Microsoft is in the process of unleashing a powerful new weapon in the console wars, and it’s something that may be an important factor in the ongoing battle for market share against Sony. The idea, announced last year at the Game Developers Conference, is simple: buy a game on the Xbox One, get the Windows 10 PC version for free. This has been intended as an optional plan for publishers, and now one of Microsoft’s most highly anticipated Xbox One games, Quantum Break, has been announced as part of this cross-buy program.
It’s a daring move that, for some Xbox One owners, was problematic. A few gamers were annoyed that Microsoft was no longer making the game exclusive to the Xbox One. Xbox head Phil Spencer was responsive on Twitter, albeit incredulous that someone would be annoyed because another person gets to play a game. That minor issue will no doubt be quickly forgotten as the larger benefits of Microsoft’s plan begin to be felt.
@The_CrapGamer You cancelled a pre-order for a game you want to play because someone else get's to play the game on Windows?
— Phil Spencer (@XboxP3) February 11, 2016
At first glance, this might look like a problem for the Xbox One by reducing the number of exclusives for the hardware, and thus reducing the reasons for someone to buy the Xbox One. Phil Spencer was quick to point out a key reason against this: “High end PC gaming rigs aren’t the price of a console. People play on console because they love that experience, same for PC,” Spencer said on Twitter. Just so – getting a powerful gaming rig for $350 in the form of an Xbox One is a good deal, all the more so since fewer people are buying desktop PCs these days. Laptops, tablets and phones are handling more and more everyday computing tasks for people, and none of those play games like an Xbox One.
The more important reason why this cross-buy program is good becomes clearer when you look at Microsoft’s overall strategy. “Under the auspices of CEO Satya Nadella, Microsoft has shifted its focus away from trying to strong-arm competitors out of the market, and towards a future of providing apps and services on the iPhones, Android phones, and Macs that they already love using,” said Matt Weinberger in a recent Business Insider article.
Microsoft benefits by making its games more broadly available, and boosting the subscription revenue it’s getting from Xbox Live. The Xbox is being put more firmly into the overall family of Microsoft products and services, and that’s a good thing. Microsoft is not as concerned over the number of hardware units it sells as it is over the number of subscribers it has to various services. The software and the service is more important than the hardware, and we’re just seeing that principle applied to consoles.
Microsoft would like Xbox Live to be the most important thing for customers, because that’s a service you pay for year after year, long after you’ve purchased the hardware. And there’s more margin there, and potential for upselling to other digital products and services. Eventually, you’ll probably be seeing Xbox Live on other hardware than Xbox consoles.
With the Microsoft Cross-Buy program, exciting games like Quantum Break will not only help sell Xbox One consoles, they’ll help bring more excitement to Windows 10 as a gaming platform. Looked at another way, it expands the market from about 20 million Xbox One consoles to the over 200 million Windows 10 devices, which suddenly makes the PlayStation 4 market look small (at less than 40 million).
Market size is important, not just because it influences where publishers decide to invest resources. Many multiplayer games get better when the pool of players is larger, because finding balanced matches happens more swiftly. And, of course, the revenue potential for selling virtual goods and other DLC is much higher when the market is larger.
This also helps broaden the appeal of future Microsoft products and services. When the HoloLens finally becomes available, as a Windows 10 device it will automatically be both a business/enterprise device and a gaming accessory. This neatly avoids the issues surrounding the original Kinect, which took forever to get a Windows version and then never caught on in the business side of things. Now future devices will have the largest possible market to find success in, because the consoles are much more tightly integrated with the PC side of things.
Sony has also been signing up some exclusives on both PC and PlayStation 4, such as the highly anticipated No Man’s Sky. Yet, Sony’s plan appears to still center around the PlayStation ecosystem, which has been expanding with PlayStation Now, the PlayStation Network, and the upcoming PlayStation VR. Sony doesn’t have to support a broader ecosystem, but instead seems to be adding as much value as it can to its ever-stronger game brand. Many observers and analysts feel that Sony’s VR entry, PlayStation VR, will have a strong bid for market share with tens of millions of people already owning the hardware needed to drive the VR headset (a PlayStation 4) without the need to buy a new PC.
Don’t forget, that Microsoft has a strong position in the VR market, even without its own hardware. The Oculus Rift comes with an Xbox One controller to drive it, and you’ll need a powerful Windows PC to power the headset. The other high-end VR device, the HTC Vive, also runs from a powerful Windows PC. Will Microsoft take advantage of these VR connections? You’d better believe it. Nothing’s been announced, but at the very least you’d expect Microsoft to tout the fact that its software is behind two of the most powerful VR systems on the market. Beyond that, we may see some other marketing or product or service initiatives as well, especially as the market unfolds this year.
Microsoft will definitely be pushing more of its own titles into the cross-buy program, and will continue to encourage other publishers to take advantage of it as well. It makes good sense for game publishers to expand their market, and many are already planning PC versions of their games. The key sticking point would be the possibility of reduced revenue, but it doesn’t seem very likely that people would buy both a version for an Xbox One and a PC version. You’re not losing a sale by giving a buyer both copies; you’re creating a more satisfied customer. That, in the end, should prove more valuable to Microsoft.