Evo sta je insajder SneakersSO pisao na GAF-u u zadnjih par dana [od cetvrtka do juce], on je ocigledno unutar MS-a i u zadnjih par godina je pre javnih objava prvi pricao o dolasku xbox multiplat igara, o stanju cancelovanih projekata [sto je Shrier potvrdio, uz komentar da Sneakers zna sta prica].
Q: What do you think they're aiming to achieve with these new console-exclusive games? What's their goal?
SneakersSO: The real answer? They want to maintain enthusiasm within the core Xbox fanbase to ensure at least 10-25m of them wind up buying a Helix over the next 2 years after launch, so that way it at least can not be an absolute financial crater. At least, thats what the intention was when the exclusive decision was made. Things are moving very quickly as the reality of MS' current situation sets in. Expect more insane last-minute shake ups.
Q: What do you think the end result will be?
SneakersSO: They become a full-fledged 3rd party publisher with a subscription service (GamePass) that has a curated set of games, as well as their own offerings, with no Day 1 releases anymore. But we have a long, stupid, and painful road to go down before they ultimately decide to abruptly do that.
From what I know, theres just no real avenue they can go down that will actually take them to where fans want them (for the sake of brevity, lets just say that is 360-era Xbox), and the leeway they have to hit their target is far shorter than anyone in the public sphere realizes, but hopefully now that this complete about-face mere days since their press conference will at least break the illusion somewhat.
Theres a lot that can be said on the matter, and how their haphazard decision making since she came in has made things considerably worse on almost every front. The reality is, shes a mid-30s modern exec who models herself after the Sam Altmans and Elon Musks of the worlds - loads to say with very little substance to back it up, and a very limited understanding of the business she is working in.
Lets just go over hardware, because she decided going in that this was the area in most need of improvement, it was the area Nadella wanted to focus on given that they had contracts with AMD that were going to need to be delivered and they didn't want to go in facing the hardware headwinds they'd been facing. The problem is, the Helix is Bond and Spencer's machine. Sure, they are going to revert some choices on the open-storefront nature of it (this is causing a big mess) but this thing was never designed to be a mass-market machine. They weren't planning on making a ton of these and shipping it en masse to a WW scale. The original plan for the console that would later be known as Project Helix was to serve as an OEM baseline, with a limited amount of shipments by MS into their strongest regions, while creating a non-HW focused ecosystem for themselves.
Asha's coming in and trying to take this device and use it to do something it was never intended to do. But moreover, the problem with Xbox HW has not been the console, and this is something almost no one ever brings up. During the PS4/X1 generation, the X1 still sold comparably to the PS4 in the US/NA and UK. Where they largely receded was Japan, which the XSS|X has done better in (although a far cry from the 360) and most-importantly Europe, but this was a problem of MS' own making. Instead of curating publishing deals with partners in those regions that could help move HW, working with local distributors and marketing groups to help bolster the Xbox and its brand, they just kept closing regional offices, outsourcing the work to 3rd party marketing groups in those regions, and basically folded up their own distribution network. Heck, they aren't even trying to increase shipments of Xbox Series consoles - restarting their supply chain for that machine would be extremely expensive at this late stage, and they just don't want to absorb that cost while also trying to get their ducks in a row for a new HW launch, and even if they did massively increase shipments - they have a ton of supply that is going unsold as is. Bell can twist whatever stat he wants regarding supply & demand, but the reason they stopped shipping to large regions and retailers began dropping Xbox, even in NA, was due to demand dropping. They're making Gears exclusive, while not trying to ship more HW on a global scale to even begin capitalize on it, and thats before we even broach the topic of how PC-releases have been the primary undermining force for the value proposition of Xbox HW, not PS5 releases.
This is why all of this is just talk; you can't sit there and say you're bringing back exclusives, which yes - exclusives can help move HW numbers - but if you're not putting that HW into markets where you're not really available in, and putting projects that could entice users in that region to adopt the machine, then you're never really going to get growth in the markets that turned their back on you. Until MS gets serious about shipping hardware globally, their fortunes on hardware are simply never going to turn around. Exclusives are one piece of the puzzle - an important one, but nowhere near the only one.
Q: What do you foresee being the result of these layoffs? We're getting word that we're looking at about 1,000 of them.
SneakersSO: Studios will be closed, some teams will get folded into other studios as support staff for their big tentpole or just development support in general.
Q: How did she get this gig? Now that the dust has settled and people are slowly realizing that these two exclusives do nothing when 90% of their games are day and date.
SneakersSO: The issue with exclusives is not volume. If Microsoft made 100% of their games that aren't Bethesda or ATVI Xbox Console Exclusive, it still wouldn't turn the HW situation around one iota. PC, Steam releases day 1 in particular, has given folks the perfect avenue to completely avoid Xbox HW. The really messed up part is that they are very much aware of this, so pinning this on PS5 is doing nothing but tossing red meat to the fan boys.
Q: Based on Matt Ball's comments on the Japanese and European markets, don't count on it. He made it sound like they've given up in those regions when it comes to consoles and they'll focus more on pushing games on PC there.
Which is a bizarre plan for trying to "repair" the brand considering that one of their biggest downfalls was trashing their various networks there. Which, to me, suggests what a lot of others here assume. That "repairing" the brand isn't really the goal here. They've got some other reason for keeping Xbox on life support.
SneakersSO: This is why I said, there isn't a real desire to actually build up their console position. Its literally just lip-service for the fans. Even this talk of re-thinking what Helix will be (surprise - its turning into a closed-eco Xbox again) is completely insane simply because they are stuck with the amount of units they are going to make of it and the price tag of the machine.
Its kinda obvious what they mean when they say 're-thinking what a console is'; packaging xCloud as a digital console is going to be the play here. Which, to me, is the funniest thing in the world because its literally what Bond & Spencer were doing, just minus the 'This is an Xbox' ad campaign that they seemed to hate.
Unfortunately though, if folks just call them out and make fun of them, it'll just speed up the demise of this whole affair even faster.
Q: So what the hell is going on? If this was going on, why did they even bother with that showcase? Did the Xbox division just go rogue and put a lot of shit out there without approval from Nadella and Hood? Was that showcase put out their as an attempt to make it attractive for acquisition?!
None of this makes ANY sense. I mean good lord. But then again almost nothing with Microsoft ever makes any sense.
It's always easy to believe negative news related to Xbox, but even this seems WAYYYY too soon.
SneakersSO: The showcase is locked in way in advance. Sure, some things can change on their end in terms of pulling E-Day or a trailer from the SoP, but the GP deals and reveals were inked years ago in some cases. The showcase wouldn't have been done as a means to attract some sort of buyer because the showcase is almost entirely meant to appeal to current GP subscribers and Xbox audience folks. An outside investor wouldn't want want to see a platform holder circling wagons around a failing console. Limiting audience reach is not something outside investors are keen on.
Look, all of this shakeup, starting from what led to Spencer exiting, Project Latitude, and even bringing in Asha, has all been basesd on one thing - bad financials with no real upside. Nadella can say they are long on gaming, but money getting tight due to AI investments not paying off, a massive moneysink like gaming is one of the easiest things to restructure and cut, especially when its had some of the largest investment with nothing to show for it. Giving soundbytes to the diehard fans is easy - MS is an absolute monster when it comes to gaslighting their audience. They've been doing it a long time.
Where we are now is that the financials have to make sense, and unlike the last time this situation showed up, there is no GamePass hail mary pitch that is going to save them. You're not going to convince the higher ups that investing another $100b is going to get them anywhere, and don't even get started on the prospect for future HW.
Q: How do you read Nadella's comments on Xbox becoming sustainable after 25 years of subsidization?
Very interesting to hear about this right around the time we also hear that a spin-off is considered.
SneakersSO: How do I read it? Pretty dire. Theres an air of finality to it that just has never really been there when speaking about Xbox by Microsoft leadership.
Lets assume that the Xbox has had brief moments of profitability. What this comment suggests is that, for its entire history, all of Xbox, the brief moments one could argue was profitable/sustainable, versus the rest of it - all of it was subsidized, meaning that if Xbox had to stand on its own, it wouldn't have. And thats a harsh truth that many at Microsoft, fans of Xbox as well, have long wanted to shy away from. Instead, the promise has always been some decision now that will finally pay off someday, that there must be ever increasing amounts of investment to reach this promised land that simply has never arrived before.
When Satya says a comment like this, there is a weight of history that is on it in a way that has never really been there when speaking of Xbox. I think there was some optimism that was inherited when Sharma took over from the old guard, projections and ideas, that simply could not square with the investment that it would require, much less the accounting that was finally catching up to the entire division. It was easy to make some proclamations of support in the early days in the face of not really understanding what the finances actually were. I know for a fact the true picture of their financial situation really didn't enter the discussion until 3-4 weeks ago, maybe a touch more, and the slated layoff round predates even that (and predates Sharma even entering the picture).
I know they are under no illusion that the entirely fan-service pleasing 'exclusive' talk was nothing more a show for convention season. Already there is talk about how to reverse course on it.
There is a sustainable version of gaming at Microsoft. What studios they are, what initiatives they are, what IP they are - those are the questions MS is now answering, in regards to what they should keep above all else. Its what happens to anything that falls out of that, the unsustainable portions as it were, thats the real question.
Q: So…what happens to the digital libraries?
SneakersSO: The point they are at, no one there is even thinking about this right now.
I mean, what happened to folks who had digital music libraries via Zune? I imagine there will always be a way to access your digital library, and it'll likely be leveraged to get folks to switch to a Cloud platform.
I really do think their angle is going to be to push a non-physical console like Stadia but for xCloud.
Q: so they only started discussing the financial situation 3-4 weeks ago? 3% margin was not an issue until recent? what is this company doing? also, they knew exclusive talk was just fan service? how can they be so willing to gas light their fanbase. thats crazy to me.
SneakersSO: Okay, its not that they only started discussing the finances and returns 3-4 weeks ago, so I guess i'll explain how corporate America works in the modern age.
So, Phil Spencer goes to the higher ups and say he has a vision for a way to not only make the business sustainable, but to make it a brand new, best-in-class subscription service. Theres a catch though - in order to do this, Phil's going to need a ton of investment. More investment than Xbox has ever received, in fact. MS over the next 5 years, gives Xbox a touch over $100 billion dollars, when its all said and done.
Xbox didn't just get this money without making a case, and making promises on certain segments of this cash. For example, Xbox got $70b to buy ATVI, and they're told it will fix the massive revenue issues Xbox now faces brought on by how GamePass is eating game sales within their ecosystem. Or how a massive influx of content delivery will ensure the service's adoption and retention rate will sky rocket, so they keep writing checks to buy studios. Or how whats really killed their sales is 3rd parties getting aggressive about leaving Xbox behind, which causes Xbox to begin using investment funds and revenue for and from GamePass to start signing 3rd party GamePass deals for future games, all because 3rd parties were no longer selling in the ecosystem, so now games that used to get ported for free now are costing you money.
Now, every year, Xbox was still expecting each piece in this collection of investments to pay out. In fact, as Microsoft keep investing more money, it caused Xbox to start to try and find ways to interpret your finances & figures so that things may appear better than they actually are. They absolutely had folks within Microsoft looking at the numbers objectively, like Amy Hood, but it becomes a battle of whose opinion do you hold in higher regard for Nadella; on the one hand, Xbox is one of the most popular consumer-facing brands Microsoft has ever owned, and on the other, the investments for it have increasingly never panned out. Microsoft started imposing things like higher Accountability Margins, which isn't unreasonable btw, in order to try and guide the decision making by those higher ups at Xbox.
Where things in corporate America finally fall apart are when the folks (Nadella & Co.) funding the positions finally start doubting if the investment will every pay off. For Xbox, that never really happened fully outside of 2017. The last time it did, the whole branch almost went under, and the Game Pass pitched saved it. And if the folks who are painting rosier forecasts and projections, who have done so for a long time, get outed, and replaced by essentially foot soldiers who need to come in, take a true stock of whats going on top to bottom to make a real assessment, this is where you find yourself.
You'd be amazed at some of the incredible math they used internally to try and make things appear far better than they ever were, and for how long they've been doing it for.
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