Is the console war over for Xbox?

In a lot of ways, it often looks like the console state of war is over for Microsoft, particularly when yous await at gimmicky metrics. Microsoft doesn't share Xbox console sales figures anymore, instead opting to focus on sharing engagement figures with its shareholders, simply best estimates put Xbox console sales at around the 35 to forty million units marker. Conversely, the Nintendo Switch is also poised to surpass the Xbox Ane if it hasn't already, despite only beingness on sale for a fraction of the time. This holiday season, it seems all only inevitable the Nintendo Switch will outpace Xbox also. And of course, PlayStation iv is around the 100 meg mark, totally dwarfing the Xbox One install base.

The transition to "next-gen" is coming, with Xbox Scarlett and the PlayStation five gearing up for a big reveal side by side year, near likely. And past all accounts, at get-go glance, it looks similar Sony is poised to come sprinting out of the gate capitalizing on the success they've found throughout this generation. An IGN poll of 40,000 readers showed that the majority of gamers are most interested in Sony'south next-gen system, chirapsia out Microsoft and Nintendo. There'due south no reason to recall that isn't the case with the wider marketplace too.

Or is it?

Let's have a look at how Microsoft is looking to change the rules of engagement for the next-gen panel war, and ultimately, why Microsoft is pushing hard to take Xbox beyond the box.

The market for console hardware

Video game industry spending breakdown, via Statista.com

Console warriors on Twitter, YouTube, and beyond oftentimes cite panel sales as gospel for the health of any visitor selling hardware, and evidently, that plays a part. No install base means no sales, but as we can encounter from the above nautical chart, the vast majority of spending in this industry goes on content, rather than hardware.

Content sales are rex, and the panel itself is just incidental.

On core consoles, mega games like Fortnite, Call of Duty, and FIFA drive huge amounts of acquirement through recurrent in-game digital spending, doubled with increasing numbers of u.s. switching to digital game purchases. Beyond games, subscription services like PlayStation Network, Xbox Alive, and Xbox Game Pass are also big revenue streams. Content sales are king, in this business organization, and the console itself is simply incidental.

The console itself is expensive to produce, and the margins on sales aren't bang-up. While the days of taking losses on console hardware are probably backside us, in terms of profit margins, there's an statement to be made that information technology'southward actually worse if someone purchases an Xbox Ane and never uses it, than if they hadn't purchased it at all. Talking profit margins and engagement is not as sexy, merely it's the business organisation reality that drives companies like Sony and Microsoft, and soon, Google, with its Stadia platform, and likely others.

Market share by platform, via Newzoo

If nosotros look at the breakup by platform, right now, Xbox represents just a fragment of the console portion of the pie chart. While the industry as a whole is growing, the speed of growth has trended towards mobile, largely attributable to preferences and concern realities in Asia-Pacific markets.

In interviews, Microsoft is pretty transparent about its ambitions. Xbox head Phil Spencer broke down Microsoft'due south thought process in an interview with The Verge a little while dorsum.

I don't demand to sell whatsoever specific version of the console in order for us to reach our business goals. The business organisation isn't how many consoles you lot sell. The business organization is how many players are playing the games that they buy, how they play. And so if somebody bought an original Xbox One from us on launch day, and they're buying and playing games, I don't need to sell them an S. I don't need to sell them an X. If they want to stay on the Xbox One they have and stay equally a cracking fellow member of our customs or subscribe to Game Pass, that'due south a smashing business organisation for us.

I think information technology'southward like shooting fish in a barrel from the outside to judge the health of our business effectually how many consoles whatsoever company sells. In the end, how many subscribers you have to something like Game Pass, how many games people are buying, those are much better metrics on the health of the business.

The global market place is two.v billion gamers strong, and Microsoft wants to pause out of the slice of the pie it incorporates now. Not just because it wants to, but because it has to for Xbox's future.

On the coming disruption

From time to time, I'll see detractors corruption Spencer's quote to claim that Microsoft isn't ambitious with its plans to abound the Xbox install base, but that couldn't be farther from reality if it tried. There but has to exist a level-headed acceptance of the concern realities faced by Microsoft and other companies.

Rank	Visitor	Q1 ($One thousand)	Q2 ($M)	Q3 ($M)	Q4 ($M)	2018 ($Thou)	YoY Growth
1	TENCENT	5,502	4,687	4,903	4,641	19,733	nine%
2	SONY	3,079	3,117	3,612	4,410	fourteen,218	41%
3	MICROSOFT	2,019	two,033	2,311	3,391	ix,754	32%
4	APPLE	2,091	2,303	2,524	2,535	9,453	18%
5	ACTIVISION BLIZZARD	i,872	1,537	1,352	2,131	vi,892	6%
half-dozen	GOOGLE	1,383	one,463	one,522	two,129	6,497	22%
vii	NETEASE	i,346	1,546	ane,590	one,694	six,177	eleven%
8	EA	1,582	one,137	i,286	1,289	5,294	4%
nine	NINTENDO	697	730	751	2,111	4,288	36%
10	BANDAI NAMCO	807	567	693	674	2,741	13%

The biggest game companies in the world via Newzoo

Tencent is by and large the biggest games company in the globe, and the just metric the megacorp is interested in is engagement in a higher place all other things. Tencent has dabbled in consoles, but particularly when it comes to Western audiences, the firm is virtually all-in on service type game investments, picking up controlling stakes in companies like Grinding Gear Games and Riot who run huge costless-to-play titles like Path of Exile and League of Legends. Nobody thinks of Apple and Google as gaming companies, yet in that location they are in the superlative six, owing to iOS and Android's app stores.

Despite having a far smaller console share than Sony, that fact isn't reflected in Microsoft's gaming revenue, which is extremely healthy owing to subscription services and content sales. Every fourth dimension someone attempts to claim "Xbox is dead" I can't help but curl my eyes, knowing the facts. That beingness said, there's no room for complacency, equally major disruption is a perpetual reality in the tech concern, and cloud services are poised to shake upwardly the gaming business in much the same way it has for music and media.

Digital lock-in and going horizontal

The transition to next-gen is arguably a fiddling different than previous generations. Roughly l pct of us are buying games digitally rather than physically, making switching platforms across generations a little less uncomplicated than it was previously. If you lot have hundreds of digital games on your PlayStation 4, and the PlayStation v has full backward compatibility (which it volition), why would y'all switch your main console to Xbox Scarlett even if it is a little more powerful? Why would you switch at all if it was less powerful?

Deject services are poised to shake upwardly the gaming business.

Almost people end up with multiple consoles towards the end of the generation, especially when you consider the portability of the Nintendo Switch as a unique selling point. Typically, though, whoever takes the head commencement adjacent-gen will generate that networking outcome purchase statement "my friend has information technology so I must have it likewise," when information technology comes to living room stuff. Cross-play restrictions are gradually being broken downwards, but it'll be a long time before the perception shifts abroad from the idea that you need to have the same console as your friends in social club to play together.

If we assume that Microsoft totally nails its content program and hardware for Xbox Scarlett, the market for Xbox consoles in the home has arguably hitting its limit. This is why Microsoft has been pushing Xbox beyond the panel, horizontally, putting its games on Windows PC via Steam and Xbox Game Pass for PC, and shortly, Project xCloud via streaming to the billions of smartphones already out there. In xCloud, Microsoft has a pregnant reward besides, which will do good the domicile console userbase as well.

It's important to note that Project xCloud is powered from the footing up by Xbox One development surround. Dissimilar Google Stadia, which requires developers to port their games to its systems, game developers already have xCloud versions made, since it but works, much like Xbox Backward Compatibility with Xbox 360. I went easily-on with xCloud at E3 2022, and came away wondering if it was some form of black magic. Every Project xCloud user that comes in sideways technically besides becomes an Xbox I console owner, growing the market share of the Xbox One development environment. This growth should better Xbox's clout with developers beyond the board, particularly with those who have often ignored the platform out of fright for low sales — a frequent reality for popular titles from Japan. With Asia-Pacific markets driving global growth, particularly in mobile, this is another area where xCloud could find some unique success that could atomic number 82 to more games coming to the platform.

Microsoft is not finished

Microsoft might be well-positioned with its massive information centers and control of Windows as a platform, but its horizontal surface area to PC and mobile phones isn't necessarily a guaranteed success story. It depends on how well Project xCloud works at scale, with millions, rather than dozens, accessing the service. Information technology depends if Microsoft can convince enough developers to license its content for cloud streaming. It depends if Microsoft's revenue model for xCloud is consumer-friendly. More than anything, it depends whether or not consumers — especially in the West — actually have an appetite for core games on their phones, tablets, and low-stop PCs.

There are a lot of unknowns here, but this strategy was effectively locked-in as soon equally Microsoft failed to achieve the networking outcome from its crude Xbox One launch back in 2022. The market place reality is evolving, and so too must Microsoft if it wants to grow and better the experience for its customers. Offering gamers a bigger, better platform with more than features and more cash flow to invest in games, and offer developers a bigger, broader userbase across multiple form factors and consumer behaviors. There's a massive opportunity for Redmond, owing to its early on investments in the Azure cloud, where a hereafter bulk of Xbox users may live.

For Xbox, the console war is far from over.

Xbox accessories yous'll dear

Every one of these quality accessories is guaranteed to enhance your Xbox experience.

PowerA Enhanced Wired Controller for Xbox One ($twenty at Amazon)

PowerA'south have on the Xbox One controller is an attractive pickup for budget-witting gamers that nails all the nuts.

Xbox One S vertical stand ($ten at Amazon)

Stand your panel upright with this accessory.

We may earn a committee for purchases using our links. Larn more than.

Here are the best steering wheels for Forza Horizon 5

Ultimate control

Hither are the all-time steering wheels for Forza Horizon 5

Forza Horizon 5 features extensive and improved support for simulation steering wheels. To get the about out of this open-world racing game, consider i of the all-time racing steering wheels available for Forza Horizon 5.