As the sun sets on the current generation of consoles, gamers have taken up residence on the edge of their seats, awaiting every tidbit of information and whisper of a rumor. Sony’s recent announcement of the PlayStation 4 might as well have dumped a few gallons of gasoline on the growing inferno of anticipation. Detailed specs for both Sony and Microsoft’s next consoles have been analyzed and compared ad nauseam. In spite of all the attention paid to this proverbial tech-phallus wagging, the horsepower fueling the next generation of consoles will have very little impact over which industry powerhouse will see the most success. The reality is that games are the primary motivating factor behind hardware sales and each company’s next-gen strategy, as it relates to software, will be vital.
Microsoft is in a particularly interesting position as they look to unveil the XBox 360’s successor. Due to some of the decisions made over the past few years, they have positioned themselves behind a mountain of expectation and uncertainty. The looming obstacle in their path is the product of two primary factors: the decline of first and third-party exclusive titles and the focus on casual gamers. These two issues are not independent of one another and are surprisingly interconnected. How Microsoft’s next-gen strategy accounts for these factors will be indicative of how they fair in the opening months of the next console war and beyond. That aforementioned mountain could be one that they scale to greater heights of success or one from which they tumble, losing their foothold in the console market.
Let’s start off by taking a look at the stark contrast between the past and current stock of games exclusive to the XBox 360. For the first few years of its existence, Microsoft’s console sported a vast and eclectic library of titles that couldn’t be played elsewhere. Aside from XBox staples like Halo, Gears of War, and Forza, games like Kameo, Ninety-Nine Nights, Crackdown, and Viva Piñata helped to cover a wider selection of genres. In spite of the fact that Microsoft has seen little success on the western side of the Pacific, the early years of the XBox 360 even saw a number of JRPGs and other Japanese-inspired exclusives such as Lost Odyssey, Blue Dragon, and Project Sylpheed. While these may not all be blockbuster titles, they were representative of Microsoft’s willingness to spend the money that was necessary to bring a wide variety of exclusivity to the XBox 360. So, what happened? Two words: the Wii.
When the Wii launched at the end of 2006, it took the world by storm and became an enormous financial success for Nintendo as it opened up the world of gaming to an entire segment of the population that had never laid a hand on a controller – the casual gamers. Suddenly, everyone was a gamer. Grandparents, housewives, and young children – not the usual demographic – were all wildly flailing around the living room while playing whatever minigame-laden drivel the Wii had to offer. In the gaming industry, trends, especially those with such obvious money-making potential, rarely go unnoticed. Like any corporation, Microsoft identified the opportunity and pursued it. It’s no coincidence that Project Natal, the initial code name for the Kinect, was announced just two and a half years after the launch of the Wii. While I don’t have an official timeline in front of me, I can only imagine that the initial decision to pursue the development of a motion-sensing peripheral was triggered by the overwhelming success of the Wii.
Such a significant shift in their console strategy would have required an equally significant financial investment. Funds had to be shifted and since exclusivity does not come cheap, Microsoft was willing to sacrifice that library of XBox-only titles in order to get the Kinect into the market and get their piece of the casual-gamer pie. The decline of XBox 360 exclusivity coincides almost exactly to the development and introduction of the Kinect. Thus far, it has been a worthwhile gamble for Microsoft. The Kinect was a huge success, holding the Guinness World Record for “fastest selling consumer electronic” with over 8 million units moved in the first 60 days after its launch. With numbers like that, it’s not surprising that Microsoft continued to shift its focus towards Kinect-based games.
However, two and a half years after the launch of the Kinect, it seems that Microsoft’s amended prioritization may be working against them. I’m not ignoring the fact that sales of the XBox 360 and Kinect have been exceptional in that time period. Instead, I’m looking at where the Microsoft stands in the grand scheme of the console market going forward. With the shift in focus towards casual gamers and Kinect-based titles, not only has the XBox 360 seen a decline in the number of first and third-party exclusives, but of those that do exist, how many have the words “dance” or “fitness” in the title?
As the number of quality exclusive games targeted at core gamers has dropped off, the trend has not gone unnoticed. In the gaming community, grumblings have begun to erupt about Microsoft abandoning their long-term customer base of core gamers. While I rarely fault a company –gaming or otherwise – for making changes to support their business, I have to agree with that general consensus from two perspectives. As someone who considers himself a hardcore gamer, I personally want to see more games that I am excited to play. As someone who knows at least a little something about business, I want to see Microsoft make decisions that will support and sustain their position in the market. Here’s the reality check for Microsoft: No offense to anyone who partakes of the occasional Dance Central or You Shape Fitness, but these novelties are not real games and the people who play them are not real gamers. Moreover, in respect to the theme of this article, they are not going to support the next generation of consoles with long-term loyalty to a brand (or brands) and commitment to the gaming lifestyle. In other words, they are not going to be a reliable source of sales for years to come.
While some may scoff at the idea that casual gamers aren’t worthy to be considered a company’s primary focus, especially in light of the industry’s direction this generation, the numbers speak for themselves. While the XBox 360 and PlayStation 3 have seen fairly consistent and stable sales figures since launch, the Nintendo Wii, the preverbal mascot of the casual gamers, saw its 2012 sales plummet to 1/5th of what they were when it peaked in 2008. A similar trend can be seen with the sales of software. The tie ratio (i.e. the number of software units sold per console sold) for the Wii has been consistently lower than that of the XBox 360 or PlayStation 3. So what does this all mean? Like myself, and many other core gamers expected, casual gaming is little more than a trend. Casual gamers may purchase a console and an occasional game, but cannot be relayed upon to continue making subsequent purchases to support a particular brand.
With that said, Microsoft’s garnering of the casual market does present a viable business opportunity that will not simply be ignored. The hands-free technology behind the Kinect has given the XBox 360 a distinct advantage in the eyes of those folks looking to burn some calories or shake their money-makers around their living room. While all of my previous comments on the casual gaming market may have cast a shadow of doom and gloom over the whole affair, the reality is that there will always be a segment of the population that wants to dabble in games. Even though the 8-year old who played Kinectimals back in 2010 may have outgrown kiddie games, there will always be another 8-year old to take that spot. The ever-changing nature of the casual gaming market makes it a tough one to pursue, but there is money to be made from it.
It is this somewhat contradictory position that Microsoft finds itself in that makes their next-gen strategy so significant. We’ve already established that they are not going to abandon their pursuit of the casual game market, but it’s still vital that they embrace the needs of the core gamer. Doing so would allow Microsoft to successfully wage the next generation of console war on two fronts. How can they go about accomplishing such a goal? The answer to that question brings us back to the beginning of this discussion: core exclusives.
Microsoft already has a trio of big-name core exclusives that are still active: Halo, Gears of War, and Forza. While these are all extremely successful franchises, it is important that they look to broaden the variety of exclusive titles available for the next XBox. Looking back over the lifespan of the 360 and its predecessor, it’s easy to see a number of Microsoft-owned licenses that would provide that diversity: Fable, Crimson Skies, Crackdown, and Phantom Dust, just to name a few. As mentioned at the beginning of this article, there are also a number of JRPGs and other Japanese-inspired exclusives that Microsoft can look to revive. As they will undoubtedly look to make headway in Asia, providing for the core gamers in major markets such as Japan, Korea, and China will be key.
Dipping into the past to find forgotten treasures can’t be Microsoft’s only source for bringing more exclusives to their next console. With the unfortunate state of the economy and the industry, acquiring new IPs from failing developers and publishers can be a viable option. I was quite surprised to see Microsoft completely absent from the auction of THQ’s properties last month. While next-gen developments are no doubt their current focus, I thought it would have been a great opportunity to bring the Saints Row franchise back into the Microsoft ranks. The first Saints Row game was a XBox 360 exclusive before the series went multiplatform with later releases. Having sold 10 million games over the course of three installments, the franchise could have been a major flagship property for Microsoft. Instead of finding a home back on the XBox 360, the Saints Row IP was purchased by Koch Media, the folks behind Dead Island. The $25 million they spent is a significant amount of money, but not a figure that Microsoft could not have easily trumped. When valuable, core properties like this become available, Microsoft has to be willing to spend the money to acquire them.
Owning and buying a broad range of gaming properties is only part of the overall equation. Microsoft has to also be willing to invest in the development of the titles that will be exclusive to their console. Working with outside development studios will make sense for many of these games. However, it would be a crime for Microsoft to continue to ignore the in-house talent they have acquired over the years. They currently own 21 game development studios around the world and several of them, such as Rare and Lionhead, are well-known industry names. Microsoft must leverage this talent for the development of core exclusives. Why has Rare, a studio known for quirky creativity, been relegated to making Kinect Sports games? Honestly, that is a damn shame.
First and third-party development strategies, while different in many ways, will both require the same thing from Microsoft: money. There are a number of other development resources that come into play here, such as time and talent, but in this case, financial backing will be key. Microsoft has to be confident in its properties and willing to provide the money needed to ensure a quality final product. No one analyzes and scrutinizes the inherent qualities of a title like core gamers. Putting out a lackluster title due to a crippled development strategy is a quick way to turn away that core audience. In contrast, high-quality exclusives can be the a key motivating factor for customers as they make a choice of which console to purchase. Realistically, where would Microsoft stand in the console race if not for the original XBox launching with Halo?
With all this talk about the direction Microsoft must take with its next-gen strategy, it seems as though the answer to their dilemma is as simple as spending the money in the right places. Is it really that obvious? Though the issue of embracing the needs of the core gamer while still supporting the casual gaming strategy is a complex one, analyzing it and understanding it presents that simple solution. During the second half of the current generation of consoles, Microsoft made a significant shift in its business strategy, requiring an equally significant shift in financial allocations. The move paid off, but Microsoft is starting to feel the initial repercussions of that change. When compared to the PlayStation 3, the XBox 360’s list of core exclusives falls far short – a fact that has not gone unnoticed amongst gamers.
With the next generation of consoles dropping at the end of this year, it would be an excellent opportunity for Microsoft to implement this new core-focused strategy. With very little effort, Microsoft can keep the casual customer in the fold. The Kinect, along with a few casual titles here and there will be enough to keep them satiated. With that said, the priorities must shift, placing the focus back on the core gamer. As that focus shifts, Microsoft must be prepared to offer that customer unique, high-quality gaming experiences that cannot be found on other consoles. It’s no coincidence that the PlayStation 4 announcement was highlighted by a slew of core-focused games, including exclusive titles such as Killzone: Shadow Fall, inFAMOUS: Second Son, and DriveClub. Sony has thrown down the next-gen gauntlet and Microsoft must respond convincingly.
I am admittedly a fan of Microsoft and I have loved the past seven years with my XBox 360. However, I am not blind to the current trend in the industry and it is time for a change from Microsoft. Embrace the core gamer – the customer who has supported the business since its inception. Invest in the customer who will still be buying your product in six or seven years when we are discussing the launch of yet another generation of consoles.