Microsoft might have considered leaving the gaming market if Game Pass didn’t succeed

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2023-09-21 08:28:00

In context: Game Pass and other hardware-agnostic services have become the core of Microsoft’s gaming strategy, but the company’s recent documents leak suggests Microsoft is betting Xbox’s entire future on the strategy. It’s unclear how critical Microsoft’s situation truly is or if its comments are another attempt to play the little guy amid its court battle with the FTC.

A new revelation from the major leak of FTC v. Microsoft court documents indicates that the company has at least considered leaving the gaming market if its Game Pass subscriber base can’t grow enough in the next few years. Throughout regulatory hearings, Microsoft has often described its console as a losing competitor.

According to the document, FTC lawyer James Weingarten asked Xbox boss Phil Spencer about an internal Microsoft graphic projecting that Game Pass could reach over 100 million subscribers by 2030. Spencer called the chart a pessimistic projection, suggesting the company might reorient its strategy if it doesn’t achieve that milestone by fiscal year 2026 or 2027. A Microsoft LinkedIn profile recently noted that Game Pass currently has 30 million users, but this week, Microsoft amended the account and reiterated the 25 million figure from last year.

Furthermore, the graph shows that most Game Pass customers use the service on Xbox, but Spencer said the company’s current direction depends on growing the proportion of PC and cloud users much more quickly than depicted. The strategy would align with Microsoft’s plans to encourage playing games across numerous devices.

“I do not believe that that is what the future Xbox business would look like. This is a presentation from our devices organization to the gaming leadership team, so this is the view from the team that is chartered with building our hardware on what the future business would look like,” said Spencer. “I can fairly safely say that if we do not make more progress than this off of console, we would exit the gaming business. If this were the outcome, we would – I don’t believe we’d still be in the business.”

There is a chance that Spencer is exaggerating, as multiple statements from the court proceedings seem designed to make the company’s position in the gaming market appear weak. Microsoft is trying to convince regulators that its attempted $69 billion purchase of Activision Blizzard won’t give it an unfair advantage on the console and cloud gaming businesses.

The company previously admitted that it has “lost” the console wars because Xbox sales put it in third place behind PlayStation and the Nintendo Switch. Additionally, Microsoft pledged to keep Call of Duty – a central focus behind regulatory pushback – on non-Microsoft platforms because keeping it exclusive to Xbox would lose the company money. The UK’s CMA is likely the final obstacle facing the acquisition.

Other information from the leak includes Microsoft’s plans for future consoles, confirming its dedication to staying in the race. However, Spencer said the company’s plans have evolved since the documents were created in 2022 and earlier.

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