DEBATE: On the Xbox One and Microsoft’s Console Future

Friday, June 7th, 2013

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Microsoft Xbox One Debate

Welcome to our latest debate. This is the second half of a debate between Jeff Neuenschwander, co-Editorial Head and author of the Jeff’s Musings opinion series, and Guy Rainey, Assistant Editor and author of the Pretentious Opinionist opinion series.

The basic rules are the same as with the used game fee debate. First, each contributor will get to make a statement of up to 400 words. Second, after each statement, there will be a cross-examination period where the opposition can ask the contributor up to five questions. Third, and most important, there will be no fighting, name calling, or degrading language of any kind toward an opponent, and each contributor will treat the other with respect.

TODAY’S TOPIC: The backlash against the reveal of the Xbox One and the subsequent interviews afterward was rather massive, with some gamers calling for an all-out boycott of Xbox products. If this boycott is successful, it could significantly lower the units sold from the Xbox 360’s 77 million. If the Xbox One fails, will Microsoft continue to make consoles?



JEFF: My dad has always said that Microsoft makes game consoles just to show that they can. And frankly, if you look at the financials, it’s hard to argue against him.

From the very beginning, the Xbox brand has been a vanity project for Microsoft. They took a massive loss on the first console and kept going. It wasn’t until the second half of the Xbox 360’s life span that they started to make a profit on their gaming division. To me, it was just a status symbol and a way for Bill Gates to give a giant middle finger to Steve Jobs and Apple.

What even constitutes failure for a console? The GameCube could only muster 21 million in sales but was still able to make some money for Nintendo. The Xbox sold more than the GameCube but lost hundreds of millions in that generation. Clearly, you could make a case for either one being a failure (or both, for that matter), but it’s all a matter of how you look at it.

Frankly, it would take bigger losses than they had with the Xbox for Microsoft to bow out after the Xbox One. There are three reasons why I believe this. One: the status symbol of being one of the big console makers. The other two: Windows and Office. These last two still have the biggest market share in their respective markets. And Microsoft makes money hand over fist with them through yearly licenses that people pay for. So, even with a massive loss, they can still tap into their Windows and Office money to cover their losses.

However, if they keep with what appear to be their current plans, the Xbox One may end up being one of those Sega consoles between the Genesis and the Dreamcast. It would be the start of the downfall of the Xbox brand, but not the end. It could very well be their Saturn, since Microsoft’s Genesis (the Xbox 360) has already started to gather ill will for things like charging people just to use pay-to-play apps like Netflix and having no self-publishing on Xbox Live, similar to Sega and their poor add-ons in the 1990s.

It will not be the final console for Microsoft. However, it could be their penultimate console.



GUY: Is having a console that is losing to everything a good status symbol? That seems to be the reason the GameCube is considered a failure, and why the PS3 was considered a failure for so long.

JEFF: Perhaps not, but being a console maker is what will drive them for one more generation. If they have any dignity, if the Xbox One bottoms out, they will make one last push for relevance in the video game industry (and perhaps drop some of the ludicrous aspects of the One).

We’ve seen it at least three times before in the industry with the Jaguar, the Dreamcast, and the Wii. All came after consoles that were considered dismal when it came to sales. Now, two did fail, but knowing that one succeeded (the Wii) will be the driving force that gets Microsoft into the 9th generation.

GUY: What if the console sells 10 million or fewer? Do you think they would have the arrogance to continue?

JEFF: Well, we are talking about Microsoft. They are trying to make your friend buy a game when you’re just trying to let him borrow it for a few days.

For me, they would have to sell worse than the Atari 7800 (3.77 million) for them to even consider stepping out. They won’t back out quietly. And they won’t sell worse than the 7800.



GUY: This is a very interesting question. No doubt Microsoft could make a new console if it so chooses. After all, this is a company that came back for a second round after losing hundreds of millions of dollars on the original Xbox. But would they? I’m not so sure.

Let’s first define a failure. I think if the console sells 30 million units or fewer in its lifetime, it will be a complete failure. Okay, now that that’s established, let’s talk about Microsoft’s grand strategy for the Xbox One.

Microsoft is finally doubling down on a concept that was there from the beginning: making the Xbox an all-in-one entertainment hub. This is what the Xbox 360 has been trying to be for the last 5 years, and that’s what the Xbox One announcement was all about. If this fails, what incentive will Microsoft shareholders have to support another one? At least with the first Xbox, they could say, “Look, we simply weren’t able to make the media box we intended, so give us another chance.”

Now that the 360 has been pretty successful overall, of course they were going to green-light another one. But if this media hub idea completely fails to attract consumers, if the whole grand vision of the Xbox brand turns out to be the wrong bet, why would shareholders allow Microsoft to try again? If stock prices plummet, Microsoft will need to listen to its shareholders, and by that point, consoles (at least those not made by Nintendo) may well be dead. So why bother?



JEFF: But what if the losses aren’t that deep, even with a number like 30 million? Do you think they could offset those losses with the money they get from Windows and Office licenses?

GUY: They could, but why would they want to? They are banking on riding Netflix, Hulu, and all the rest with mandatory Xbox Live Gold subscriptions. In other words, they want to profit off of other services through their system. With TVs, Blu-ray players, and the competing consoles now offering the same services for free, why should customers pay for Xbox Live? Xbox Live subscriptions have printed money for Microsoft for the past decade, and they probably think they will continue to. If they don’t, what incentive will they have to try again?

JEFF: But isn’t that assuming that all those people are informed about the other consoles? How informed do you believe the average console buyer is?

GUY: I suspect Sony will match the media capabilities of the Xbox One, for the most part. They haven’t announced plans like that because for now, they want to focus on the gamer. Come the holiday season, both Sony and Microsoft will heavily promote their products. Microsoft will bill its product as it has thus far: as a media box. All Sony would have to say is, “We can do that, too, but for free.”

Plus, I wouldn’t count out children here. If every child who owns an Xbox 360 sees that they won’t be able to borrow games from their friends, they’ll ask for a PlayStation 4 (which, at the moment, seems to support that, though we’ll see). I also wouldn’t count out news outlets looking for Orwellian technology horror stories to exploit.

JEFF: Funny that you bring up the media. Most of the mainstream media was touting Tuesday, May 21st, as a great day for gamers. (This was Tuesday night, mind you, when the confusion was at its highest.) Would mainstream media actually care about something they see as little more than a hobby for kids?

GUY: If they thought such a story could bring in more viewers or readers. As human beings, there’s something compelling about bad news. That’s why I feverishly pore over news items regarding the train wreck that has thus far been the PlayStation Vita and pick up every Big Brother tidbit released about the Xbox One. Other than that, I can’t say for certain.

JEFF: Hypothetical situation: what if the economy collapses, and the Xbox One doesn’t get to 30 million but still has a pretty good market share? Would that be considered enough of a failure for Microsoft to stop making consoles?

GUY: If the economy collapses, I think we’ll have more to deal with than game consoles. The problem with that scenario is the One will (likely) be a very expensive machine to make. People assume that a new generation brings new technology. If, to save costs, the successor used much of the same tech that’s in the One, people would skip it, even if the graphics were still outstanding (as they are now. We don’t need a new generation, in my opinion; we just need fresh ideas).


What’s your opinion? Leave a comment below.