 100% of proceeds fed back into the same studio not just publishing the game, but developing it. To me that was a huge selling point of CP77 among all the others.
But then she did some minor, pandering actions and suddenly everyone was "oh boy! A new era of xbox!" Only it was all a ruse to ensure people didn't jump ship too quickly and make the bleeding too heavy. They want people to keep pumping money into a platform heading to the graveyard.
You go when we tell you to go! Not before!
Gaming is like cuisine. Can it be art? Sure. But most people will never visit a Michelin starred restaurant in their whole lives. They go to McDonald's and their local equivalent. Mainstream games have been like McDonald's for a long time. It's not about being a thought provoking artistic expression. It's about engineering a predictable entertainment experience that the average Joe can enjoy while being half checked out after a day of work the same way he enjoys a Budweiser or a Big Mac.
Of course, no critic will ever be caught praising McDonald's for its culinary artistry. But it doesn't matter. People will keep spending money on it, and the business continues. Same deal for gaming.
That's the thing -- for a while they had figured out gaming. The xbox and 360 were solid consoles with lots of great internal and external games. Halo was incredible.
Then the company did the thing that Amazon did, Blizzard is doing, and all the big tech companies do -- they thought their big war chest meant they should make bigger games. Budgets ballooned, game timelines extended. Now they are stuck with games and studios with 10 year dev cycles trying to create the biggest, the most incredible, the most expensive games.
There's SO many devs out there making incredible games for fractions of the cost. It's a shame Microsoft (and others) keep thinking that reaching for bigger means better outcomes. No one wants "the game only Microsoft can make", everyone wants another great Zelda. Or Gears of War. Or Satisfactory. Or Mina the Hollower. Or UFO 50. Or Animal Well.
Hell, people want a game about shelving 3000 books in an Arcane library. Let games be smaller, more exploratory, more creative experiences. Let your studios get weird with it. Let them explore spaces and take risks. Stop sinking tens of billions into games. Start sinking tens of millions into them.
Overall I think western AAA game development is dead. The executive class killed it with their greed and incompetence, and as long as these huge corporations are allowed to keep buying smaller studios/publishers and shutting them down a few years later, nothing is going to change.
Also worth noting Skyrim first came out on the 360; an honor shared by GTA5, but at least they have an imminent release.
This IMO is a display of what is wrong with a lot of online gaming discourse — it is dominated by people who spend more time playing and critiquing games than 99% of the population and has a tendency to overemphasize indie darlings and ignore the massive commercial success of mainstream titles. Forza 6 released in May and is wildly popular among normie gamers. So is your yearly call of duty instalment which is now a Microsoft property. Go ask people coming out of a Walmart if they know what is Animal Well and they will probably think you are soliciting donations for a local animal shelter.
I'm not saying you can't criticize mainstream AAA games. I get they are boring, formulaic and increasingly rely on predatory business models. But if you want to talk about business and what kind of games companies should invest into, you can't just ignore the massive commercial success AAA already enjoys or the fact that most indie games flop anyway.
And yes, people will play games that can only be made in an established franchise by a major company. Forza is able to license real world car models from companies like Porsche because it is a well known and safe brand backed by a big company. Not to mention games like Microsoft flight simulator or GTA.
Call of Duty is, but it's also noteworthy that sales of CoD are slumping. Hard. Like down-by-60% hard. And the gamepass numbers aren't really boosting it back up.
Also, I think you'll find my list absolutely included big games. Gears of War? Zelda? These are not "indie darlings".
I agree, they need to be focusing on smaller projects that take risks. Maximum 24 month dev times but with modern tooling could do some special things. Maybe if after 6-12 months they see something that is gold, they can give it more resources but that would be on a case by case basis.
Sure they were chasing the Wii, but they did try to innovate on the hardware and capability front, and back then VR was nascent, but investing in this area for gaming made sense then (it was very easy to imagine VR games being the 'next big thing').
Unlike Nintendo, Microsoft couldn't really figure out good and fun gameplay for Kinect. Basically only dancing games took advantage of it well IMO?
Not so much the game itself so much as the excuse for the masses to buy a console for a game even grandpa can play.
I feel they kind of did in the Xbox 360 era. Maybe it was just down to luck because Sony dropped the ball in the early years of the PS3 and Microsoft got the jump on them a bit.
The 360 was amazing looking back on it, Xbox Live, trying out innovative ideas like 1vs100, attracting lots of publishers to the platform for games, Xbox Summer of Arcade.
I was a big OG Xbox fan but even then I knew deep down it was never going to catch up to Sony with the PS2. Then the 360 came out and it was brilliant.
Sadly they threw it all away with the Xbox One and while recovered some credibility somewhat with the Series X, it's definitely not the same as those golden years of the 360.
Maybe the 360 was an aberration in Microsoft's history and the years since then have just been a regression
You could say it's just a response to Steam and the PC gaming indie scene, sure, but the 360 era is definitely one where Microsoft hit all their strides. Then they ruined it with the Xbox One.
truth. far too many MBAs in that company. "Let's monetize Solitaire!!!!" Only an idiot would even come up with that idea, never mind follow through on it.
Microsoft is a dying company, and they are trying not to end up like IBM, but their fate is inevitable.
I'd say games can be either art or hype. Call of Duty is not art, really, it's hype. In the same way that no one thinks Marvel films are moving film forward, but they are hugely popular. GTA is somewhere in the middle, being mostly hype driven, but based on solid "art" in good gameplay. Indie games tend to be art over hype.
Microsoft can't do the art because it's too big, too safe, and it can't do the hype because it's not cool.
Not saying that I disagree. I absolutely agree. I think Xbox is downright moronic to buy Bethesday on a promise of Starfield being a massive hit, and after it hilariously fails, they throw out a bunch of studios just so they can focus on their next thing even more.
It's just, come one. You have to see how ironic and conceited your opening paragraph was.
They had it figured out perfectly in the Xbox360 generation (and for PC games by the late 90s), but I guess that the MS Games and Xbox divisions had a lot more freedom and were more decoupled from the Microsoft org chart back then.
We have not left the PS4 era. Both Sony and Microsoft use modern CPU and GPU in the PS5/Xbox Series that can 100% replicate the previous console. They use the exact same online store, ushering in a modern era where old devices will lose access to the store, but the store's never gonna close. All of this makes the use of generations to describe console gaming obsolete. We don't talk about generations in phones, or laptops. Same thing with gaming.
But at the same time I appreciate the candor of Asha saying that the corporate management are to blame and letting studios go back to being independent where possible.
Phil Spencer really messed up. Everyone in the industry knew Microsoft were making bad calls trying to dig themselves a hole with gamepass and simultaneously digging a hole with their acquisition spree. I’m glad that Asha is laying this bare even though it sucks to be brought in as the hatchet person.
This is an example of the glass cliff and I’m hoping she can help right the ship. I think they need to split to a wholly owned subsidiary rather than be in Microsoft proper, and I expect that to be announced at the Q1 investor meetings.
Phil really dug their hole deep. Microsoft themselves encouraged it. It’s been a decade of sheer incompetence at the highest level so I’m hoping they can right this without taking out half the industry in their wake.
Xbox exec: Deletes AI from games.
Color me surprised.
Anyone who's been paying attention to Halo for the past 15 years knew there was bad management the entire time. (Halo used to be the game that everyone wanted to have and to be; now it's an also-ran due to self-sabotage.) The first step is admitting you have a problem, so good job there, keep following through.
Giving a player a reward for putting in effort is one of the fundamental principles of game design. If you remove all the rewards, what incentive do they have to play?
Their response to player backlash which was essentially “deny, defer, gaslight and ignore” killed the online community for it within a couple of months, and I think they dropped what little content support it had within two years as well, after initially marketing it as a long-term “live service game”.
Blatant incompetence, how Microsoft ever let itself get in this state I’ll never understand.
Also I can’t even remember the campaign story. Was there an angel or something? It was a cliffhanger about some new enemy, as if they’ll ever make another game?
I just remembered the monstrosity that is the Halo TV series as well now, ah god… it’s been a rough decade.
I’m not really sure how the C-suite is escaping blame here.
Not even national security institutions operate like this
- The make around 5 billion in revenue per quarter - The problem according to them is profit margin - around 150-160 million
So first of all, they are big! Secondly they are not at a loss. They just have a "thin, non-growing margin". So to fix all this they are trimming down, so they can "return to growth" (which I think is ridiculous).
Some points -
- They are huge business even now - 5 billion per quarter revenue is no joke
- They did not have to buy all those studios
- They looked at Netflix, and wanted the sweet monthly subscription cash stream
- Then they did not have to give away popular games day one on Game Pass
- And finally, they did not have to raise Game Pass prices to improve the profit margins. Of course, consumers pulled out.
- Once again, short term vision, crazy decisions, bad spending spree and a constant need to "make numbers go up" and who has to pay for all this?
> So first of all, they are big! Secondly they are not at a loss. They just have a "thin, non-growing margin". So to fix all this they are trimming down, so they can "return to growth" (which I think is ridiculous).
How is that profit margin distributed though? King (Candy Crush etc) and Mojang (Minecraft) are specifically called out as money-makers, it's possible that they're carrying the majority of profits while everything else is a dud:
> We have also learned that we are not the best home for every type of studio; in a typical year, we lost 64 cents for every dollar we invested.
As an example, Double Fine (one of the studios being chopped) has released 2 games since 2021, Keeper (191 peak player count on steam) and Kiln (163 peak players); these would be flops even for a normal indie game, for a studio getting Microsoft salaries those are enormous flops.
Now, I think the vast majority of the pain is more than self-inflicted... I think actual business, marketing and focus need to start taking priority over idealistic political PoV. Let the games target their natural audiences and have the broadest appeal... at a certain point, trying to gain 1% of audience means alienating 25% or more.
If you're a video game company, you invest millions of dollars in a project up front, for years, and you don't know until after release whether you:
- Make back all the money you spent plus a healthy profit on top.
- Just break even, but you lost the opportunity cost of all the other things that money could have been spent on with better utility.
- Your game flops and you wasted all the money you spent developing it.
It's also highly uneven. Extremely likely that King (Candy Crush) and Mojang (Minecraft) are making a ton of money, and everything else is a money pit where you pour in millions of dollars and you don't even make your money back.
Or they play some indie game like Among Us and not some big studio expensive game.
They're getting below the rate of return of treasuries. That's abysmal.
The problem was that if you kept a studio small and lean, you were often at the mercy of predatory publishers who controlled the distribution channels (pre-network, physical media).
So most studios tried to vertically and horizontally integrate into conglomerates: own their own publishing + have a diversified enough pipeline of games that one flop wouldn't take down the entire works.
Unfortunately, that works at Activision (pre-Blizzard) and EA (00s) scale, but not Microsoft scale (where you essentially own a large chunk of all studios).
This was a reckoning long in coming, as MS XBOX leadership, after some initially brilliant ideas, got high on their own supply and forgot they couldn't endlessly acquire more studio with their parents' cash.
Tbh, they probably should have lured away one of Berkshire Hathaway's acquisition people and put them in a go / no-go decision role.
It's the acquisition price, product, and financials that make something a good deal or not, but XBOX spent the last 10 years valuing potential acquisitions on intangibles (synergy, strategy, if we don't they will, etc).
Absolutely drop-dead gorgeous but I don't think I am going to ever finish it until I get a Deck 3/4 in like 5-7 years.
Despite that loss leading strategy, Obsidian has had quite a few other releases that did to make up for that side project. So the studio would overall be in the green despite that.
And yes, no one expects a brand new IP to have the same odds of success as a old IP that's become a cult classic. DF's strategy and directions were not to make the most profitable, safe release because that's not why you buy a studio like DF.
Those kinds of statements show a misunderstanding of both the studio and how the games industry works. Any one of those engineers could have gotten into a FAANG the traditional way and doubled, if not tripled, their salary on arguably less involved problems than what they go through creating a real time game.
Its also likely why Schafer chose to take the studio back rather than go the route of finding a new publisher to work under. He still wants to work on games for a little longer rather than get a last paycheck and retire early.
Only people without GamePass subscription and no desire to get it for even a month or two would buy the game on Steam.
So the majority of people?
I jest, but I honestly don't know anyone who consults the GamePass offerings before making a decision on whether or not to buy a game. It's Steam or pirate.
The margins they're holding, while not negative are too thin to be maintainable and too risky long term. They're a bad quarter from losing billions.
Mix that with the increasingly higher concentration of wealth, and things are just going to get worse.
The whole point of a market-based economy is to allocate resources to making things people actually want. How does the market figure out what people want more of? Well, profit margin. If someone is making a lot of profit selling something, that is a really good sign that people want more of that thing. Other people see the high profit margin, and move to get into that business. More of that thing is created, and people's demand is satisfied.
The high profit margin is the signal (and the incentive) to get more of that thing.
In other words "Compulsively chasing only the highest margins" can be rephrased as "investing in things that people want more of"
That's news to the ALDI brothers and Henry Ford. Capitalism used to be about the exact opposite. We moved from low volume - high margin, extractive feudal-like economics to consumer capitalism, high volume low margin. You create wealth by churning out commodities at low margins that the average worker could buy.
The tech industry is trying to exactly reverse this, as Varoufakis appropriately points out, by returning to techno-feudalism where you're not a consumer but a sort of platform serf. High volume commodity markets is exactly what these people try to eliminate to return to a kind of direct resource extraction.
Look, I am not saying there aren't horrible flaws with capitalism. There are a ton, and we should, as a society, work to mitigate them.
I just don't think the solution to the problem is for us to ask capitalists to not seek the highest margin. This is not a problem that is fixed by people just being more moral.
We fix this problem through public policy.
https://www.bloomberg.com/news/articles/2025-10-23/microsoft...
Gamepass is quite literally the most anti-steam strategy ever. It's a massive loss leading (or rather, low margin leading) service relying on a pseudo-rental service to provide value. Steam got to where it is by keeping all its costs lean and developing a service around taking a cut from premium digital goods.
>From other child comments many studios they bought probably were below average.
In revenue, maybe. That's the fault of Microsoft in two fronts. One for purchasing game studios who always operated at low margins, and two for directing them to focus on quality over budget. Double Fine and Ninja Theory aren't studios you buy with an expectation of 30% ROI in 6 years (ignoring the pandemic in the middle of that). Let alone when you explicitly tell them not to worry about finances.
On an artistic level, Hellblade was an insutry darling and about as close as you can get to an "oscar-bait" of a game. It's something you buy for prestige. Double Fine is a very seasoned indie studio who delivered several cult classics. You buy that for a brand that gives you variety from the current "online FPS juggernaut". Those strategies changed dramatically over the decade.
Gamepass as a subscription to make sure you always have something to play, that has a lot of old games or indie games and other games that have no commercial value makes sense to me. The back catalog for any of the current consoles is plenty deep with games that have lost their ability to move units independently but still have a lot of value and can also give that perception of value. Such a plan is picking up pennies, but it's a lot of pennies.
I've never understood putting your new releases out on gamepass and bragging about that as your primary value proposition. Many new games are, say, 20-30 hour experiences, assuming you play them from start to finish once. One does not need to spend too much time with "this % of other players got this achievement" to see how many players tend to drop off of a game even that long. So if you put your new game that you would have sold for $60-80 dollars to me directly and it translates to three weeks of engagement on your $15-ish/month (depending on level) subscription, it's hard to see how that is an economic win. Put that game on Gamepass in a year or two, sure, that can make sense, but on release? And that not as a mistake, but a deliberate strategy? I can not fathom the mindset that leads to that.
As a deal for customers it seems to have been pretty good but I've never understood how Microsoft expected to make money on that plan. The streaming-video proposition of making a high-budget release to keep your subscribers makes quite a bit more sense, you could never have counted on getting $70 out of a customer for those anyhow, and even that economic proposition I think has proved more complicated than the streaming companies expected. The Gamepass model has just seemed insane.
I expect it to move to more like what I described at the beginning. As a way to turn a lot of old and hard-to-monetize content into a subscription stream it's brilliant. As a way of releasing new AAA titles it's crazy. Movie studios played with that model and I don't think they liked it at all.
Compare that to my nephews who have a lot of time for gaming, but they’re always fighting to scrounge up the money for another month of Nintendo online or Xbox online and go without it for at least half the year
I _think_ the thinking is that not everyone is going to buy more than a couple full priced new releases per year (in general). $80 or whatever is just too much for most people to drop on a game they "might" like. On the other hand, most people would have few reservations being perpetually subscribed to a service that lets them play every new game "for free" (so long as they keep rolling in on a monthly basis). Theoretically, the subscription money would exceed what they'd normally collect from the average person buying the usual 2 or 3 full priced games per year.
Where I think it breaks down is quite a number of gamers are hopelessly addicted to playing all the latest games, all day every day. MS is surely losing money when those guys substitute buying physical games for a subscription.
I don't entirely understand... well... from a rational perspective anyhow, of course companies are not entirely rational... why it didn't become clear that this was a silly idea and not working. It's easy to make Gamepass stop cannibalizing your main game sales. You don't need a big announcement, you don't need to advertise your plans. You don't need a huge internal political fight. You just... stop. You just stop putting your brand new AAA games on your cheap subscription service plan. You don't even have to remove the old ones, they turn into your old AAA games naturally in the fullness of time. Nobody has to lose face. It's easy. It's like falling off a log.
I think that's what I thought it would be, too. XboX has a really good track record of backwards compatibility. I can (and do, occasionally) play 360 games on my series X.
A model where people can buy the latest games, can not only keep them but play them forever on future consoles, and can have access to an increasingly vast back catalogue of older games, seems like a huge win. And maybe each full price new game gets them a bit of a discount on their next month's game pass, to make it slightly better value than the playstation equivalent full priced game.
But they didn't seem to want to do anything like that.
By this I meant via a subscription.
If anything, it should be easier to make cool new features when you own the hardware side of the platform experience too, but no, it's Steam that has stuff like remote play together, not PSN or Xbox.
I love the Steam Deck because it feels like a consumer electronics device: it has the reliability of Linux but not the sweat. The Steam Deck is the only device I've seen that works 100% perfectly with Airpods, for instance, including Apple devices.
I was at Best Buy the other day and saw an ASUS device that looked pretty cool until I picked it up and saw a Windows desktop with fonts not scaled appropriately for the size of the device. Like, wazzup? Steam Big Picture turns my big Windows machine at home into a game console and does the same for my Mac Mini. How is it you can have the back of frickin' Microsoft and not be able to do the same?
Not to say that Steam isn't packed with features that are valuable to many gamers, but just having a great selection of games that "just work" and knowing I can enjoy my investment on the devices I have now and devices I get in the future is worth a lot.
For example, I used the example of remote play together, which is very neat and a lot of people love it, but I personally don't use it.
On the other hand, I make extensive use of Steam's gifting feature, including its ability to handle multiple gifts to multiple people in a single transaction, and to schedule exactly when those gifts will land. And this is something that the other major stores don't seem to support at all, a big advantage for Steam for me, but I'm sure there's many people who don't care at all about gifting.
As you already said, Azure is awful and only in second place behind AWS because of how much worse Google Cloud Platform is. Windows is back to sucking again, this time so hard that I'm seriously considering learning Linux and/or switching to macOS on my home system, & playing games on SteamOS instead. I almost never use Microsoft Office anymore, outside of household budgeting spreadsheets that I could easily work with LibreOffice instead.
I expect Azure is in second place because Windows-only shops use it because of the Official Microsoft Active Directory integration (which might be called Entra now?).
For basic "Create a VM, attach disks and networking, and use it as a computer." tasks, it is my professional experience that Azure is the worst of the Big Three US "cloud" providers by far. Their "control plane" is flaky and unreliable, so it's something that you'll probably only notice if you create, destroy, or modify VMs a lot. [0]
If you have a support contract, Azure makes it much easier to talk to a human than GCP does, but I never encountered an issue that they were able to solve. "File a ticket, but don't expect support to be able to help because they won't understand the problem, and it will eventually go away." was the lesson I eventually learned.
[0] And the word on the street is that a huge chunk of Github's reliability problems are caused because of the move from AWS to Azure. Having used all three pretty extensively, I believe the rumors.
Well it turned mine into a 2000s linux/wine debugfest flashback when I wanted to play GTA IV: Ballad of Gay Tony... Also don't get me started on having to keep the poweroff button pushed on the xbox controller for mouse emulation for games not having controller support in the menus. It is far from the polished experience you had, but possibly I just held it wrong.
Oh weird, mine have always made weird clicks and dropped audio here and there and shit like that when using them with my Deck.
They don’t do that when I use them with my Franken-PC bazzite machine. Instead, that one disconnects my BT mouse a couple times an hour and sometimes seems to stop processing BT keyboard input and “queue up” my presses instead, to be processed at random intervals over the next minute or so. Both of which are fun when playing games.
Microsoft killed it
They really should make a choice between xbox as separate platform and xbox as windows pc. I has been like 10 years where they were kept advertising it as some kind of single ecosystem, while it was not
The biggest problem however is network effects. Most people simply don't want to juggle multiple stores and the communities attached to them.
People would likely juggle the use of two stores if the value proposition was great enough. But it isn't, which is why Steam dominates and all their competitors operate in comparatively tiny fiefdoms.
But the purchasing experience is top notch and they even have a generous refund policy. It's just lightyears ahead of the competition.
A company that sells consoles complaining about not having enough games after 25 years in business and acquiring most popular game studios is hilarious.
They keep cutting game studios, killing games and then set ambitious profit margins. At some point you have to question, do the people in charge understand their own business at all?
They just gutted bungee and basically killed Destiny 2, not because the game won’t sell, but because it won’t generate the profits they unrealistically set.
While Bungie had historically been tied to Xbox / Microsoft during the Halo era, Bungie spun out to be its own company in 2007, and then was bought by Sony in 2022. It was Sony, not Microsoft, driving the most recent layoffs at Bungie.
Never ending growth and profits just seem to ruin everything
Another way to think about risk is opportunity cost. What other investments would give me the same return?
A lot of the strategy you outlined -- buying all these studios, replicating netflix, giving away day one games, raising game pass -- was a strategy put in place by Phil Spencer. Phil pushed for this investment with the promise it would pay off later for MS. He's talked publicly about having to convince Nadella to put up ungodly amounts of cash for these investments and about how the bar for expected return was very very high. It seems like it clearly hasn't worked out to Microsoft's expectations or they've lost patience for waiting, and Phil has now "retired to spend more time with his family" (i.e. been fired).
Now Asha is here and presumably has a mandate to fix this and get back the profit margins that were expected from xbox. Sarah Bond, the xbox president, has resigned, and with this letter it seems the previous Xbox COO is out too. There is clearly a huge shift in Xbox leadership happening and it shouldn't be surprising that Asha -- who is known as a business-driven executive and not a 'gamer' -- is going to be reverting a lot of previous strategy decisions.
Sometimes, adults minding the financial shop focuses creativity.
If the company lacks either, or either gets too much power they are in trouble. Creative types will spend too much money on things that are nice but won't deliver enough value and so the company goes bankrupt. Financial types don't understand what customers want and optimize away all the expensive creative value the customers buy.
Note that the above applies to every type of company. Exactly what "creative" means is different for different industries, and some need it more than other (how much innovation do you need in soap?...). It always applies though so you need to ensure you get both types in leadership positions even though they don't like or understand each other.
One reason is that from the public eyes they kept their names and independence from Microsoft/XBox branding.
It was a risky bet that became even higher risk when MSFT spent ~$80 billion dollars rolling up game studios near the peak of the historic COVID gaming bubble. They bet it would greatly increase Game Pass sub growth. Instead, Game Pass sub growth slowed down. At the time I thought it was a reasonable plan - but not at the prices MSFT was paying for content. Then the DRAM drought killed hardware sales to gamers forcing the issue.
Buy a plethora of studios. Pay an order of magnitude over the odds for the big ones - just to be sure you get them! ‘Rescue’ smaller ones of questionable financial value - as part of Xbox they’d somehow be successful enough to justify the price paid. Heavily manage the studio heads - but, uh, also give them total creative freedom - and allow them to make niche games. Sell hardware at a loss - but also make the games available on all platforms. Don’t allow any software that takes advantage of your most powerful hardware, because it also has to run on the other, less powerful console you are also selling. Also, the future is streaming! But, uh, maybe not!
Not just the strategy, but almost every aspect of the ‘strategy’, was incoherent - as current management is very close to outright saying.
To be fair to Phil Spencer, this was the strategy across the industry right after COVID. Remember the shopping spree Embracer Group went on between 2020 and 2022? I think we were in an e-sports & live service bubble that has now popped.
IIRC Xbox had been criticized for quite a while at that point for having very few exclusive/first-party games worth buying an Xbox for. I always assumed this move was to try and fix that problem.
So you end up with this schizophrenic way that XBox became more of a publisher than a console brand, with a leadership used to cross platform (Sarah Bond), thus ‘everything’s an Xbox’ pivot for the "curve must always go up".
He headed things during the Xbox 360 era, which was a golden era of gaming, one of the best console generations and also peak Xbox.
Just look at this video to get an idea of how high the density of great games was at that time: https://youtu.be/w5u8jyPIrIY?is=NsTee0620BmmVbcB
Wikipedia doesn’t show him in an ‘overall leader’ role until 2014, a year into the relatively disastrous Xbox One era.
https://en.wikipedia.org/wiki/Phil_Spencer_(business_executi...
Buying Activision for 20x of its annual profit, on the other hand, makes zero sense. ABK was not lacking capital, had the same MBA management Microsoft has and did not have much room to grow, Blizzard alone had 5K employees. Their IPs had long time since plateaued or had been in decline already. What was Microsoft plan to increase profit? Switch everyone to Teams? Put more people to work on CoD and release 2-3 CoDs per year, hoping they all will sell as well as the annual CoD? The more realistic path to return of the investment could come from increasing Xbox's share of the market by making their newly acquired IPs Xbox exclusive. But they did not do even that.
IMO, at the time, it was to buy ABK and make CoD an Xbox exclusive. That clearly didn't play out when everyone screamed about it being (rightly!) anticompetitive, and so they had to resign themselves to accepting that day 1 gamepass exclusive was going to be their way to get people to switch over from PS. That also didn't work.
The 'K' part of ABK was also probably going to be their way to drive mobile into Xbox as well with their 'everything is an Xbox' push at the time.
This is not even considering they basically bought all the PR issues that came with Blizzard.
Instead, they paid way over the odds for IPs that seem past their prime.
Another crazy deal like this is the EA's buyout, I wonder if it will come through or the investors will eventually realize that they are not going to see their money ever again.
Undead Labs has shipped nothing Compulsion shipped South of Midnight topping at ~1600 players on Steam Ninja Theory has shipped Bleeding Edge and Hellblade 2 and Double Fine shipped Keeper and Kiln.
It's a net positive that these studios and this culture is gone. I am sure that food was amazing.
And the bad plays are management-related, so they’re firing a bunch of people…
The bigger issue is that console manufacturer revenue is highly cyclical. This is hard to see in e.g. Xbox and Sony since they are both part of a larger conglomerate, but really obvious for nintendo.
You generally have a cycle of - "Launch": high marketing costs, low/negative HW margins - "Mid-cycle": lowering manufacturing costs, large game sales, high margin DLCs - "end-of-cycle": falling HW sales, fewer exclusives (-> preparation for next gen), fewer consumers (-> waiting for next gen). Here you usually have maximum profits since you don't subsidize HW and marketing is minimal (platforms are already locked in)
Generally you have to establish a big userbase during the mid-cycle such that you can levarage it during the late-cycle to be able to afford next-gen. Xbox has the big issue that their mid-cycle was catastrophic, which means they now don't have the console base to get into the next generation: If they have 3% margin _right now_ in the end-of-cycle where marketing and development costs are at their lowest, this does not bode well for the overall health of the business.
That was true historically but is no longer the case. Even last gen manufacturing costs didn't go down as much as they used to. This current gen they actually increased multiple times.
Consoles losing physical media and not allowing 3rd party app stores, or gasp, the ability to run user programs is going to kill the consoles. Expensive and marginal future utility.
They actually tried this a few months back when Game Pass Ultimate went from $20/m to $30/m. I cancelled my sub and went to essential. Then Asha backtracks and reduces it to $22/m and people are like wow, she will save Xbox. No, it just shows me they probably saw so much churn, especially from long-time subs, that they backtracked.
- A company which has undertaken a concerted, long-term effort to consolidate the industry under its umbrella (something they themselves call out as a problem in this post), reducing consumer choice
- A company which has captured a significant chunk of the console market. They're one of the big three (alongside Sony and Nintendo), and have been since the early 2000s, arguably, for crying out loud.
At a certain size (typically as measured by market capture) the expectation for growth needs to be reality checked. This is still $150M of pure gravy every single year. Sure, this is going to a corporation, but that's more money than most people could possibly dream of earning in ten lifetimes.
Every year. For a company that's already putting money towards opex in the form of developing new games and new content for existing ones, for a ridiculously broad portfolio.
To be clear: it is Microsoft's and Xbox's prerogative to pursue more profit, but I reserve the right to call this out as absurd under the circumstances.
If you want to make the argument that Xbox has suffered from a lack of focus in the past decade (... or even longer), or that there's been mismanagement (I would say since around the time 343 got created), then those are fair arguments, though I don't think those are justifications, on their own, for cutting thousands in headcount.
Allowing this org to balloon to fourteen levels of management on any vertical is a joke. Allowing the absorption of so much of the game dev industry and still being unhappy with $150M in annual profit after being such an active participant in the oligolpolization of console gaming is just a bit unserious.
That actually seems... tiny? Xbox is nearly 17,000 employees. That's like $8k in profit per employee. That's worse than big box retailers and like 1/100th of what is common in big tech and (to the letter's point) far worse than their biggest competitor.
Like sure at least you can say they aren't losing money, but Nadella can't be looking at that after just spending 75 billion on Activision Blizzard and be happy with it as the status quo.
You're neglecting to consider that any time they acquire a studio or have a flop or two -- poof goes that $150M and probably more. It's not a risk-free venture. Entertainment is all about hits, and misses hurt.
Would you put up $5K to win $150 on a hypothetical roulette wheel that hits 90% of the time? The math's not perfect obviously but Xbox is a somewhat similar situation. Microsoft is putting up nearly $5B a year to make $150M. They'd be better off stuffing the $5B into bonds or something. There is a point where the returns aren't high enough to justify the expenses when risk is taken into consideration.
As said elsewhere in the thread:
> You’re saying that they should take the money people pay to buy Xboxes and put it in T-bills instead of delivering Xboxes?
Wherever it comes from now! They're spending about $4.85B to bring in $5B.
So they could do that and invest the income they still get into bonds, and then that would be where the returns come from.
They don't want to do that obviously, hence why Xbox needs reform.
and yet everybody - including Microsoft - is in a big rush to sell us AI services, which could look an awful lot like a historical utility business. 3% will be a dream return in that scenario!
Older forms of media understand this. WB loses money and its still really valuable because people see the potential of Batman, Harry Potter etc.
IP studios are really valuable because they can drive attention to your platforms. Try starting a premium streaming service or a console without IP. But you can't manage it like tech. It's not going to grow all the time and returns are uncertain.
MSFT could be in the XBox as a platform business. They could have a few in house studios to prime the platform pump. Once it started being a content business they got lost.
I'm curious what you mean by this. It seems like gamers have never been more vocal and there have never been more avenues (social media, short form video platforms, etc.) for them to voice their opinions than we have now.
How exactly do you know that developers have never been more disconnected from their audience? And how would that be relevant to declining AAA game quality when it's the responsibility of management and leadership to ensure the quality of the final product?
This is a trope that's more than a few years out of date. Silicon Valley is run by Mark Zuckerberg, Peter Thiel, Marc Andreessen, Elon Musk, and many other executives who are completely devoted to the current administration; even Tim Cook bent the knee and donated $1 million to Trump's inauguration.
And what does "far left" mean in this context? Is it the abolition of private property and the creation of a communist utopia? Or are we talking about basic equal rights and a slightly more progressive tax system?
Without a bit more clarity, comments like yours come off as being uninformed at best, ignorant at worst.
There are studios that routinely put out games that people love. For example, my wife and I will happily pre-order the next co-op game from Hazelight Studios. FromSoftware, Ghost Ship Games, and others fall into the same boat for many people.
The difference, in my opinion, is that games from these studios don't focus on creating an "always on" service, microtransactions, day-1 DLC, MRR, etc. Those things that blight games made by corporate studios are evidence of corporate executives putting their thumb on the scale.
There's only so much you can do, as a developer, to polish a turd.
I wish devs would stop trying to make every game an uber-game. They need all the monetization because they've already blown the budget before work even started.
Nintendo figured this out. When will the other big players?
I’d be curious what you think the changes in dev culture are. I have worked for or with a lot of these studios and to me they have different cultures. But I could be missing the forest for the trees. MSFT has one culture that imo lacks a creative vision.
There is absolutely no reason to be in sync with Sony on their console release date. They could have effectively released consoles bit more frequently. But they choose not to do so. Their acquisition has been questionable - Activision/Blizzard.
At the end of the day, the employee pay the price for bad management decision which they keep on making.
It’s possible stadium sized esports wasn’t directly profitable or was break-even, but seems like it could have had the potential to catapult the idea into the mainstream when there are 7 figure prize pots, and the games are accurate to anyone with equipment.
sure Rivals is strong competition but remember time where Marvel Rivals didn't exist, OW is already dying by then
If you played enough overwatch, you'd know that it was messed up from when Jeff started doing his silent fireplace streaming.
This was a silent protest by Jeff.
There’s definitely some Blizzard DNA in the characters and lore. I like to think it’s as close to what StarCraft Ghost could have even been.
Nintendo get a pass because Switch is a very different console, closer to Game Boy.
Oy vey maybe this kind of money grubbery is not good for our society.
Making terrible decisions, such as investing in distractions for your company and consumers, and then letting your workforce pay the tab.. is the thing that is not great for society.
Who is the "we" here? Because the profit margin not being high enough is certainly not a problem for consumers. The only people who should care about that are the company's shareholders and "shareholders" certainly isn't synonymous with "society".
But the point is locking up money in a 3% margin business doesn’t impress investors.
So you either need to improve the margin with lower costs or higher price (or both). Or bail from the market entirely and put your money in something that makes more money.
Our society has a finite capacity to do projects and to run industrial processes. We want that finite capacity to provide as much quality of life as possible (and as much expansion of our capacity to do projects and run processes as possible), and achieving that is a thorny intellectual problem, which for many centuries in our society has been solved mostly by lawyers and judges knowledgeable about corporate law, stock markets, corporate managers, accountants and investors.
Many of those developers may not have the job elsewhere, or job paying much less. They now have the experience working in a proper software engineering environment.
https://home.treasury.gov/resource-center/data-chart-center/...
But doesn't that make situation even worse? They likely would be 100B+ market cap/total asset value if spun off into independent company, but not able to generate even 1B in annual profit? Activision Blizzard managed 1.5B income/20% margin by themselves before being bought by Xbox -- and somehow whole of Xbox now earns less?
- Investors bail - You run out of cash
However the owners are still going to be mad because their cash is down and they will demand changes to fix that.
Not to mention a company with thin margins is going to have a hell of a time raising money through debt.
3% is pretty close to 0% which is very close to -1%. Think of it as a 3% margin for error.
No, it's a signal from the market that the product being sold is not wanted by the market.
They've mismanaged all their IP pursuing that yummy subscription revenue. Turns out gamers really don't like to buy subscriptions. As a poster downthread pointed out, the games that are not always-on and subscription-based are doing fine. It's the recent AAA model of subscription that is bleeding money.
Doesn't matter how big the revenue is if the market is not interested at the price you are selling.
I mean, by your logic, if I sell a dollar for 64c, and do $5b revenue, that's an indication that the market does indeed want the product, but not an indication that the market wants the product at the price you need to sell at to stay in business.
If you're offering even 25 year 75% LTV mortgages at such a low interest rate it's $1.07 future money you're going bankrupt. And these days people are taking 30 year, 95% LTV or even asking for 40 year 100% LTV which is fully batshit.
This is all normal and justifiable. Where is the logic that corporations need to preserve dysfunctional parts of their operations?
I'll counter by saying that pruning off failing things is not only good, it's the core of capitalism. Creative destruction, as Schumpeter called it. You get efficiency by hunting down and eliminating inefficiency, redeploying the resources elsewhere.
Plants do this. What’s it got to do with capitalism?
So errors abound, and have to be subsequently corrected. This correction process is as natural to capitalism as breathing is to you being alive. Without it, things would rapidly grind to a halt. We see this in sclerotic centrally planned economies where errors persist for much longer.
It's quite serious that you see "being good" as something inferior to "the core of capitalism".
Also, the core of capitalism is making money for private individuals, nothing more, nothing less. Whether that's done with or without "failing things", is really beside the point.
What private individuals choose to do with their capital, chase infinite growth and profit or sit on it, is up to them. This is as opposed to say, state ownership of capital.
People confuse the stock market with capitalism. You don't need a stock market for capitalism to function. Publicly traded companies in the United States are legally bound to maximize profit (Dodge vs. Ford Motor Co.)
* firing people * making services worse * sacrificing their own future
Whether it actually does involve those things is effectively arbitrary, because the consideration of the "bad sign" is also arbitrary. If there is no objective value judgement of their operation there is no objective value judgement in their streamlining either, so all bets are off.
no percentage no good
"complex consideration"
This level of greed is also relatively new, and was pretty well managed by previous (30~ years ago?) administrations. There's an obvious direct correlation between the rapid growth in wealth of the top 1%, businesses becoming increasingly anti-consumer, degrading quality of life amongst the average person, etc. It isn't something inherent to capitalism, it's something inherent to unmanaged 'trickle down economics' capitalism and societies built on individualism above all else.
to me, it is really a signal that the cost of production is high - ala, they're inefficient, rather than the market not wanting the product.
Players purchased roughly $6.8 billion worth of the Roblox in-game currency Robux in 2025, a massive 55% year-over-year increase.
So for example, if I can make twice as much money as a software developer as I can as a musician, that is strong evidence that my doing the former kind of work will benefit society about twice as much as my doing the latter kind of work.
Unfortunately that hasn't been the case for most subject in over 10 years. But I have yet to find a better place though.
That's exactly when the prototype development kits come out of small scale testing (maybe tens of units, all incredibly expensive bespoke units, probably hand soldered and assembled), production ramped up a little and the evaluation kits are produced and distributed to first party studios and large third party studios, with thousands of consoles produced with the expectation that their lifespan is likely only going to be 6-12 months. These are then extensively tested by developers, both to see what needs to be done to get their launch titles actually working on the machine, but often very serious hardware bugs are found in this period that may require fixes to the chips themselves or software workarounds that affect performance. For some of the recent console launches there have been 2 or 3 rounds of evaluation kits in a year, and the previous consoles are effectively bricked.
After the evaluation kits seem to have converged on a final product, the development kits are produced to ideally match the final version of the evaluation kits, but again these are tested before production is ramped up because some things do change (most trivially the case, even if the board is fine). At this point tens of thousands of dev kits are produced, each different enough to retail kits (more memory, maybe extra ports, etc), usually at least 6 months to a year before console launch so studios can make a final push on the launch day or first quarter titles, and in the background the same evaluation process for retail kits (usually just stripped down from the development kits, but usually different cases etc) starts, and eventually a final design for the retail product is produced that's good enough for manufacture.
This time is definitely not just when the console manufacturers kick back and rake in their profits, this is when they're already spending big on the final push to get to the point where they even have a new console to start a new cycle with.
Separate to the console manufacturing side, the years before release are when big money is spent getting studios on board to produce launch titles, because without those, the console will be dead on arrival.
TLDR: revenues at the end of the console cycle aren't funding the next generation, because it's probably already been in development since the launch of the current console, rather those end-of-cycle revenues are hopefully paying off the gamble they took funding development for the current generation.
Yes. 3% margin is lower than inflation of US treasury rate. As some business would even call it borderline charity. It is also not a commodity market, which means it is not healthy. And any headwind is going to be damaging.
I saw this coming from day one. The instant they did Netflix for Games, it was going to gut their margins. And then the inevitable pullback, either holding new games for months or raising the price, was going to kill the value proposition.
They said "This will make us a mint" and celebrated the victory years too early.
For Xbox being what it is today, which is mostly about the subscription and not the hardware console or the exclusives, you have to compound their acquisition frenzy of 2018-2020 or so, which totals about 75 billion+.
They didn't want the developers nor the catalog. What Microsoft wanted is to change the economics and dynamics of the entire games industry, to make it Netflix-like (play what's in the catalog today, pay monthly even if you don't play anything) vs. what Steam offers (purchase once, own "forever", even if it's de-listed).
But that didn't play out. Optimistic estimates put total revenue for Xbox since then in the 20B ballpark. At a ~5% margin (as other commenters have pointed out) the profit is about 1B dollars.
It means that after almost a decade, the entirety of Xbox is in the red for about 74 billion dollars, which is 74 billion away from breaking even.
Steam still dominates PC gaming. Xbox consoles can't be more irrelevant today.
This isn't about over-hiring or AI. It was a bet at the executive level that went horribly wrong. They can still do things like selling IPs at a bargain to compensate, but still. Horribly wrong.
Note: Microsoft doesn't publish hard factual data so the numbers above are somewhat speculative (e.g. "analysts data")
Both exist. I would say single player games tend to content in the range of 10+ hours. Think First Light, Ghost of Yotei in recent years.
Competitive and multiplayer games will tend more towards what you are thinking. CSGO, FIFA, and of course many others.
But I feel like even that doesn’t really capture the full range of everything.
People see a 3% return and think, "Well, they aren't losing money so there is no reason they can't just keep doing business as usual." What this idea is missing is that the investors in a company aren't choosing between "keep my money in this company" and "sit on the cash", they are choosing between "keep my money in this company" and "invest my money somewhere else"
In other words, you aren't just looking at direct returns on an investment, you also have to think of the OPPORTUNITY COST of the investment. By keeping their money invested in a business making 3% returns, they can't invest that money somewhere else.
It's this competition that leads to prosperity, the alternative is central planning which leads to poverty.
I wonder how are they taking in 5 billion per quarter when their latest console barely outsold the first Xbox. I doubt it was making a bit less than 5 billion per quarter with quotes like "Ultimately, Microsoft lost an accumulative total of $4 billion from the Xbox, only managing to turn a profit at the end of 2004." on wikipedia.
So how are two consoles with roughly the same sales numbers so far apart in revenue?
Myself and 2 of my friends stopped our subscriptions the day that happened and never went back. I know it’s anecdotal but I’m happy to see others did the same.
But paid online games you need to be subbed yes.
I don't usually take HN audience seriously when talking about economics
3% profit should be totally fine for any business. The planet is cooked, I think we can live with the shareholders making a bit less.
At a roughly 3% profit, they are barely breaking even and have no money to invest in staying current. It's not a sustainable business.
How are they still doing 5 billions in revenue per quarter? Are Xbox and games still sold? In my area they seem to have disappeared from the physical stores alley. I realized that a few weeks ago there were Playstation and Nintendo products in the video game area but no Xbox anything.
Yikes, I bought every Xbox console and plenty of day-1 releases, but skipped the last gen when it became clear that the platform isn’t about gamers anymore.
Triple-As are also getting tiresome, so I think plenty of people are happy to get a cheaper title on Steam that feels like better value.
I tend to agree about the lackluster AAA industry, but I don't think that's the gamers 'fault' for wanting indie games, more private equity and the share market environment forcing developers to generate slop as opposed to good titles. It's a sad way that the broader economy is going in that regard.
If we talked about costs as much as we talk about revenue (which carries roughly the same amount of information) people would judge theses reports very differently.
This reads like something from The Office.
xbox-specific issues aside, this proposes an interesting view of the future of work.
Your manager who used to just focus on motivating and unblocking their people? Now they have to ship code too since they’re a player coaches! You’re a DRI who needs management to get your project unblocked? Too bad your player coach who has to ship code now also has 20 direct reports because the hierarchy was flattened so you can’t get time with them until next week and are blocked until at least then.
It is the hot new trend from the “thought leaders” who have all consistently copied each other’s bad ideas for the past 10 years.
This is the real problem. If you don't have enough folks for a 4+ IC team then you don't have a team.
It sounds pretty similar, for example, to team structure ideas proposed by Fred Brooks in The Mythical Man Month from 1975.
Good old times. The last time I tried to buy something on Xbox it fails miserable with multiple cryptic error messages - mostly around my credit card.
No problem though to biy the game on my mac via browser and then after a few more settings actually showed up on my xbox.
Interest in physical media has actually been on the upswing, and, with Sony announcing their plans to abandon physical media, it feels like MS has a chance be the "good guys" like what Sony did to MS when MS threatened to ruin physical media prior to the Xbox One release.
However, I'm expecting Microsoft to simply follow Sony's path, because I think they are already going down a path that favors digital-only, and I also think they just don't care to distinguish themselves. It seems like Xbox's claim to fame for the past few years is "It has game pass, and it can play a lot of the same games PlayStation can."
Not only that, but RAM/GPU/SSD prices going up so much recently (which is especially jarring for SSDs, which for like a decade had been getting more affordable; I bought a 120 GB SATA SSD in 2012 for around $100, and I was able to buy a 1 TB m.2 one for around the same price a few years ago) is starting to equalize pricing for PC gaming. In 2022, the initial Steam Deck launched for just $400, and it continued to be offered at that price for a few years, which made it cheaper than the Switch 2 launch price.
I feel like if I were a console manufacturer, I would be trying to figure out a way to take advantage of that. Other than price (previously), the other obvious selling point of PC gaming is more control over your system, so there could be an opening to try to lure away wayward PC gamers with some changes that give them a bit more control on the console. I agree with you that I can't really imagine Microsoft doing this though.
I do think there is a market for a return to an XBox 360 model where the tech behind the games is artificially constrained to allow for games to be published solely on DVDs again. No installation required, no patches required, smaller budgets, quicker release time lines. But Microsoft is not the company to pursue that approach
i agree that mandatory downloads are a big problem (thats why willitplay is a thing) but offline installs from disk are the biggest change that made ps5 games load so much faster than ps4 and opened up a lot of new options for devs. reading data from ssd will always be faster than a blu ray. the only downside is you have to manage space a bit more but its worth it. if you want straight from disk get ready for slower uglier harder to develop games.
You can occasionally get one where a very final version copies straight off a PS5 disc.
Sure it has. Just like how demand SD card slots and 3.5mm jacks on phones is on the upswing. If you only read tech forums.
Is it true?
I was in the console/platform dev org so not a ton of insight into studios, but I've seen a ton of ESO and Id folks posting on twitter
But they kept increasing the cost of Game Pass with no new features, the platform has seemed stagnant, and honestly I can't tell you why my Series X is better than my Xbox One. Literally I don't see a difference. I'm sure there is one but as a user I really didn't feel like it was a big step up. I bought it because I had every other Xbox and it seemed like the next logical step.
That coupled with most games feeling like lootboxes wrapped in just enough of a game to justify calling it one, at higher and higher price points, all while trying to get more money after they've taken your $70/$80 for the base game. Oh wait, you bought the poor-person $70 version? You really need to the Ultra Collectors Edition Gold Special Release Version for $120. Oh also, make sure you are buying the season pass...
Meanwhile I buy games on my steam deck and/or from indie developers for a max of $30 and get way more gameplay/fun that the "AAA" games (which have largely sucked IMHO).
I'm over here playing Mass Effect 1-3, Skyrim, Fallout 4, and other games OVER A DECADE AGO. They are the only games not completely ruined by lootboxes, always-online BS, or trying to sell you a shell of a game with extras you have to buy [0]. I was excited for Starfield (Skyrim in space!!) but it was a complete bust. After spending, quite literally, 1000's of hours in Skyrim (and buying and rebuying the Anniversary/Special/Collector's edition enough times to be embarrassing) I could not get excited about Starfield and stopped playing after a few hours. The new Halo was meh, I played through it and the open world was somewhat cool but I guess they wanted to do seasons of new content and I have zero interest in that. Give me a solid single player game, that's all I want. I cancelled Game Pass after realizing I was paying an absurd amount of money to play a single game (Deep Rock Galactic).
I think I'll stick to my Steam Deck which I enjoy way more than my Series X.
[0] Yes, Skyrim/Fallout had expansion content but it's tame compared to most games today.
Then realised just how few games I'd actually bought this generation. Game Pass was a mistake, or at least putting big AAA releases on there on day one was.
Spinning fiascos as opportunity is standard practice.