Microsoft’s great gaming gamble
Microsoft are about to announce the biggest, most powerful gaming console to date.
It was in the vast air-conditioned darkness of the Los Angeles Convention Center at the Electronic Entertainment Expo (E3) this past June where Microsoft were announcing their biggest gaming bombshell of 2016 — a project code-named Scorpio.
What was this mysterious project Scorpio? What implications was it going to have for consumers and gaming? To answer this, you must go right back to understand Microsoft’s 15-year tango with the gaming industry — the Xbox.
Originally conceived as a portal to unite the committed, but niche PC gaming market and the wide-spread, but casual console gaming markets, the original Xbox was unveiled by the bespectacled Microsoft CEO Bill Gates 17 years ago at the Games Developer Conference. Touted as one of the first true pieces of 21st century technology, it showcased features that would go on to become industry standards — a hard-drive, built-in networking capabilities to take advantage of burgeoning broadband internet and trigger buttons on its controller. Utilising Microsoft’s connections in the hardware space and their immense economies of scale, the Xbox could trounce the tech specs of the opposition’s offerings, the Sony PlayStation and Nintendo GameCube.
On the games side, Microsoft had devised a strategy which could attract developers who previously had never gone near the console market. The system would run on the Windows operating system in a PC architecture — the standard systems used by nearly all game studios. This meant that games on the console could be quickly made in a manner which matched their PC game equivalents.
Using common PC porting methods, games from other systems could easily be transferred over to the Xbox. It was a strategy designed to make a developer’s transition to the system as painless as possible and it worked. At its launch in late 2001, the Xbox boasted a strong line-up of games. It had its own mammoth success, Halo, coming from its own in-house studio Bungie as well as titles from the world’s major gaming publishers, including a range of offerings from Electronic Arts and Sega among others.
Despite this cultivated environment constructed for it to succeed, the Xbox was not the immediate success Microsoft had hoped for. It trailed miserably behind its chief rival, the PlayStation 2 for its entire lifespan. Even for Microsoft’s best efforts, it struggled to attract and keep customers engaged in the platform.
On the hardware side, where the Xbox had a distinct competitive advantage over its rivals, they managed to shoot themselves in the foot. At the turn of the century, the new DVD home market had taken the world by storm. In many cases, films and TV shows, both new and historic, presented in high quality were available and affordable for the first time. The PlayStation 2, a product of the Home Entertainment conglomerate Sony, had the ability to play DVDs baked directly into its functionality. Suddenly, a games console was not just a child’s plaything — it was also a home cinema system, an acceptable purchase, an adult piece of technology.
Sales of the PlayStation 2 exploded exponentially, easily breaking through the 100-million-unit barrier, eventually becoming the best-selling games console of all time, fueled by its integrated DVD player. The Xbox also played DVDs, however, this functionality was not enabled out of the box and required a separately sold peripheral. This oversight quashed any technological advantage the Xbox had over its rivals.
This discrepancy in unit sales left developers with a decision to make — they could either work with the simple Xbox framework to create games or develop for the more obtuse PlayStation architecture, but have a potential market that was six times the size of Xbox’s to sell their product to. The outcome was simple, the Xbox was crushed.
Despite the original Xbox’s failure to win over the console market for Microsoft, it did make its mark. The Xbox had a small, committed share of the console market and band of loyal users. It had pioneered online gaming functionality through its Xbox Live platform, a subscription based system which allowed people to play, chat and connect with each other online, which had been hugely successful. It was on this platform they would build their future.
Four years after the launch of the original Xbox, Microsoft released their follow-up, the Xbox 360. Building on everything they learned from their first crack at a console, the 360 focused on the successes of the original Xbox and Xbox Live. Games were made exclusively for the platform, big releases utilised its online features and the community thrived, attracting the loyal original Xbox users. Crucially, the Xbox 360 was released in November 2005, almost a year before the PlayStation 2’s follow-up. Microsoft were gifted a year to win over PlayStation customers who were looking for something new and they took full advantage. A competitive pricing strategy and a strong string of releases gave the Xbox 360 an almost unsalable lead before the Sony console could get off the ground.
More recently though, Microsoft’s gaming division has had a strange time. They had a fantastic 8-year period of growth with the 360, establishing one of the best-known brands in the world along the way. Their ads can be seen on countless bus stops, billboards, on the internet, TV, in print the world over while their hardware, software and merchandise can be seen being used by millions on every continent on the planet. Yet, with all this, Microsoft’s current offering has been deemed a failure for years now.
The gaming media pronounced the Xbox One console dead on arrival on its release in late 2013. The reason — the console’s strange refactoring to transform their games console into an all-in-one home entertainment unit, its focus on entertainment like TV and sports content while simultaneously promoting ambiguous policies on stopping the use of second-hand games and focusing on an always online connection rather than listening to its devoted gamer audience who only care about the games they played.
Since then, a lot has been done to arrest that initial verdict by Microsoft. These efforts have been spearheaded by Xbox Head, Phil Spencer. Spencer, while admitting previous errors made by the console and by Microsoft, has refocused the ailing giant towards a gamer-centric mantra — more games, more fun, less slogans, less talk. It has proven a qualified success, the Xbox has sold, it is continuing to sell and its games are selling too. However, it still trails hugely in units sold (by a factor of 2–1) to its great rival, the Sony PlayStation 4, while they are badly struggling to release exclusive games that give it unique selling points. If this current gaming generation was a race, it has long since been won by Sony.
So, what are they planning with Scorpio?
Scorpio is a new Microsoft device that will be compatible with all existing Xbox One games but will have six teraflops of computational power, several times the power of the current consoles on sale. When announced at E3 last year, a collection of talking heads made up of developers and executives from across the gaming industry accompanied it, lauding the prospect of Scorpio. The additional power could make what once were their dreams a reality. Scorpio should represent nothing less than a new console generation.
Mooted as the beginning of a new era in console gaming, Microsoft are looking to move the sector away from decade-long generations of a single piece hardware to be more like the cycle of smartphones. Like phones, this would mean that new consoles would be released every couple of years with improved innards but capable of running the same software. At the same time, newly released games would be playable on older hardware, therefore leaving no Xbox user behind while offering a more refined experience for premium customers willing to pay.
The goal is to create an iterative games console which could capitalize on generations of now mature gamers — people in all walks and stages of life. Living as part of the iPhone generation, our whole society, irrespective of creed, race or economic circumstances already maintain a healthy familiarity with the workings of a gaming devices, through that little glass portal they carry around with themselves everywhere.
Yet, with over one billion smart devices in the world, for the companies who make it their main business, propriety gaming hardware woefully languish with hardware sales only a quarter of this. Companies that made themselves behemoths long before entering the gaming realm, Sony, Microsoft and Nintendo, try, but time and time again fail to grasp the public’s attention long enough to convert a passing interest in their product and the experience they sell, to a group larger than a fifth of the population.
Suppose that were to change. Over the past few years, Microsoft have been unifying their gaming output. Games directly developed and published by Microsoft are simultaneously released on the Xbox and on their Windows 10 operating system, the dominant operating system for PC gaming. Microsoft seem to be attempting to do what they tried to do initially with the original Xbox, uniting the PC and console gaming spaces.
A lot has changed in the 17 years since the original Xbox was envisaged, none less than in the PC gaming industry. That area is now completely dominated by one company, Valve, which operates Steam, a digital distribution platform to sell games. Valve, originally a game development studio formed by two former Microsoft employees, has produced some of the most highly rated games in history. Now however, Valve nearly entirely focuses on its Steam platform for the sale of games and this has benefited the whole industry.
Steam has managed to capture approximately 75% of the PC gaming market and along the way has effectively nullified the presence of traditional brick and mortar retailers for PC games. They have achieved this while reducing prices for consumers and increasing return on investment for developers. With all this, Steam has acted like a cradle for creativity, offering huge support to independent developers and enabling creators to easily and simply publish content to its online store.
For Microsoft to truly unite the console and PC gaming spaces, it needs Steam — it needs its selling platform and its loyal community of more than 125 million users. However, the PC gaming community is significantly segmented, it has a library which spans the entire history of consoles while also encapsulating games running on the latest and most cutting-edge technology.
PC games are designed to run on the latest hardware rather than be optimized for a single system with years old technology. This has always proved a stumbling block between the two distinct sectors of the market, yet, with Scorpio, the immense power and potential it promises could finally overcome this frailty and the incompatibility between the two gaming sectors. Hundreds of millions of potential customers could leap on the Xbox platform in place of buying an expensive purpose-built gaming PC, gaining full access to the whole repertoire of PC gaming history while also getting titles usually reserved only for consoles. But does Microsoft have the stomach for what would be a huge acquisition and a huge overhaul which would be at the expense of its own Xbox platform?
Microsoft does have priors. In 2011, they purchased the online voice and video chat application Skype for $8.5 billion. This massive investment was in a product which mirrored their own offering, Microsoft Network Messenger (MSN). Although Skype has not proven to be a roaring success for Microsoft, it does show that the company can take an expensive risk to improve upon their service and actually follow through on it.
New consoles act as a reset button — Microsoft have used it before after the original Xbox and it has the prospect of reinvigorating the whole industry with Scorpio. Suppose if you will that Scorpio is truly an iterative games console. Suppose Microsoft are trying to merge the console and PC gaming sectors. Suppose then that they do indeed buy Steam. Suppose they take their own successful product (Xbox) and merge it with something different, yet more modern and refined (Steam). Suppose they finally cut out the middle man and move to a new, frightening, entirely digital means of selling games. Suppose then that prices for consumers fall. Suppose that those people who were previously disenfranchised by the gaming world for socio-economic reasons finally had a window, a way in.
Sways of people, a whole new market sector, could have a crack, come in, join and jolt the gaming world towards a place at the centre of the cultural epoch, the 21st century’s answer to the motion pictures of the last millennium. They can finally fulfill the potential of the original Xbox, this is the opportunity, it is a gamble but will they take it?
