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Xbox is Losing the Console War, But It’s Not Over Yet

Xbox is Losing the Console War, But It’s Not Over Yet:

The Xbox is at a pivot point. Something needs to change, and it needs to happen this year. If it’s going to happen, next week’s Electronic Entertainment Expo—E3, the big Los Angeles gaming convention—will be the place.

Let’s set the stage. After a wildly successful and very long generation with the Xbox 360, Microsoft was confident. As confident as Sony announcing the PlayStation 3 back in 2005. As confident as Icarus flying high into the sky.

But like Icarus, things didn’t go well. Microsoft came out of the gate when they announced the Xbox One in 2013 describing a media player that happened to play games (and was less powerful than its direct competitor, the PlayStation 4), rather than a video game system that had apps for Netflix and Hulu. The focus on entertainment over games irked many gamers, including Microsoft’s fans.

The Xbox One when it was announced also required an internet connection at all times and required that the Kinect camera, which can be set up to listen for voice commands, be connected to the system. It sounded like they were asking us to pay $500 so they could spy on us, even if that wasn’t anything like the truth. And a plan to permanently link purchased games with user profiles would essentially end the used games market for the system.

Those features were dropped almost instantly, but let’s keep the Greek mythology metaphor going: Pandora’s Xbox was open and couldn’t be closed again. This was all on top of that $500 price tag being a full $100 more expensive than the PS4.

Then, Don Mattrick, head of Xbox at the time, gave some of the most tone-deaf interviews about video games we’ve ever seen. It was almost as bad as the time Activision CEO Bobby Kotick said at the 2009 Deutsche Bank Securities Technology Conference that he wanted to “take all the fun out of making video games.”

“We have a product for people who aren’t able to get some form of internet connectivity,” Mattrick said. “It’s called the Xbox 360.” In other words anyone without a steady, super-reliable internet connection wasn’t invited to play the next generation of Xbox games.

Microsoft didn’t just fall from the sky—they cratered when they hit. The Xbox 360 was such a huge success that, as Microsoft and Sony introduced the new generation of consoles, it was Microsoft’s game to lose. That’s exactly what happened. Sony has over 40 million systems on gamers’ shelves, while Microsoft has stopped reporting sales altogether; third party publisher Electronic Arts has suggested that about 19 million Xbox One systems have sold. The PlayStation 3 and Xbox 360, by comparison, were usually neck and neck during their lifespans, with both ending right around 80 million sold.

Since then the company’s been playing catch-up. Even if Microsoft is worth more than Sony overall—about $407 billion for Microsoft versus $34 billion for Sony—the Xbox One’s implosion makes them look to gamers like a limping beast in comparison.

Right from the start Sony saw Microsoft’s plunge coming and jumped into the fray, playing off its opponent’s bad press and garnering tons of goodwill with gamers in the process. Take this cheeky video, with Sony demonstrating that they wouldn’t be regulating game trading the way the Xbox One was originally going to:

Microsoft took sharp measures quickly. Mattrick left Microsoft for Zynga, best known for Facebook games like Farmville, and was replaced by Phil Spencer, who fans often speak of in messianic terms. There was never a confirmation that Mattrick was fired, but his decision to leave right before the Xbox One launched suggests the departure wasn’t a coincidence.

Since Spencer’s glorious ascension, the Xbox division has been working like mad to catch up. Aggressive sales and price cuts, big pushes for exclusives, and the addition of features like the ability to play old Xbox 360 games on the newer console continue to try to push back against the tidal wave that is combined PlayStation sales and ill will toward Microsoft.

Sony, since then, hasn’t really done much, but that’s because they haven’t had to. They pretty much gave us exactly what we wanted right at the outset. The vast majority of games look slightly better and play slightly better on their system (not just according to fans but also to technical examinations by places like Eurogamer’s Digital Foundry), and they’ve had some really good exclusives, like Bloodborne, Until Dawn, and the recently released Uncharted 4: A Thief’s End.

Microsoft has had to scrape and claw for every bit of fan love they’ve managed to garner with things like the Xbox Elite Controller and that backward compatibility with Xbox 360 games. All that scraping, though, hasn’t overcome the gap in power between the Xbox One and the PlayStation 4, and many still see the Xbox One as the worse deal despite multiple price drops.

It’s also done nothing to change the general perception people have built up of the Xbox One. Compared to the relatively sleek PlayStation 4, the Xbox One looks like a huge VCR. While the PlayStation 4 is a tightly packed box, the Xbox One is mostly air. A manufacturing defect in the Xbox 360 caused systems to overheat and fail, costing Microsoft over $1 billion, and they overcompensated to avoid repeating such a costly mistake.

Further, a 2015 software upgrade intended to speed up the sluggish user interface only gave it a small bump instead of the huge jump Microsoft promised. Even the use of AA batteries rather than a rechargeable built-in battery in the controller is seen as an outmoded design choice by many gamers. The list just keeps going.

So as the E3 2016 approaches, Microsoft is at a crossroads. What they announce there could decide the future of the Xbox brand and change its course with gamers.

IN WITH THE NEW

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Rumor has it that both Sony and Microsoft are set to announce new hardware this year, with rumors about the PlayStation 4 Neo having floated around for a few months and Xbox One-Two rumors popping up much more recently. Both rumored systems are more powerful than their original incarnations, with the Neo about twice as powerful as the PlayStation 4 and the One-Two about four times as powerful as the One (and a third more powerful than the Neo).

If all this is true, then it could be the key for Microsoft to get back into the race instead of just playing pace car.

A new system, even a variant of the old one as both systems are expected to be, is costly and rife with potential traps. Microsoft has to get the tone of the announcement and the system’s price right on the first try. Getting either one wrong will prove to gamers that nothing has changed, and the system will be a non-starter.

And it’s worth noting that the Xbox One came out on November 22, 2013. It hasn’t even been three years since the system came out. Console generations have typically been about five years each for the last quarter century or so, while last generation was eight-plus years for the PlayStation 3 and Xbox 360.

Announcing new systems now is a huge risk for both companies. The rumored systems are expected to take an approach more akin to the world of mobile phones rather than the historic progression of consoles. Like we see with mobile phones, games would be compatible with the multiple generations of system, meaning games would function on both the Xbox One and the Xbox One Two, and compatibility wouldn’t be an issue until much later.

People are used to having to replace things like mobile phones every few years—they’re necessity items and are often on the cutting edge of technology. Consoles are luxury items that are usually a few years behind the cutting edge because they’re specialized devices. The leapfrogging compatibility mitigates this, but gamers tend to like having the newest and best stuff, and a new console reminds them that they don’t. Introducing these systems could have a chilling effect on console sales. That’s unlikely, but both companies have botched hardware announcements before.

Microsoft wants to wants their PC and console gaming arms to work in concert instead of separately, as well, and repeated failures in the former category make any attempt there a venture into hostile territory. It might end up being a great and necessary move in the end, but right now they’re fighting expensive wars on two fronts and meeting massive resistance on both.

Every little move at this point matters, and Microsoft’s show at E3 2016 is going to show a bunch of those moves all at once. Once they’ve shown their hand, Microsoft can’t take any of it back.

The Xbox One-Two could be a huge leap forward for the company, considering the rumored jump in power, if they execute it correctly—or it could tank their momentum entirely, slowing their already troubled console sales without any real way to speed them back up. What they’ll have to say about PC gaming is a bit less certain, but it’s similarly sensitive.

Can Microsoft turn the tides and catch up, providing Sony some real competition—something any industry, games included, needs—or are they doomed to be relegated to a distant second for the foreseeable future? Hopefully E3 will tell either way.


Eric Frederiksen has been a gamer since someone made the mistake of letting him play their Nintendo many years ago, and it’s been downhill ever since. He takes a multifaceted approach to gaming news and reviews, mixing business analysis, cultural studies, tech and design. In his free time, he perfects his napping technique and pursues the elusive perfect cheeseburger.


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