The Missing Piece in Xbox One’s Big Comeback

With the Electronic Entertainment Expo (E3) coming up in a few days, the gaming community is eagerly anticipating what companies have in store. This year, many eyes will be on Microsoft, who has been secretive on what it plans to reveal. Their shift from the E3 show floor to the Microsoft Theatre at LA Live, just across the LA Convention Center, has heightened the intrigue.

Many people in the gaming community are hopeful that Microsoft’s move to its own space is a sign that the company has big things to share during its E3 press conference. Reading through pre-E3 online commentary, we find a community seeking a refresh of the Xbox brand, which seems to be falling behind in the current generation of game consoles. Reception for its latest console, Xbox One X, is tepid, even if it has the most powerful technical specifications.

So far, Sony’s PS4 has outsold Xbox One two-to-one.

History in reverse?

To regain momentum, Microsoft can learn from its competition, Sony.

When Sony launched PlayStation 3, it set a higher price point than Xbox. And just like Xbox One, PS3 faced criticisms on its design and hardware. Microsoft took advantage of these critiques and sold 8 million more units than the PS3. However, by the end of the cycle PlayStation caught up thanks to a significant console redesign, a price adjustment and major software releases.

Fast forward to today and Microsoft seems to be taking a page out of PS3’s comeback playbook. Microsoft released a redesigned, smaller and more affordable console (the Xbox One S) and introduced innovations such as a backwards-compatibility feature that allows gamers to play original Xbox and Xbox 360 games on Xbox One. To appeal to consumers who prefer a more powerful console, Microsoft also released the Xbox One X.

But despite these smart moves, Xbox’s sales haven’t caught up to the PS4. So why is that?

Content is king

In the previous generation of consoles, what made Xbox 360 so compelling out of the gate compared to PS3 wasn’t necessarily its hardware or software. Xbox 360 was a hit because of a wide variety of original titles, and Xbox Live, an innovative online platform to play these games with friends. IPs such as Crackdown, Mass Effect, Gears of War, Halo, Fable, and Forza made Xbox 360 a must-have for gamers.

In the current generation, Xbox is receiving tough feedback about its lack of title innovation, while the PlayStation has produced some of the best games this hardware cycle. Unlike Microsoft, who has closed down studios and cancelled projects, Sony has invested heavily in quality-first party titles, and that strategy is paying off. God of War (2018) is one of the most acclaimed games of all time. And at E3 2018, Sony is expected to reveal more exclusive content, including what President and CEO Shawn Layden calls the “fab four.”

Sony, of course, wasn’t always this strong. The PS3 launched at a very high price point ($599!) and its biggest launch title, Resistance, was a brand new IP that happened to be a first-person shooter, a genre that many would have said Sony was weakest at producing at the time. Strategic investments in original content, developing their PlayStation Plus service, and enormous trust in studios helped them eventually win over many Xbox 360 owners and PS2 holdouts. Today, PS4 has a lot of great titles, including the mega-hit Uncharted 4, which can only be played on Sony’s console.

In short, the gaming community is watching for Microsoft to build and launch its own “Uncharted”. We don’t mean an Indiana Jones-like adventure game, but instead a first-party title which demonstrates Microsoft’s investment in making innovative, blockbuster content.

Uncharted, more than any other title, demonstrated Sony’s investment in first-party titles. At the time of release, it had impressive visual effects, a compelling narrative, interesting characters, and very memorable set pieces. Just as important, Sony allowed one of their most valuable studios, Naughty Dog, to make something new and innovative. Uncharted went on to sell 2.6 million units worldwide. Uncharted 2 was considered a masterpiece and sold over 6 million units! It was the premier title that has since defined Sony PlayStation as a brand that produces high-quality, cinematic, narrative-driven, visually astonishing games. It was able to get lapsed PlayStation gamers, many of whom were playing games on Xbox 360, to reinvest in the PlayStation brand.

We believe there are strategies that the Xbox division can take to make strides to win over Xbox 360 holdouts and PS4 owners, and be in a better position for the next generation of consoles. Microsoft needs to reestablish itself as a company heavily invested in its first-party developers, not just a services provider and hardware manufacturer. Microsoft has released some interesting games like Sea of Thieves, Sunset Overdrive, and Forza Horizon, but none of these games have been met with the same acclaim as God of War or Uncharted 4. Microsoft needs big, critically-acclaimed, and exclusive first-party titles to win over people who have lost interest in purchasing or playing an Xbox One. It is easier said than done, but we are looking forward to the titles they show at their E3 press conference.

A great console lacking a critical ingredient

Comparing consoles feature-to-feature, we believe Microsoft has the best hardware, and Microsoft’s studio continues to produce popular franchise titles such as Forza, Halo, and Gears of War. However, many in the community are hoping for fresh and innovative new franchises. To win over people who have a PS4 or who haven’t upgraded from Xbox 360, Microsoft needs to take risks on innovative and new titles and inject new energy into its platform. The investment in new IPs can often take multiple iterations to pay off, but exclusive titles will make gamers pay more attention, have their friends pay more attention, and create a snowball effect.

Of course, Microsoft is an enormous brand; after all, the company ships millions of units per year. But are they leaving market potential on the table? As Sony itself has demonstrated, it is possible for a company to make a big shift to their market position. To change positions, the gaming community is clear: Microsoft needs to meet the gaming community’s appetite for innovative and original games. Only by giving what gamers want can Microsoft improve its market share in the console space, and challenge Sony as the top console manufacturer in the world.

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Nick Nevins

About Nick Nevins

Nick has more than five years in the market research industry with a focus on the Technology, Telecommunications, and Consumer Research divisions at Market Strategies. He specializes in testing new concepts, analyzing strategic priorities and reducing consumer churn. Nick is an avid gamer who has previous experience working with some of the biggest companies in gaming including Xbox, Activision, and Electronic Arts. He is currently playing Dragon Age: Origins at the behest of his girlfriend. He graduated magna cum laude at California State University, Fullerton with a bachelor’s degree in political science.

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