Microsoft’s shaky Xbox holiday strategy

At a glance, Microsoft had a decent E3. Their presser showcased a huge number of quality games, solid genre diversity, and decent pacing. Xbox head Phil Spencer remains a great ambassador for the brand. And the Xbox One X looks to be an engineering marvel, a cutting edge console in a svelte enclosure.

But Xbox doesn’t exist in isolation. Sony is well ahead in mindshare and sales. Nintendo surprised many (myself included) with the runaway success of the Switch. With E3 over, Microsoft has two chief questions to answer. Why should anyone buy an Xbox One X? And why invest in Xbox over the PS4?

Sadly, Microsoft stumbled on both questions. Like I wrote earlier, by leaning so heavily on 4K, Microsoft has put themselves into a weak position for the holidays.

Xbox One X’s niche market

Microsoft failed to hype the Xbox One X beyond its 4K capabilities. We saw more in the margins; offhand references to faster load times and supersampling for 1080p screens. But Xbox primarily hit the 4K drumbeat. Shoutouts to “true 4K” were so common in Microsoft’s E3 presser that the hype machine verged into self parody.

Granted, Microsoft understands where technology is heading; 4K is the future. 4K capable sets are reaching the price point where it’s a default choice for a replacement TV. And streaming services have made 4K content commonplace.

But the 4K market is still small, and isn’t a differentiator from what Sony offers. The PS4 Pro may on all counts be a less powerful 4K box, but it’s also $100 cheaper. The 2:1 network advantage enjoyed by PS4 will incentivize many customers to stick with Sony.

It’s disappointing Microsoft failed to diversify their Xbox One X pitch. They had many options:

  • Price. A $399 or $449 price would have been a gamble; I understand Microsoft’s trepidation. Yet when looking at the console market, price is a huge selling point. Matching the PS4 Pro’s price generates a powerful message: Xbox has more powerful hardware for the same price.
  • Higher frames per second. Xbox One X likely has the horsepower to push many otherwise 30fps games to the more fluid 60fps. Fps has a direct effect on gameplay and player control, making it easier to digest. It’s also democratic – you don’t need a 4K TV set to enjoy its benefits.
  • Other graphical enhancements. Xbox One X enhanced titles will have bumps beyond raw resolution like higher texture quality, antialiasing, and draw distance. Like fps, it benefits all players. It’s also possible to illustrate with a side by side comparison.
  • VR/AR. VR/AR requires serious horsepower; the Xbox One X would be more capable than any other console. VR’s isn’t assured mainstream success, but with the competition picking up the slack, it felt inevitable Xbox would join in as well. The lack of even a cursory partnership was surprising.
  • Windows PC. Given Xbox One’s Windows underpinnings, Microsoft could reconfigure the console to run standard Windows 10 apps. The process transforms Xbox One into a true Windows PC for the living room. It’s a power user only feature, and it’s unlikely Microsoft would ever allow Steam on their console to cannibalize software sales. Yet it greatly expands the console’s potential.

Xbox’s larger exclusivity problem

Microsoft has a bigger problem than selling its premium hardware: a lack of first party exclusives. Xbox only has three of note through the holidays: Forza Motorsport 7, Crackdown 3, and Playerunknown’s Battlegrounds. Forza will play great but is a known quantity; Sony will be able to counter with Gran Turismo Sport. Crackdown 3 looks undercooked and may fly under the radar. Battlegrounds is a legit get but the holiday season will be overrun with premium first person shooters.

Admittedly, Sony has a weak 2017 exclusive lineup as well. A minor key sequel (Uncharted: The Lost Legacy) and a racing game with a storied legacy but questionable future (Gran Turismo Sport) are unlikely to move systems. Yet it matches Xbox toe to toe this year.

And for gamers looking for exclusives after 2017 the story gets worse for Microsoft. Sony’s E3 presser, while anemic, underlined heavy hitters for 2018 and beyond, from God of War to Spiderman and Death Stranding. Xbox currently only has Sea of Thieves and an inevitable Gears and Halo sequel, both long in the tooth franchises.

Microsoft’s endgame for relevance

Xbox leadership isn’t stupid; given the PS4 sales advantage, the battle now is for a strong second place this generation. Steady sales boost Microsoft’s bottom line and Windows 10’s profile. As Phil Spencer has said many times, as long as you’re running Windows and buying games, they’re happy.

But there’s a fine line between second place and fading into irrelevance. And Microsoft can’t hit the reset button as early as they’d like; the long tail could be especially long this generation. The recent incremental console release should sustain the PS4/Xbox One library for a while. Combine that with 2017 looking like a slower, transitional year and the ground game suggests PS4’s momentum will continue.

I fear we could be at the point of no return soon. If Xbox sales slow, Sony could get complacent. Dedicated consoles may no longer be a worthwhile investment for Microsoft. As someone who wants innovation and competition in the console space, that’s worrisome news.