Everybody missed the point of the Showcase. Microsoft’s gaming business plan is not dependent on next gen console sales or even solely on GamePass (which is what smarter bloggers have been saying). It’s based on services for gamers, studios, publishers, and even Sony and Nintendo : xbox

TL,DR: Microsoft’s business plan isn’t Sony’s or Nintendo’s. Nor is it just about GamePass. It’s bigger than that. And it’s wildly lucrative

Let’s start with where Microsoft’s gaming revenue is gonna come from. In no order, they include, and perhaps are not limited to:

1. GamePass. With 10 million users it’s already a $1B/year business without even counting hardware sales. At $120/yr, GamePass pulls in twice the revenue Xbox Live did. Let that sink in

2. Azure. That’s what PSN and PlayStation Now will be running on. Sony can’t stream or serve a single bit without paying Microsoft. Ditto Nintendo. That revenue won’t show up under the Xbox division in quarterly reports, but it will be there anyway

3. Game sales

4. Hardware sales

Here are some arguments I’ve seen, and my counterarguments to them:

A) Microsoft didn’t make the case for the XSX/Microsoft “bungled” their cross-gen messaging

I combined the above because they’re 2 sides of the same coin. If Microsoft presented the XSX as something gamers needed to buy to experience upcoming games, then it would have made the X1 truly irrelevant. The cross-gen messaging in XGS, which so far no one seems to have been able to read between the lines, is not that new games will support multiple generations, but that they can easily do so with minimal development effort. That’s why no game features exclusive to the XSX were shown off. The moment Microsoft shows those, the entire X1 line goes up in smoke. This isn’t a bug, it’s a feature.

Now, it’s true that some official Microsoft statements have implied cross-gen support was a given, but I think like many things there’s often a gap between marketing and reality and it’s left to the buyer to sift the wheat from the chaff. If you’re upset about that, ask yourself this: if you really care that much about previous gen support, then why are you following XSX news? XSX shouldn’t matter then. If XSX does matter, then that must be because previous gens are less important than it. Both possibilities can’t simultaneously be true, which is how it’s obvious MSFT’s previous statements were just fluff.

B) The exclusives thing

Microsoft has said multiple times that this isn’t what they’re about. Microsoft is neither a content nor a showmanship company and never will be. That’s why they got out of the music streaming business and the Microsoft movie/TV store is basically available on Xbox and PC only where barely anyone realizes it exists. It’s not in their DNA. Expecting that from them makes as much sense as expecting your grandfather’s cardiologist to suit up and start for the Cowboys on Sunday. And no, it doesn’t matter that they bought studios. The cardiologist doesn’t become Tom Brady because he bought pads and cleats.

Microsoft’s real exclusive is Azure: the cloud infrastructure it’s 2 main competitors quite literally depend on. More on that in a bit.

C) But Halo’s graphics were terrible!

Halo is transitioning from a standalone release, where software goes “gold”, to a service model, where software is released early and often. The fact that there are a gazillion people angry at Fortnite and Warzone bugs and Destiny exploits hasn’t prevented those games from become huge hits. If Halo even looks noticably worse but is far less frustrating, then Microsoft could have something on their hands. Besides, as PS5 teraflops and Nintendo apologists will tell you, graphics aren’t everything. Right?

D) So what’s the point of Xbox then?

Xbox is reference hardware. That’s why the XSX is simply a more powerful X1X and also why the Xbox controller has none of the DualShock 5’s trick features. It’s also where ID@Xbox comes in. Microsoft wants studios to target Xbox and/or PC (preferably “and”, thanks to DirectX 12 Ultimate) 1st via ease of development and publishing. Or they can target PlayStation and come to Xbox later (more on that below.) Because all available Xboxes are more or less powerful versions of each other, devs are free to go as big or small as they want. If a studio can’t afford AAA production, they can do something small that runs easily on an X1S, and it’ll still be playable by anything in the lineup. If they wanna go big, the XSX is there for that with all the horsepower to show studios just how good their games could perform. Again, reference hardware. Midrange? X1X or XSS. Even if the lower Xbox SKUs aren’t specifically targeted, they could be covered via xCloud.

Publishers can leverage Smart Delivery for the above and also to make their offerings more attractive for consumers (1 game purchase covers all Xboxes) while doing so.

Oh yeah, and actual backwards compatibility.

OK, so what?

Well, Microsoft doesn’t really care about keeping devs exclusively on Xbox after that happens. Why? See revenue source number 2.

Microsoft actually wants devs to port their games to PlayStation and Nintendo because they make 3 sales for the same game: they get the sale on Xbox and the cloud revenue from Sony and/or Nintendo!

Again, because the Xbox hardware has no trick features, everything developed for Xbox is easily portable to other platforms! This is why you see Xbox execs congratulating Sony on God of War and not firing back at Sony’s “SSDs make games run faster” nonsense or harping on the fact that the “revolutionary” game scene Sony showed off would run just fine on an RTX 2070. Sony is now one of their biggest cash cows. This is also why Microsoft would love for Sony and Nintendo to adopt GamePass: more cloud revenue. Not surprisingly, Sony and Nintento also realize that, which is why they’ve declined. As far as they’re concerned, they’re probably paying their competitor enough already. Can’t blame them.

For the devs who start on PlayStation first, the allure of Xbox is GamePass + xCloud + the ability to target multiple generations with the same code, all of which does a lot for smaller productions thanks to the long tail effect.

E) But where was the gameplay?

Again, reference hardware. If you wanna see Xbox gameplay just combine the best graphics you saw in the showcase with the gameplay for cross-platform titles you may have seen elsewhere. There’s unlikely be anything “OMG” about Xbox versions of games besides them looking better and running at a higher framerate. Every “industy insider”/blogger/podcaster/”YouTube personality” from Phoenix, Arizona to Thomasville, Georgia will dog them for this, because it’s easy content. “Did Microsoft Screw up Xbox AGAIN? 😱😱😱” = 2M views and 15K comments. Again, it’s a feature, not a bug: see A) above.

F) But why would Microsoft spend all that money on xCloud if they don’t care about Xbox sales?

Because Xboxes aren’t the only xCloud clients. The service will also cover phones, and it looks like Samsung is about to make a major push in that direction. Considering the positive effects of the Note9/Fortnite promo, this should see similar success.

G) So why should I buy an Xbox?

Speaking for myself only, I’ll most likely get one because I like the fact that I can get 2 TB storage at launch (assuming the Seagate expansion SSD is available.) Why should you? If you don’t want to, then don’t! It’s really as simple as that. This post is not an attempt to convince anyone to buy an Xbox, and neither was the Showcase, by most accounts. I plan on getting a PS5 too. I might even get that 1st if the expansion storage is available and the price is right. Microsoft’s gaming business plan is literally designed to make Xbox sales numbers largely irrelevant. When they stopped reporting numbers, it wasn’t because they were trying to hide anything, but rather because Xbox hardware sales only matter in internet arguments and in bloggers’ heads, not to Microsoft’s balance sheet, and Microsoft was willing to take a small early L to get investors used to that and secure the cloud bag later. Smart move.

Sony and Nintendo’s strategies are easier to understand – sell more games and consoles, make more money – which is why so many just naively apply them to Microsoft. But if you do that, you miss the entire point. You’ll also miss Microsoft laughing all the way to the bank.

Buy the console you want, or buy them all! Have fun!