Xbox's evolving first-party strategy

The biggest announcement of E3 arguably wasn't a game, but Microsoft's revelation that it had added five more studios to its internal roster. The creation of Darrell Gallagher's new studio The Initiative and the acquisitions of Playground Games (Forza Horizon), Compulsion Games (We Happy Few), Ninja Theory (Hellblade), and Undead Labs (State of Decay) effectively doubled the company's first-party development studios.

Speaking with GamesIndustry.biz at E3 this week, Microsoft's chief marketing officer for gaming Mike Nichols explained a bit of the thinking behind the moves

"We looked at a whole bunch of different approaches to increasing the number of studio teams we had," he said. "Because these studios are ones where we've been admirers, we've been partners with them, we know who they are and the strengths they bring. We've been talking to them and the team decided that these are creative studios that will help us tell new stories in new worlds, in better ways that are diverse. They have different approaches than our standard five big studios that we already had. And that's what led us to say, 'Hey, let's go make some investments. And let's go ahead and announce them so Xbox fans know not only are there games they're hearing about coming now, but also there are games that are going to be coming from a whole bunch of different, creative minds.'"

Microsoft's first-party strategy has been a subject of some debate this generation. Since the launch of the Xbox, the company has shuttered three first-party studios (Lionhead, Press Play Studios, and its Victoria, British Columbia development studio), and spun off a fourth in Twisted Pixel. Combined with a turn to simultaneously launching its big Xbox One exclusives on PC and a move away from reporting hardware sales figures in favor of engagement metrics, it seemed fair to ask if the company's first-party efforts this generation had shifted away from the goal of selling hardware.

"The future we want to enable is that you can play amazing games, you can play with the people you want regardless of the device you're on, regardless of the device they're on, and you can choose to play those games on whatever device"

"I would say the role of Microsoft Studios is firstly to differentiate our platforms," Nichols explained. "I use that phrase 'platforms' specifically, and not just hardware itself. Platforms as in Xbox One, the Xbox Live social network, our Game Pass service... all of those exclusive games provide value for those platforms. Frankly, what you're seeing and what's changed over the last many years has been a really strong pivot, and I think a very forward-leaning pivot, into what's the future of gaming we want to enable. And the future we want to enable is that you can play amazing games, you can play with the people you want regardless of the device you're on, regardless of the device they're on, and you can choose to play those games on whatever device. That is a more gamer-centric view of what it is we're trying to build that for sure is different than the way people would think about the console business in and of itself five or 10 years ago.

"We want to reach gamers of all types. We want to reach gamers who are only on phones. We want to reach gamers who are only on PC, who are only on console, and mixes therein. And in order to do that, we need to make our content available across the relevant devices. And in some cases, we want to make content specific to a device, like we announced the Gears Pop game specifically for mobile. It is definitely a change in our approach, but it's a change in our approach that I think reflects consumer dynamics, technology, evolution... Frankly, consumers look increasingly at every form of entertainment. They expect it to play across many devices. There are some reasons why that's harder in gaming than other forms of entertainment, but I would still look at it as a really great vision to work towards, and that's what we're trying to do."

Microsoft's announcement that it was working on a game streaming service was another big piece of news from the company's E3 briefing, as it apparently joined a growing list of companies hoping to finally realize ambitions of a "Netflix of games." Nichols took exception to that idea, saying that the technology and the business model most readily associated with it aren't necessarily so linked.

"I prefer to not use the phrase 'Netflix of games' because there are a lot of differences in the models," Nichols said. "In gaming, once you get someone playing the game, there can be post-sale monetization mechanics. In video, that's not the case, and there are plenty of other potential differences too. But this notion of a subscription model at the same time as a direct purchase model and giving consumers the choice between picking one or the other or doing a mix of both feels a lot more consistent again with other forms of entertainment."

For Microsoft, Game Pass has the subscription approach already covered. As for streaming, Microsoft looks at it more as a way to expand the number of devices it can push content through.

"With the way networks are being invested in, the way the technology can evolve, we think there's an opportunity to reach more gamers over time," Nichols said. "It's going to be multi-year. This is not a thing that's going to be at massive scale right away. But we do think there's an opportunity to reach a lot of gamers where maybe the phone is their primary form of engaging with content. Maybe they have to pick between which device to purchase, a phone or a console, and they've just decided they have to communicate with people first. Reaching them in new ways is going to require new technology. That's where we were today when we said, 'Hey, of course we're working on this.' Of course, we're working on a new console, too. Of course. You should expect all these things."

One thing Microsoft isn't working on right now--at least as it pertains to Xbox--is virtual reality/mixed reality.

"We don't have any plans specific to Xbox consoles in virtual reality or mixed reality," Nichols said. "Our perspective on it has been and continues to be that the PC is probably the best platform for more immersive VR and MR. As an open platform, it just allows faster, more rapid iteration. There are plenty of companies investing in it in the hardware side and the content side, or some combination therein. Obviously on phones, augmented reality is a good scenario as well that's going to grow. But as it relates to Xbox, no. Our focus is primarily on experiences you would play on your TV, and ultimately we'd like to make those experiences more broadly."