Aug
07
2015
Posted by James at 09:27
At Gamescom last year, Microsoft announced that Rise of the Tomb Raider would be a timed exclusive on Xbox. This year, no similar deal was revealed.

Times are-a-changing for Xbox. As a brand, it now has close links with Windows, where developers can easily target both Xbox One and Windows 10 with their games, helping Microsoft to diversify its core business in video games.

The biggest change, though, is in how Microsoft has been dealing with third party content deals. Microsoft has been losing a lot of the marketing deals that they once commanded over the previous generation. This year, FIFA Football, Star Wars Battlefront and Call of Duty have gone to Sony. Those are three of the biggest releases launching this holiday, and Microsoft losing out on marketing time and early content will reinforce the PlayStation 4’s dominant position in the eyes of the customer.

As a result, there’s been a notable shift towards first party content for tentpole releases. At this year’s E3, Microsoft’s tagline was “the greatest games lineup in Xbox history” – all but one game was a first party release. Indeed, Phil Spencer himself has revealed this change in strategy when speaking in an interview with Gamespot. In a response to a question about Microsoft’s first party lineup and Sony “gobbling up so many third-party deals”, he replied with the following (emphasis ours):
So, they don't "gobble" the deals up. They buy them. You know, I read the same things you do, and I know some people think it's somehow less expensive to sign third-party exclusives if you have a bigger market-share. I can tell you, it has nothing to do with market share.

When you go in to do a deal, with a third party, that third party has its own view of the global market and the value of it. And they should, they should think about their assets and how valuable they are, just like anyone would when they are selling their goods.

I ran first party before I took on the job as head of Xbox. And when I was picked to do this job, I think people would have expected that my focus would be on first party. My view is, there are some bellwether companies out there in terms of first-party games, like Nintendo, which has incredibly strong IP, and a breadth of characters and games to play, which allows them to do a great job in lighting up peoples' interests.

So we're making a conscious decision to focus on our first-party games. It doesn't make it harder or easier, it's just a decision. I do think that building up first-party exclusives is creatively more difficult than signing a deal, just by the nature of what it is. But I'll point out too that Sony has some great first-party franchises. I'm a big fan of Uncharted, I thought that looked great at E3. I really admire the team at Naughty Dog, the team at Polyphony.
There’s a lot of truth behind this statement. Sony’s internal resources are focused on Morpheus right now, with SCE CEO Andrew House even admitting that its first party lineup was looking a little thin this year, during an investor relations briefing. It made sense for Sony to chase these third party deals so customers associate PlayStation 4 with that content in the short-term. And that has cost them more than Microsoft would see worth pursuing. Publishers use the value of their IP, and the value it would have to Sony (or Microsoft), as leverage in these deals.

Instead, Phil Spencer is playing the long game and is investing money that usually would have gone towards third party deals (marketing, timed exclusives or exclusives) into building up Xbox’s portfolio of first party franchises.

This is a much better strategy. Xbox is typically associated with Halo, Gears of War and Forza Motorsport despite generally offering much more, and given Xbox One is destined to be in second place, investing in third party deals won’t change anything in both the short term and long term.

Investing in first party franchises and making them into tentpole IP in the long term could change Xbox’s fortunes down the line, especially when a new console generation rolls around in around four years' time. Xbox has traditionally struggled in Continental Europe, Japan and Asia; it has been argued that the brand, as it stands right now, is mostly centred around Anglo-American markets.

In theory, investing in its own content is a much better way to give Xbox as a brand more universal appeal than buying the odd piece of third party content and marketing here and there. With Sony giving first party content a backseat, the ball may well and truly be in Microsoft’s court.
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