Microsoft Corporation is moving away from hardware in order to focus on the cloud and enterprise software. The firm’s focus was shown in stark relief in a recent release from the NPD on console sales in the month of June. The Xbox One is still falling behind, and the PS4 is building up quite a “snowball effect” that keeps it winning.
The NPD numbers have not been made public, but the console makers have already received them. Microsoft’s Aaron Greenberg, who leads the marketing team for Xbox One games, offered some insight into why his firm is losing the Xbox One VS PS4 battle.
Microsoft looks at Xbox One VS Ps4 defeat
This morning he tweeted “Good June
#NPD #XboxOne sales +51% YOY & proud we were #1 selling console the week of E3 +79% WOW, but Batman ps4 bundles strong as expected.” It’s the last piece of the Tweet that carries the most import.
Exclusive content tends to be a loser for third party publishers. In recent years they’ve tried to make their games open to both platforms while still selling exclusive content to Microsoft and Sony in the form of exclusive content and timed exclusives.
Selling content to the bigger console maker is always going carry a lower price, because the game-maker is losing out on less sales. For example, Batman Arkham Knight, the top selling game for June, had exclusive features on the Sony Corp PS4.
VGChartz, which isn’t a perfect data source but one that works well for this example, says that, in terms of sales, the Xbox One VS PS4 market stands at 13.1m to 23.8m. If Warner Brothers, who made Batman Arkham Knight, were to put extra content on the Xbox One it would turn its back on the 23.8m users who have a PS4.
Going with the PS4 means the firm annoys fewer users. That means it costs much more for Microsoft to bring extra content to its system, even though that extra content appears to have made all of the difference in sales in the month of June.
This is the “Snowball effect” that might finally end any hopes Xbox One VS PS4 sales numbers turning around.
Microsoft can’t give up right now
Microsoft is not going to pull the Xbox One consoles off of the shelves right now, despite how some might read the firm’s recent move away from hardware. That doesn’t mean the firm is going to keep pouring billions into the platform in order to put win the Xbox One VS PS4.
Microsoft does not have the deep pockets to spend on hardware dalliance that it used to. The firm is in the midst of a major change in the way its entire business works, and it can’t afford to leak money into a cash burning home console business in order to win that fight.
Microsoft flubbed the launch of the Xbox One, and the firm has no recourse to drive sales bar spending money. The firm has tried to increase sales on the cheap by unbundling the Kinect and bringing backward compatibility to the Xbox One. Both of those features make the console better, but neither help it win out against the massive lead of the PS4.
Costs for exclusives are much higher for Xbox One VS the PS4. Microsoft is simply not going to put the resources behind its console that it would have to in order to level the playing field. We’ve been here before, and not all that long ago.
Microsoft meets snow ball failure
The Xbox 360 got a good start on the PS3 for a number of reasons, chief among them were the price leg-up the PS4 had this time around. The PS3 cost far more than the Xbox 360, and gamers weren’t ready to shell out extra for a Sony console.
The Xbox 360 doubled down on that success. They brought in teams from Activision-Blizzard, makers of Call of Duty, the most potent franchise in gaming apart from Mario, and convinced them to make content that would appear in the Xbox 360 versions of games first.
The DLC for Black Ops, the biggest game in the series, came out one month earlier on the Xbox 360 than the PS4. That’s a timed exclusive, and the sales show the kind of effect that can create. Black Ops sold 12m units for the Xbox 360. It sold just over 3m units for the PS3.
Sony has learned from Microsoft , and it’s turning the screws in order to force the Xbox One VS PS4 battle further toward total defeat. Paying for the Arkham Knight content gave the firm an edge over the Xbox One just as Microsoft thought it had made a real play for the market.
During E3 2015 Microsoft said that it would roll out backward compatibility for the Xbox One, giving users a reason to stick with the brand if they already owned a host of Xbox 360 games. Sales spiked, and Microsoft sold more than Sony during that week, a rare event.
Snowball builds from multiple sources
It’s not just the lower price of added content that Sony has secured with its snowballing success in the Xbox One VS PS4 market, there’s a lot more sources of that effect, and some of them are built by the natural dynamics of the market.
Modern AAA Games don’t allow users to play against each other if one is using a PS4 and the other an Xbox One. The more popular console appeals to the marginal gamer who hasn’t bought in just yet simply because more of their friends are likely on the system
Branding also plays a part. If more people have a PS4 more people talk about it and the first party games that come with it. Uncharted 4 may be talked about a lot more than Halo 5 simply because more people will have a way to play it. That makes it a bigger game in the minds of those without a console but the desire to buy one.
A snowball takes real effort to turn back. In a console market where third part sales matter most, that effort means cash. Microsoft has shown no taste for burning more cash in the console market.
Satya Nadella is no fan of the hardware business that Steve Ballmer built at Microsoft. He’s already gotten rid of most of it, and pushed the rest out to the edges.
His firm will try to keep up, because the Xbox brand has value that’s worth preserving, but it won’t put the effort needed to reverse the snow ball effect in the home console market. While the Xbox One was cheap and cheerful at E3 2015, the PS4 team shelled out cash and got DLC for Call of Duty: Black Ops 3 to come to the PS4 first.
Without a seismic change in the workings of the Xbox One VS PS4 battle, there’s unlikely to be any solace for fans of the Microsoft console. The June numbers from NPD show that clearly. Arkham Knight mattered. Call of Duty: Black Ops 3 will matter this holiday season. The snowball is happening, and there’s little Satya Nadella’s team seems willing to do about it.