Is Microsoft Losing to Sony in Gaming? Don’t Be So Sure | Analysis

Anyone with knowledge of Microsoft’s history as a gaming company would have perfectly good reason to wonder whether Sony’s positioned to perpetually outclass the home of Xbox when it comes to gaming. But there’s evidence to suggest that while Microsoft may sometimes fumble the proverbial ball on the micro level, its macro plays mean it could easily come out the long-term king of gaming.

“Different businesses,” said Michael Pachter, managing director at Wedbush Securities. “Microsoft is all about building subscription at any cost, Sony is all about being consistently profitable. Sony is winning now, but not over the long term.”

Sony’s PlayStation brand has had a straightforward business model: Sell consoles, sell games. Sony has beat Microsoft in console sales by having more prestigious exclusive titles only playable on Sony’s hardware. Microsoft has long struggled to consistently produce decent exclusives and is still recovering in the console department thanks to its botched Xbox One efforts. Though Microsoft is currently targeting four big games per year, that’s a “believe it when you see it” sort of estimate.

Despite its stumbles in sales, Microsoft has been smart about knowing the value of subscriptions. Back in the Xbox 360 era (official lifespan: 2005 to 2016), Microsoft revolutionized ways to monetize players, pay-walling games’ online multiplayer features behind a subscription fee. Many decried this strategy as greedy, but even so, it worked. Sony later copied it.

Now, Microsoft has iterated on that subscription strategy with Game Pass, which is basically the Netflix of gaming (though Xbox head Phil Spencer dislikes that association), providing players with a way to pay one cost for access to hundreds of games, including brand-new Xbox exclusives. Sony says that model’s not sustainable. However, Microsoft recently said Game Pass subs brought in nearly $1 billion in revenue last quarter and that it’s a profitable endeavor.

It’s all about the long game

“I think Microsoft’s focus on gaming is broader and might be a little less focused than Sony’s because Sony is focused on the PlayStation, while Microsoft has the Xbox and PC as well as a cloud service and is trying hard to unify them together under a single vision,” said Anshel Sag, principal analyst at Moor Insights & Strategy.

“Microsoft’s approach to gaming feels like it will move beyond the Xbox sooner than PlayStation’s and might end up winning out in the long term, especially if they can figure out a way to close the Activision Blizzard deal because I do think that’s putting quite a damper on the company’s plans.”

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Many speculate the Activision Blizzard deal could be key to solving Microsoft’s perennially lacking exclusive lineup.

“It’s no secret that Microsoft has faced challenges trying to keep up with Sony’s dominance,” said Osman Masud, CEO of cloud-gaming startup The Game Company. “Sony has nailed it by securing exclusive titles that draw gamers towards PlayStation.”

Like Sag, Masud mentioned the Activision acquisition could shake things up, assuming it goes through as intended. After all, that would give Microsoft and Xbox control over colossal franchises such as “Call of Duty” and “Diablo.”

Press “X” to doubt Microsoft’s prospects

One could point to “Redfall,” the first major fruit to fall from the “Microsoft’s acquisitions will elevate Xbox” tree, as evidence that Activision might not be the beacon of hope some frame it as. Microsoft bought ZeniMax for $7.5 billion and the first big Xbox game to result from said acquisition, “Redfall,” has been a disaster that’s unlikely to boost Microsoft’s gaming profile. So when Spencer says Game Pass is largely about “curating a great portfolio,” these sorts of releases don’t help his argument.

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The same situation could happen with Activision. After all, it doesn’t matter how much money Microsoft throws around if it can’t successfully manage the things it buys. This outcome wouldn’t be a major shock, considering Microsoft failed to manage its own brand with the Xbox One, to the point where Xbox’s Phil Spencer admitted the Xbox One’s mistakes (e.g., its anti-consumer positioning) caused rippling problems moving into the current Xbox Series X and S era.

Add those problems to gamers’ ongoing annoyances with Microsoft’s perennially shoddy PC gaming efforts (a poorly designed Xbox app and Windows game storefront that pales in comparison to third-party offerings such as Steam) and, on the surface, any gamer would appear to have a case when saying “those guys will never beat Sony.”

However, if Netflix and its colossal basket of mixed-quality content are proof of anything, it’s that it doesn’t take particularly good content to win; sheer quantity will suffice. If Microsoft can convince gamers that its Game Pass subscription service and Xbox-PC-cloud all-in-one ecosystem provide enough compounded value, then Sony’s walled-off platform and prestige offerings could be dwarfed to the point where they no longer stack up as equal competition.

That’s why analysts speculate the long game is Microsoft’s to win: The company has the uniquely deep pockets to fund ambitious subscription efforts and acquisitions that could, combined, be enough to ultimately force Sony into second place.

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