If the platform's software situation starts to look up within the next few quarters, it'll have made it to the edge of the ice unscathed – but conversely, a few significant software delays, or some major titles not meeting expectations, could see the ice start to crack. Thus far, it has been sustained by an interlocking set of positive factors, such as high-profile acquisitions that have given weight to lavish promises of software just over the horizon, the hugely competitive pricing of Xbox Series S, and the good fortune to have had slightly less supply-side trouble than Sony has experienced in the past few years. Nonetheless, as the third year of the console's lifespan looms, the company must be aware that it's on thin ice. Game Pass, and the enormous library of classic software from systems dating back as far as the original Xbox which it unlocks, is just one of the ways in which Microsoft has done an amazing job at positioning Xbox to succeed even despite the long wait for its software plans to come to fruition. Microsoft lumps services and software revenues together in these numbers growing Game Pass numbers are likely covering for a hell of a slide in more traditional software revenues. That the decline in software revenues in the quarter was a mere 3% is a testament to that service's ecosystem, and specifically how successful Game Pass has been. The new Xbox consoles are still, for now, in the weird and uncomfortable position of being unquestionably superb systems with widely praised services ecosystems and strong consumer demand and goodwill which simply don't have an exclusive software line-up worth a damn. People are still keen to buy Xbox consoles, but they're buying fewer games for them. Nonetheless, the company's financial results this week drove home the point that the fruit hasn't been borne yet, with the Xbox numbers seeing a very unusual pair of trends for a console at this point in its lifecycle – hardware revenues up, software revenues down. We often talk about the ZeniMax/Bethesda acquisition in 2020, which was Microsoft's biggest gaming acquisition prior to the record-breaking bid to acquire Activision Blizzard King, but there was also a flurry of smaller acquisitions in the preceding years, which saw the company kickstart its first-party studio ambitions by picking up studios like Ninja Theory, Double Fine, Undead Labs, and Forza series developer Playground Games.Īt some point, those acquisitions must bear fruit – nobody doubts that, even if Microsoft's chequered history of sitting down rather heavily on companies it acquires and then wondering why they're flattened has not gone unremarked. It's a promise with some weight behind it, in the form of the many billions of dollars the company has spent on acquiring publishers and building up a portfolio of first-party studios. In the normal course of things, a console which failed to deliver a solid line-up of exclusive titles by its second birthday would be dead in the water, but we're not dealing with the normal course of things Microsoft is maintaining consumer goodwill and enthusiasm on the back of a promise: that the games are coming, and while it may take a while, it'll be worth the wait. In the normal course of things, a console which failed to deliver a solid line-up of exclusive titles by its second birthday would be dead in the water, but we're not dealing with the normal course of things. For all that, though, its software line-up remains weak – incredibly so, in fact, for a console that's approaching its second anniversary. Moreover, the company has gone back to its winning playbook from the Xbox 360 era with a brilliant services ecosystem. The Xbox Series consoles have fantastic hardware. Nonetheless, when we discuss Microsoft's success in this generation there's always an elephant in the room, and every now and then, the elephant gets a little restless and a little harder to ignore. The success of Xbox Series X/S has been an absolutely staggering turnaround for Microsoft's fortunes in the console market, putting the company back on something approaching an even footing with Sony despite the (largely self-inflicted) drubbing it suffered in the previous generation.
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