Exclusive no more: Inside Xbox’s rationale for a new gaming paradigm

Filling the void on the topic of the business of games, Microsoft gaming CEO Phil Spencer argues why the current economics aren't stacking up.

It’s the ultimate ode to excess in gaming: Buying a near $1000 gaming console to play just one game.

But it’s a thought I’ve had about the new Xbox a number of times of the past few years. The latest reoccurrence of it was six months ago with the release of Bethesda’s space epic Starfield. But if you can’t tell from the past few posts, I’m a budget conscious gamer. I couldn’t shake that feeling of waste. 

Well, many gamers like me who don’t own an Xbox got some good news at the start of the year. The company is actively investigating making its ‘exclusive’ games available on other consoles and systems. 

No Xbox, no problems says Microsoft with its Cloud Gaming plans.

To explain: much like Netflix and Disney+ with their own platform-only TV shows, gaming companies either develop their own games for their consoles, commission publishers via distribution deals where they only release on one console at a time.

The logic for this is that gaming consoles are typically sold to consumers at a loss to the companies creating them. They generally make their money back on software over the life of the console. Nintendo is the exception to this, which attempts to make money on both the console and its titles, part of the reason its consoles are generally less powerful than its competitors.

All of this making Phil Spencer — CEO of gaming at Microsoft — perhaps one of the gaming industry’s most interesting figures at the moment. 

He’s attempting to change how the industry thinks about exclusive titles, and is filling a communications void created by a dealing silence on the matter from both Sony and Nintendo.

Xbox is arguably under more pressure to justify and communicate simply avoid as being seen as a drag of Microsoft’s overall business. It also doesn’t help that Microsoft is primarily US-based along with the majority of the high-profile gaming press. 

At the Game Developers conference last month, Spencer went into more details arguing why video game exclusivity is killing the sector. To summarise his four key points:

• Premium games are more costly to produce than ever before. You only need to look at the burgeoning number of credits tied to each title and the length from development to release to get a sense of this. Final Fantasy 7 Rebirth credited over 3000 people in its development, the original 1997 Final Fantasy 7 game credited just over 400.
  
  Because of this, game studios are less willing to take risk on new IP. If it flops, the game publisher ends up wearing quite a large cost. We’re also seeing a Hollywood-style effect play out where most new games are actually reboots of older more successful ones. 
  

• Spencer also contends that the gaming console market has peaked. The number of consumers buying gaming consoles hasn’t increased, each gaming company is going after the same pool of console-based players. This lines up with analysis earlier this year from Data.AI and NewZoo. Gaming analyst Matthew Ball says the sector only grew 1% last year, which is slower than inflation. 
  

• You can mitigate this risk of new IP by ensuring each title is playable by as many gamers as possible. This means removing console exclusivity — and likely exploring new means of distributing games.

There’s actually five: The other point that Spencer isn’t making as prominently is that per the competition-based legal rulings in the EU with its recent game company acquisitions (namely, Blizzard / Activation) it is actually legally obligated in some cases to release a few of its most popular games on other platforms.

It’s all pretty logical, but that hasn’t stopped loyal Xbox gamers from seeing red over this idea. Many of whom bought Xbox consoles for years on the basis of exclusive titles and brand loyalty. The company’s now towing a line of essentially giving them first dibs on new games for a year or so on their platform, but then pushing it out to other consoles when sales die down to maximise impact. If Spencer can convince the Xbox faithful, it would get more bang-for-buck in terms of maximising marketing spend and sales with one big universal launch. This may be the end goal.

One point that’s been overlooked: While Xbox may be rolling the communications on this strategy now, it’s been running it in stealth for the past few years.

One example: Xbox’s Cloud Gaming service has crept onto a myriad of devices. You already don’t need to own an Xbox to play “Xbox-only” games on release. Even now, I’d wager you already own one that can access it.

However, it’s telling that years after release, Xbox GamePass on Samsung TVs is still in beta — a fact that’s prominently displayed every time you boot up a game. 

The big question: Will this all lead to an era where you can play anything on any device? Maybe.

Sony would be the most receptive to this, given the lukewarm performance of its PS5 console and the increased costs it’s seeing in developing titles for it.

Nintendo however, will likely want to see what happens with its next device before seeing Mario and crew move onto any other platform. It only considered putting them on mobile phones in response to lacklustre Wii U sales.

What makes this approach so fascinating and risky is that the only thing it may do is stop cold future sales of Xbox consoles. If spending nearly $1000 on a new device seemed excessive before, it now feels dumb. 

Turns out I don’t need to chase new games anymore, even ones I don’t have the hardware to play. If I wait long enough, all of them will come to me.