Microsoft’s quest for gaming world domination

Microsoft made global headlines on January 18 when it announced its $68.7 billion acquisition of Activision Blizzard, one of the world’s leading gaming companies, which produces blockbuster mobile, PC and console games such as Call of Duty, Overwatch, World of Warcraft and Candy Crush. Predictably, prophecies of a foray into nascent gaming segments like the metaverse and crypto gaming started quickly pouring in.For those who have been following Microsoft’s recent trajectory in gaming, however, this acquisition is more about further strengthening its presence in the one area where it has traditionally been lacking — a strong in-house catalogue of high-quality games. medium89200566It’s a power play that sent shockwaves through the gaming industry, which is estimated to have generated $180.3 billion in revenues in 2021, dwarfing traditional entertainment industries like film and music. There are an estimated three billion gamers around the world, with the number expected to continue to rise as mobile gaming becomes more accessible in developing markets, and with new technologies like game streaming — or cloud gaming — lowering the barrier to entry for consumers.It’s no surprise then that traditionally non-gaming companies like Meta, Apple, Amazon and Google are also betting big on gaming. Even Netflix is making an aggressive push into gaming as it aims to become a leading game distributor.Untitled Carousel 88987096For all of Microsoft’s industry-leading prowess in software and cloud computing, its Xbox business has been struggling to keep up with long-time rivals Nintendo and Sony PlayStation in terms of bankable original games. When consumers decide to spend upwards of ₹35,000 to buy an Xbox, a PlayStation or a Nintendo console, the games that are available to play on them is a key part of the purchase decision.Third-party companies such as EA (which makes games such as FIFA, Need for Speed), Activision Blizzard, Ubisoft (Assassin’s Creed, Prince of Persia, Far Cry), Rockstar Games (Grand Theft Auto, Red Dead Redemption), Warner Bros. (Mortal Kombat, Batman) and others don’t have a horse in the console hardware race, and so their games tend to appear across all consoles as well as PCs. So, for the three console makers, exclusive (first-party) games — which are available exclusively on their respective platforms — tend to be the ones that help sell more console hardware. medium89217384Why first-party titles matterWhile Xbox consoles have been home to some popular gaming IP (intellectual properties) like Halo, Gears of War and Forza, its first-party offerings have paled in comparison to those of its Japan-headquartered peers. Sony boasts of an impressive PlayStation Studios stable: teams around the world churning out one blockbuster after another — God of War, Uncharted, The Last of Us, Ghost of Tsushima, Gran Turismo, Ratchet & Clank and the Spider-Man series, to name a few. So much so that four of the 10, including the top two, highest-selling games on PlayStation 4 came from Sony’s own first-party studios.A similar story can be told of Nintendo’s first-party offerings, which pack arguably even greater firepower. Each new release in the Mario franchise and its many spinoffs, The Legend of Zelda, Pokemon, Animal Crossing and others sends its console sales skyrocketing. When a new blockbuster game is only available to play on a specific platform, gamers will be more inclined to buy into that platform. It’s a formula that has worked wonders for PlayStation and Nintendo for decades, and Microsoft had some catching up to do. medium89200625Alongside setting up a few first-party studios of its own — including dedicated studios for its Halo and Gears of War franchises — Microsoft has opted to solve this problem through acquisitions. The first of these was game developer Mojang in 2014 for what was then an eye-watering sum of $2.5 billion.You would be forgiven for not having heard of Mojang, but you have probably heard of the only game it makes — Minecraft, the world-building sandbox juggernaut, which remains one of the most popular games across age groups. Microsoft remained reasonably quiet on the acquisition front after that deal. Then, as sales of Microsoft’s previous console, the Xbox One, paled in comparison to rival consoles from PlayStation and Nintendo, the US tech giant looked at the future of its gaming business and took a decision that, in hindsight, was a masterstroke. medium89200635Unable to compete in the traditional console gaming model, Microsoft decided it was time to shift the goalposts entirely and lean on its cloud computing strengths.A decade ago, it would have been hard to imagine the home video business — DVDs and Blu-rays — almost disappearing, and being replaced by streaming platforms. Microsoft is hoping that with its new gaming service, Xbox Game Pass, it can do for gaming what Netflix did for television and film.Read the second part: Why Microsoft is trying to be the Netflix of gaming The writer is a games industry consultant and founder of Kridana, a social awareness platform for responsible gaming.Untitled Carousel 83335769