Microsoft Corporation (NASDAQ:MSFT) Xbox One VS PS4 Stunned by Past Glory

Xbox One VS Ps4 Microsoft Corporation

Microsoft Corporation  won’t make much money, if any, from the Xbox One VS PS4 battle, but that may not be the firm’s aim any more. Phil Spencer, the man in charge of the Xbox brand, has openly stated that beating Sony Corp isn’t among his team’s goals. What’s important is making sure that the Xbox One isn’t a complete failure.

Xbox One VS PS4 Microsoft Corporation

In a recent interview with VentureBeat Liam Callahan of NPD, the main research firm that tracks game sales, said the recent moves by Mr. Spencer and his team were, in fact, shifting the nature of the Xbox One VS PS4 battle, and it was shifting them, relatively, in Microsoft’s favor. Game sales on the Xbox 360 beat those on the Xbox One in July. That’s a major surprise, but it’s a good thing for Microsoft.

Xbox 360 + Xbox One VS PS4

While a lot has been made about the recent links created between the Xbox One and Windows, the links between the Xbox One and the Xbox 360 may be even more vital. Mr. Callahan says that Xbox 360 game sales beat those of the Xbox One in July because of Microsoft’s coming backwards compatibility drive.

He said “one reason for the stronger 360 sales may have been the news of backward compatibility for the Xbox One coming out of E3.”

“Consumers may have felt safer buying 360 games knowing that they will be able to play them on Xbox One if they choose to upgrade,” he added.

With Microsoft  losing so many Xbox 360 owners in the Xbox One VS PS4 battle, that may be the best news the firm could hear at this point in time.

If Xbox 360 owners are buying more games because they feel safe about their future use, as Mr. Callahan suggested, that may mean higher sales for the Xbox One in the months and years ahead as more users upgrade.

The install base for the current generation is still only around 25 percent of the last generation. There’s still a lot of people out there who might think about buying into the Microsoft system when they look at the pros and cons of Xbox One VS PS4.

Xbox One looks backwards

Microsoft hasn’t yet put the features on their system, and the firm doesn’t have the best record with keeping promises. Thus far it says that there are “over 100 titles slated for this fall, and hundreds more added every month, Xbox One is now the best place to play your Xbox 360 games.”

The firm was supposed to reveal its launch line-up this week, but pushed the reveal until next week for reasons that weren’t fully disclosed. The feature is set to be open for use on any Xbox One console in time for the holidays.

Back in February Strategy Analytics said that the PS4 would outsell the Xbox One by 40 percent over the next three years. The research house says it expects PS4 to sell a total of 80M units by the end of 2018. The Xbox One will sell just 57M according to the report.

It doesn’t seem as if backwards compatibility is going to change that. The feature, just like PC crossplay an the other upgrades that Microsoft is bringing to the Xbox One, will  likely increase sales marginally, but Sony can respond and it has the incentive to do so.

Sony is losing part of its Xbox One VS PS4 lead

Sony is still winning the Xbox One VS PS4 battle, and it’s not likely that Microsoft will ever be able to overtake the firm in terms of sales. The snowball effect is real, and it’s almost entirely clear that Microsoft has little enough interest in putting its money to work in the console market.

Sony was way ahead of Microsoft in terms of branding and consumer perception for the first year and a half of the current gen of games consoles. What’s going on right now, in large part thanks to the work of Mr. Spencer, is a re-balancing of sorts.

Sony hasn’t done anything really wrong, though some gamers aren’t happy with its purchase of so many third party exclusives, but the firm isn’t making as many big happy announcements as the Xbox team is right now.

That will have some effect on sales in the Xbox One VS PS4 battle, but it’s not going to change the nature of gaming. People want to play, and they’re going to go for the best experience. Right now, due to a combination of a higher install base and more timed exclusives, that’s on the PS4 rather than the Xbox One.

Xbox One VS PS4 may decide Microsoft hardware push

All of that doesn’t make Phil Spencer’s work futile, however. His job is to rescue the Xbox One, not to make it the best, or highest selling, console on the market. Microsoft  needs to justify its entire hardware business. The Xbox One VS PS4 battle may be the best place to do just that.

RBC Capital Markets said, in a report published on July 22, “Unless Microsoft can get to hardware break-even within two years or demonstrate sufficient offsetting value elsewhere in the portfolio, we think the company should exit the hardware business.”

FBR Capital Markets analyst Daniel Ives agrees. He thinks that Microsoft should be looking away from the Xbox and other products in favor of a focus on the core. In a recent report he wrote, “Hardware is not what got Microsoft here – software did.”

Sales of more Xbox 360 games is a good sign for Microsoft, but it isn’t likely to win the Xbox One VS PS4 console war. After the disaster at Nokia Satya Nadella and his team in the big chairs aren’t going to want to put more money to work behind money-losing hardware.

For Microsoft, the important task is to make hardware look like less of an outright failure. The Xbox One, though very likely a money loser, is the best place to start making that clear to shareholders.

Phil Spencer’s job is to do more with less and, despite some opaque hiccups, he’s been doing a good job. Backwards compatibility is a win for Microsoft, and it’s one that was likely bought at little cost. As we inch toward the holidays we’ll see what effect that has on sales, and how Sony responds.

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