Transcription
A few days ago, I spoke on the channel about Xbox announcing a reset. Well, this reset has arrived, and with a real bang, because a real earthquake is happening at Xbox. And this is a bit strange, because just a moment ago, Microsoft was trying to rebuild the narrative after the Xbox Games Showcase, reminding players about Gears of War Eday, Clockwork Revolution, Fable, Halo, and other big projects. Well, in recent days, we've also been talking about the new strategy announced by Zasza Szarma, who, along with Math Booti, published a very candid memo about this entire reset of the entire business. Well, and this note here is a very good starting point, because Xbox itself admitted that over the last few years, it has expanded too broadly, trying to simultaneously support subscriptions, streaming, devices, its own studios, external partners, big brands, and new IPs. And to this were added the rising costs of hardware, profitability issues, and various other problems. Well, and what can you do, Xbox decided that it couldn't go on like this. Except that since then, the situation has begun to develop at a pace that can hardly be called calm. We have reports of further layoffs, we have information about possible closures or spin-offs of some studios. We have departures of important people from Xbox Game Studios, and we have discussions about whether Xbox could be spun off as a separate entity. We also have suggestions to accelerate work on the biggest brands in its portfolio. We have the topic of advertising, new monetization models, financing purchases through payment platforms, and another round of confusion around exclusivity. We've already talked about some of these things on the channel. In short, if anyone thought that the Xbox reset would just be a nice slogan from a corporate memo, then the last few days have brought them back to earth quite quickly. Do you want to take care of your financial future? Take advantage of the opportunities of our main partner, XTB. Register with the code Grifter and receive a special course on financial management from scratch. The channel partner is Holly. Try HL Energy. A better alternative to classic energy drinks. And let's also clarify one thing right away: this is a very dynamic situation, and this material is being created now on Tuesday morning, June 16th, so some information may still be clarified, denied, or, knowing the pace of this story, escalate even further. But one thing is already visible. Microsoft has clearly stopped pretending that Xbox can continue to function according to the old model. And it is at this point that Satiavella, the CEO of Microsoft, enters the whole story, because just a few dozen hours after Asha Szarma and Matoti published their memo about the Xbox reset, Nadella appeared in a recorded conversation for The New York Times' Hard Fork podcast, and his words very clearly show what this is all about. The head of Microsoft admitted that no one can accuse the company of a lack of investment in Xbox and the gaming segment. I would argue a bit here. And for 25 years, Microsoft has pumped huge amounts of money into this brand, built hardware, bought studios, developed services, and tried to create its own place in gaming. But now, as Nadella stated, it needs to be turned into a sustainable business, and this is a very important sentence, because it sounds like an elegant corporate formula, but underneath it hides a rather brutal message. Xbox finally needs to start delivering results, not just justifying further investments with the promise that the entire ecosystem will eventually start working at full capacity. Well, and here it seems to me that it turns out that Phil Spencer was probably the biggest brake on all of this. Nadal also talked about monetization, and here a statement was made that immediately started circulating in the industry: that according to him, more monetization of Xbox games happens on YouTube today than on Microsoft itself. In other words, to put it less diplomatically, people watch, comment on, and stream, earning from Xbox games, but Microsoft is not capturing enough value from this. Well, so yes, if someone is asking in which direction this entire reset might go, the answer is starting to look increasingly unambiguous. More cost control, more emphasis on the biggest brands, and more searching for money where Microsoft might have looked too leniently until now. In short, less of a romantic vision of the ecosystem, and definitely more Excel. And I am generally against it, but in my opinion, Microsoft has already gone too far with this romanticism, and I've often said that Phil Spencer is a bit too much with his vision. And here it gets interesting, because Nadella is not just talking about games, because in the context of rising hardware prices and an increasingly difficult console market, he also drew attention to streaming. And according to him, as traditional hardware becomes more expensive and harder to sell, cloud gaming may become an increasingly important part of the puzzle for Microsoft. I don't think so, but I don't have billions in my account. E, this all fits very well with the earlier memo from Arme and Booti, that Xbox is no longer to be just a console, a service, a store, e, you know, a subscription, and a big slogan about playing everywhere, it is to be a business that earns predictably. And when the head of all of Microsoft says something like this publicly, it no longer sounds like a casual suggestion, but more like setting a direction of march. Well, okay, but if the head of all of Microsoft says publicly that Xbox needs to become a more sustainable business, then the question quickly arises, who will pay for this reset? And unfortunately, the answer is starting to look increasingly grim for some, because according to further reports, a wave of very serious discussions about layoffs, cuts, and the future of selected studios has begun behind the scenes at Xbox. And we are not talking here only about anonymous support teams or small technical departments whose names never really appear on game covers. On the list, listen, studios mentioned in reports include, among others, Compulsion Games, the creators of South of Midnight. As it turns out, it paid off for them to create this masterpiece in collaboration with Sweet Baby Ink, right? They even won the Gaming of the Year award, or something like that, right? A very prestigious award that means a lot about a given production. And they are now saying goodbye to Xbox. Double Fine, known among other things for Psychonouts, and listen, Ninja Theory, the authors of Hellblade, and the latter is particularly striking for many, because just a moment ago, a new game starring Senua was shown at the Xbox Games Showcase, and now, according to many sources, Ninja Theory and Compulsion may have already been designated for closure, although at the same time, information is appearing that some studios are trying to negotiate with Microsoft and find a way to survive outside the structures of Xbox Game Studios. I'll tell you this, if there wasn't the announcement of the third part, which was supposed to be more dynamic, I would say, it was supposed to have much more developed systems, it was supposed to have much more gameplay than the previous two parts, I wouldn't care. Now, on the one hand, I was waiting, because these games always looked and sounded wonderful, but it was a mixtape case, there was a bit more gameplay than in the mixtape, so to speak. No, well, the fact is that Hellblade was a game, the mixtape was not a game. Nevertheless, if they were to keep the same formula they had so far, a small loss, and since something new was announced, a slightly bigger loss. And interestingly, Double Fine itself responded to this whole commotion on social media in a very Double Fine way, and the studio published only a smiling emoji without any longer comment, clarification, or official statement. And it's hard to say whether this is an attempt to defuse the atmosphere, a subtle signal that the situation is not as dramatic as the leaks suggest, or perhaps just a classic "we can't say anything, so we'll post an emoji." The very fact that one such post was interpreted as a reaction to reports of possible cuts shows how nervous the entire atmosphere and situation around Xbox has become. And it must also be emphasized that at this moment, this is still a very dynamic story, and some information may still change. Some may be clarified, and some may turn out to be an element of negotiations that are currently taking place behind closed doors. But the direction is quite clear. Microsoft is clearly looking at Xbox Studios today not as a collection of creative teams that are supposed to build the brand's prestige, but as a portfolio of assets that must start fitting into a new table of costs and revenues. And it's not just about the studios themselves, because Craig Duncan and Luis Ocon are also leaving Xbox Game Studios, or from Xbox Game Studios. Duncan, the head of Rare, took over the leadership of Xbox Game Studios relatively recently, about 18 months ago, and Ocon Cononor served as Chief of Staff, a person coordinating the work of Xbox Game Studios management, and their departure at such a moment looks like another signal that this reset is not a cosmetic course correction, but a truly deep rebuilding. To all of this, Sylvane Trinal from the French service BFMTV also added his two cents, and according to his reports, employees of other teams, from Arcane Lion to Bethesda to Software, are also looking at the current situation with concern. And here, special caution must be exercised, because we are still talking about reports, not official decisions. But the very fact that such an atmosphere is said to prevail in subsequent studios shows the real scale of uncertainty. In short, not long ago, Microsoft boasted about a powerful base of its own teams, and today, part of that base may be trying to save itself from closure or seek independence. And did it turn out to be true, what I've been talking about? I've really been saying it very often lately, that we will see the breakup of large conglomerates and a return to small studios. But then I'll be proud of my prediction, [laughter] because I said that quite a long time ago. I basically said it when there was that big acquisition of various studios. I would be good. However, at the same time, one can start discussing what I said in the last gaming weekly review, when we had that podcast format, which I hope will stay with us. And my question then was, it's interesting how we'll talk about Microsoft in a year, and now these changes show that we will definitely talk in a different tone than before. And here we come to an even bigger question. Does Microsoft simply want to slim down Xbox, or perhaps rebuild how this brand functions within the company? Because according to The Information, Microsoft has been considering various scenarios regarding the future of Xbox. Among them, the spin-off of the gaming business as a separate entity, its transformation into a subsidiary belonging to Microsoft, and even the creation of a joint venture with external partners. But let's clarify one thing right away: this does not mean that Xbox will be sold tomorrow or taken out of Microsoft. No, no. According to sources, no final decision has been made on this matter yet, and the whole thing is rather one of the options being considered by Microsoft during this great reset. But the very fact that such options are on the table says a lot about the scale of the problem. And some people were arguing that everything is okay with Microsoft and Xbox, because a few years ago, Xbox was presented as one of the pillars of Microsoft's future in gaming. In entertainment. Jesus, I'm mixing up my words today. Game Pass was supposed to change the way games are consumed. The cloud was supposed to open up access to gaming without a console. The acquisition of Activision Blizzard King was supposed to strengthen the offer to a level that the competition would not be able to easily surpass or even catch up with. And now there are reports that Microsoft is considering how to organize, simplify, or at least force this entire structure to earn better. And interestingly, this is not supposed to mean any withdrawal from the biggest brands, but quite the opposite, according to the same reports, Sharma is pushing to accelerate work on the most important series in Xbox's portfolio. Primarily, we are talking here about Halo, Fallout, and The Elder Scrolls, as well as Minecraft. And this is a very clear signal that smaller, riskier projects may come under increasing pressure, but the big brands are to receive more attention, more investment, and probably significantly higher sales expectations. In short, if Xbox is to become a sustainable business, then Microsoft clearly wants to base it on things that are easily recognizable, easily sold, and easily monetized worldwide. Halo, Fallout, The Elder Scrolls, Minecraft, Call of Duty. Well, listen, this is not a noble vision of a creative ecosystem full of strange authorial projects. This is a vision of a portfolio that ceases to be an investment in the future and starts to function like a regularly working money-making machine. Well, okay, but since Xbox is to stop being solely a large investment in the future and start functioning like a regularly working money-making machine, then the obvious question arises, where does Microsoft want to look for this money? And here it gets quite scary, because on the one hand, Satia Nadella talks about the importance of game streaming in times when classic hardware is becoming more expensive. The logic is simple. If consoles become more expensive and their production becomes more difficult to make profitable, then cloud gaming may become a convenient way for Microsoft to reach people who do not want or cannot afford expensive hardware. Remember when we talked about hardware prices and said that cloud will increasingly be presented to gamers as a sensible alternative to expensive hardware? Well, here we are. But on the other hand, if Xbox is to be a more sustainable business, then streaming alone probably won't be enough. And here the topic of monetization returns. Because in recent days, Matthew Ball, the head of Xbox strategy, Chief Strategy Officer, has generated a lot of emotion. This is his official position. And in an interview with The Game Business, he spoke about advertising as one of the possible ways to lower the entry barrier for players. In other words, if someone doesn't want to pay the full price for a service or access to content, ads could theoretically help create a cheaper option. And it sounds familiar, right? Well, probably. Because streaming services have been doing this for years. The problem is that when players hear ads in games, they immediately see the worst possible scenario, and it's hard to blame them, looking at the actions of the biggest players in the gaming market. You pay for the game, you start the campaign, and before the boss fight, a spot pops up, like from a free mobile app, right? A tragedy. And this is precisely why Ball later had to clarify his words and emphasized that he was not talking about any specific Microsoft plan, and in his opinion, interrupting gameplay with ads would be a very bad idea. But does that close the topic? Well. Of course not. Because even if we're not talking about ads interrupting gameplay, we can still imagine ads in the dashboard, in the menus, in cheaper versions of services, right? With cloud streaming or other places in this entire ecosystem. And looking at Nadella's words about Xbox being too poorly monetized, it's hard to assume that Microsoft won't be testing further ways to extract value from this brand. And that's not all, because there's also another little detail that internet users found in the code of the Xbox website, and we're talking about the "buy now pay later" option, with payment support through PayPal and Klarna. And Microsoft hasn't officially announced this yet, so this matter should be treated with caution, but if such a system actually appears on the Xbox website, it would be another signal that the company is looking for ways to mitigate the increasingly high prices of hardware and services. Because if new consoles or other devices from the Xbox family are to be expensive, then spreading payments over installments may become one of Microsoft's ways to convince people that it's still worth entering the ecosystem. And in short, streaming, advertising, new service variants, deferred payments, all of this doesn't necessarily mean that tomorrow Xbox will turn into a console version of a free mobile game, but it shows the direction of thinking. If Xbox is to bring in more money, Microsoft will look for it not only in the games themselves, but in every place where another payment model, another service [music] or another layer of monetization can be added. To all of this, there is also the topic of exclusivity, which we already discussed during the Xbox Games Showcase. Well, and Microsoft reminded players then that Gears of War Eday and Clockwork Revolution will be console exclusives for Xbox. Of course, we are talking about console exclusivity, because the games are still supposed to be released on PC, so they simply won't be on PlayStation. On paper, it looked like an attempt to rebuild the platform's identity, and after years of talking about playing everywhere, in the cloud, on PCs, and an increasingly open approach to other platforms, Xbox suddenly strongly emphasized again that there are games that are to be associated with our ecosystem. However, even here, chaos emerged, because in the case of Gears of War E, reports quickly resurfaced that a PlayStation 5 version was at least considered, and according to some leaks, it might have even been in an advanced stage. And now Laker Sneaker Sneakers SO suggests that Gears might still eventually end up on PlayStation 5, although of course this is not any official information, so again something doesn't add up here. After all, we are talking about leaks. Yes. E, well, and this probably best shows what a strange place Xbox is in today, because on the one hand, the company is trying to remind that its platform is still supposed to have its own identity, and on the other hand, Microsoft as a publisher is increasingly looking at other ecosystems, because there are millions of potential customers there, and they don't know which path to simply take. And that's why, in the case of Xbox, the word "exclusive" itself less and less often actually closes the topic. More often, it becomes the beginning of some further discussion about whether we are talking about a permanent decision, a temporary move, or perhaps a strategy that someone will rewrite in a few months. And this is what the current picture of Xbox looks like, my dear. We have this strategy reset, pressure for higher profits, uncertainty around studios, discussions about rebuilding the entire business, and further questions about what Xbox will actually be in the coming years, because one thing is already clear. This is not a simple course correction. And my dear, this is what the current picture of Xbox looks like. We have a strategy reset, pressure for higher profits, uncertainty around studios, discussions about rebuilding the entire business, and further questions about what Xbox will actually be in the coming years, because one thing is already clear, this is not a simple change or course correction, because this could really be an attempt to rewrite this brand from scratch. And from scratch, I invite you again to our main partner, XTB, where in Poland, in Poland alone, over a million portfolios have already been opened. I am one of those portfolios, among others. And why is this happening? Why so eagerly? Because at XTB, when your turnover does not exceed 100,000 EUR, you do not pay commission. Additionally, by registering with the code Grifter, you get access to over 220 hours of educational materials in video form, which will introduce you to the world of investing, teach you if you know nothing, educate you if you already know something. So this is for every level of advancement, but you must remember that investing is not a simple game, it is not easy, you have to do it wisely, and even then there is no guarantee of winning. You should always take risk into account, because investing involves risk. Well, okay, my dear, we have finished the Xbox topic a bit. This big strategy change, this strategy reset, this big Xbox reset is now in full swing. Just a few days ago, we talked about it so calmly. About 300 people are just going to go somewhere. We'll see how it goes. Here a studio, a studio, a studio, and not even small studios. So I am very curious what Xbox will show us not in a year, but still this year. And you? Thank you very much for your attention. I hope you enjoyed this material. If so, you know what to do. And I invite you now to the next episodes. Thank you for your attention. See you next time. Bye. Yeah.