Great read as usual. One thing I'm curious about though - you mention:
> Where competitors like Nintendo treat games as cultural events, Xbox has leaned into commodification, relying on distribution innovation without corresponding content quality.
While of course there is some minimum bar of content quality required for any distribution innovation to pay off, I wouldn't have guessed that Xbox was so far below it. After all, the Xbox/PC ecosystem covers the vast majority of AAA titles. If the problem really is one of content quality, then doesn't that question whether this is all entirely due to a distribution-led correction?
I feel like the reality is more that there are several factors all hitting the industry at once - lack of new distribution innovation certainly is one, but so is lack of new content innovation (no new genres since battle royale? autobattlers?), lack of business model innovation (how many monthly battle passes am I seriously going to buy?), hangover from overhiring assming COVID growth curves would continue, etc.
I don't disagree that there is a renewed focus on distribution that is driving some of the industry malaise (and these cuts), but it seems like that's only part of the story.
Well, nothing I can think of really - but is that a problem? If the real problem is the industry needs to shift to distribution innovation, and has been overindexed on content innovation, then shouldn't Xbox (by arguably investing in distribution innovation more than others) be better well off? In that light these studio cuts make sense: Xbox is realizing that content matters less than it used to. Which I think is sort of what you're saying when you say "On one side, the firm’s restructuring appears consistent with the macro-level correction across gaming."
I think I was just confused by the critique later on about Xbox looking more adrift, with critics arguing they've mismanaged talent and IP. I'm wondering if you think the state of Xbox is more that (lack of content / mismanagement of talent and IP) or if it's actually more a "painful but necessary deprioritizing of content given the state of the industry"?
By taking a 'tech' approach by, for instance, hoping to quickly scale their GP offering, Xbox has also done a disservice to the perceived value of content. Like Steam, players will increasingly expect more for less. Rolling out a differentiated subscription service with different price points would be a natural next step.
Great discussion. I also see the cuts being driven by multiple factors, the largest of which is, in my opinion, is organizational efficiency. The Xbox organization is simply massive now and while from our perspective the studio shut downs are significant, I think Xbox said they have 50 games in active development, many of which we have no insight into. Anonymous Project #22 maybe looked a lot like Everwild and is coming along nicely, so they cancelled Everwild (it’s a hypothetical scenario). Additionally, the publishing side continues to be centralized. You only need so many pricing and promotion strategy people, for instance.
After organizational efficiency is the commodification of content, as pointed out. The new Doom, despite being critically acclaimed, felt like it just came and went in a way that the last two didn’t and showed more tenacity in the within the gaming community. Because you’re right; around the corner is another great game to sink a weekend into.
Great read as usual. One thing I'm curious about though - you mention:
> Where competitors like Nintendo treat games as cultural events, Xbox has leaned into commodification, relying on distribution innovation without corresponding content quality.
While of course there is some minimum bar of content quality required for any distribution innovation to pay off, I wouldn't have guessed that Xbox was so far below it. After all, the Xbox/PC ecosystem covers the vast majority of AAA titles. If the problem really is one of content quality, then doesn't that question whether this is all entirely due to a distribution-led correction?
I feel like the reality is more that there are several factors all hitting the industry at once - lack of new distribution innovation certainly is one, but so is lack of new content innovation (no new genres since battle royale? autobattlers?), lack of business model innovation (how many monthly battle passes am I seriously going to buy?), hangover from overhiring assming COVID growth curves would continue, etc.
I don't disagree that there is a renewed focus on distribution that is driving some of the industry malaise (and these cuts), but it seems like that's only part of the story.
What would you say is are the cornerstone IPs for Xbox currently?
And you're right that's only party of it. I'm highlighting it here because it is central to Xbox's strategy.
Well, nothing I can think of really - but is that a problem? If the real problem is the industry needs to shift to distribution innovation, and has been overindexed on content innovation, then shouldn't Xbox (by arguably investing in distribution innovation more than others) be better well off? In that light these studio cuts make sense: Xbox is realizing that content matters less than it used to. Which I think is sort of what you're saying when you say "On one side, the firm’s restructuring appears consistent with the macro-level correction across gaming."
I think I was just confused by the critique later on about Xbox looking more adrift, with critics arguing they've mismanaged talent and IP. I'm wondering if you think the state of Xbox is more that (lack of content / mismanagement of talent and IP) or if it's actually more a "painful but necessary deprioritizing of content given the state of the industry"?
By taking a 'tech' approach by, for instance, hoping to quickly scale their GP offering, Xbox has also done a disservice to the perceived value of content. Like Steam, players will increasingly expect more for less. Rolling out a differentiated subscription service with different price points would be a natural next step.
Great discussion. I also see the cuts being driven by multiple factors, the largest of which is, in my opinion, is organizational efficiency. The Xbox organization is simply massive now and while from our perspective the studio shut downs are significant, I think Xbox said they have 50 games in active development, many of which we have no insight into. Anonymous Project #22 maybe looked a lot like Everwild and is coming along nicely, so they cancelled Everwild (it’s a hypothetical scenario). Additionally, the publishing side continues to be centralized. You only need so many pricing and promotion strategy people, for instance.
After organizational efficiency is the commodification of content, as pointed out. The new Doom, despite being critically acclaimed, felt like it just came and went in a way that the last two didn’t and showed more tenacity in the within the gaming community. Because you’re right; around the corner is another great game to sink a weekend into.
Love the summer story, same for me with my 7 and newly minted 4 year old!
Good morning, always a good and insightful read.
Jus a question: what's the source for King annual revenue drop? AFAIK, they're not publicly disclosed.
I rely on my team at ALDORA intelligence, which aggregates industry data, including mobile revenues.