Xbox Is Too Profitable For Microsoft To Quit The Market – Michael Pachter

Michael Pachter, analyst at Wedbush Securities. He, however, does not think this will happen. ‘No, I don’t think so,’ he said flatly. ‘[Xbox consoles] are wildly profitable. We are concerned about warring about who is first and who is second, but that’s like saying, Pepsi doesn’t sell as much cola as Coke does, why not just shut down? Or Burger King doesn’t sell as many hamburgers as McDonalds, so why not shut down? They’re both profitable, who cares? The only people who care are fanboys

This line is a line every fanboy should think about...

http://gamingbolt.com/xbox-is-too-profitable-for-microsoft-to-quit-the-market-michael-pachter

Good job, Pachter. Now Xbox will be no more.

Microsoft have Windows and that will never die.

Microsoft doesn't need to quit the market they need to employ someone who cares more about games than 'ecosystems' i.e. not Phil Spencer who has completely diluted the brand by throwing all the exclusives on PC and not actively pursuing a single solitary first party AAA exclusive to launch the X with.

The guy should have been sacked long ago. Even with the pending launch of Xbox One X the brand already feels completely dead, doomed to bleat about slightly better multiplats than PS4 Pro while being absolutely slaughtered by one killer PS4 exclusive after another with literally nothing at all of its own to answer with.

A good point from Michael freaking Pachter? Did hell freeze over?

He took a trip to Japan but where the hell are the japanese games at for xbox he didn't get a damn thing on that trip to japan

@granddogg: Please don't quote that muppet Patcher EVER.

Please tell us more about game development works. You seem to think that a trip a few months ago should yield games right away. You should open your own studio with your secret to turning around games so fast.

Something sensible comes out of his mouth? I'm surprised

Well it works like this. Spencer takes the job and puts the wheels in motion for first party AAA titles that sell the Xbox One. Or he doesn't. So here we are in 2017 and he hasn't done any of that at all, instead dumping their only exclusives on PC and following it up with absolutely nothing. At all.

Did you have any other questions while I'm here?

So xbox done by the end of year now?

I think the original reason they even bothered with Xbox in the first place was to solidify Windows dominance and keep gaming as one of the central drives for preference for Windows PCs. You see it in their focus with Windows 95 in creating the DirectX APIs to draw in developers. Even back in the late 90s, Microsoft was trying to court the console gaming companies to adopt the usage of the APIs in their consoles, I think to bridge console/PC development and further strengthen the diversity of gaming titles. It was Sony's refusal to even use the APIs I think that motivated Microsoft to even create the Xbox.

And with the dominance of Windows in gaming, the sale of the OS isn't the main financial drive I think as much as the supporting software that goes with it, like Word, Excel, Powerpoint, etc. These too are big money makers for Microsoft, but I wonder if there's not greater uncertainty about their viability down the road with companies like Google offering those same tools free online. Heck, even Microsoft has gone to allowing for these tools through Hotmail accounts for free, there's really no need to pay for them anymore even with people paying for Office 365 annual subscriptions and such.

Now gaming represents something more, maybe a future hedge on their bets to remain profitable should these other sources of revenues decline. Whether their gaming division is profitable now or not is inconsequential to what it could be down the road, an they're treating it as such. Unlike a company like Sony whose profits are more marginal, given they deal more primarily with hardware and have more overhead despite large revenues, Microsoft's profitability nets them a lot more, so much so that they have tons to invest every year in acquisitions they can write off against their high tax liabilities and still net billions upon billions in profits. So, maybe they acquire a company, its IP, patents, etc. Invest in new ventures like its own line of cellphones and laptops. Building a global network of servers to support its software and make available commercially to other businesses. They have economic means to invest in these avenues without much consequence.

Phil should be commended for what he did. Xbox Play Anywhere is an amazing initiative. MS has now widened their audience and are able to reach more gamers. Giving people choice is good. Exclusives are bad for the consumer. Games should be available to as many people as possible. MS is more concerned about selling software and services as opposed to hardware anyway. Only dumb fanboys care about exclusives. I never understood why gamers praise exclusives. If you like a game so much, don't you want everyone to be able to enjoy it?

Well I mistakenly double quoted but context clues could have told you that my response was not to what you said. Regardless of that... because a game is put on Windows (a Microsoft platform if you're keep track) he's doing a terrible job? Nevermind that the additional sales will likely lead to more money and thus a greater chance that more games will be made. But no, you're right, keeping games on exclusively on the console just to appease the few people who take allegiance to a piece of plastic makes sense. /s

'play anywhere' I have yet to encounter a single human being either on or off the internet who gives a flying **** about having a choice of playing a game on a shitty Xbox as opposed to playing the same game on a far superior PC with hugely increased quality and performance.

I will now just blow your absurd fanboy drivel completely out of the water with the ONLY game related subject that has ever been close to your heart in your entire post history.

Phil Spencer to Gamespot: 'Why would you want 60 fps?'.

Based on what he said, maybe.

So completely devaluing the Xbox reason for even existing just to grab a few sales on PC is a masterstroke in your estimation? lol, okay.

I answered your question about game development. Spencer knows how long it takes to make games. He plans ahead. Or doesn't.

It's 2017 and he has jack shit and has sold the Xbox brand down the fucking swanee as a diluted mess with PC.

Do you understand now or are you going to continue to feign stupidity? Hey Spencer does that all the time, why shouldn't you?

Xbox Fanboys, "Pachter is a genius!"

LOL, I see that your sessions with the shrink are not helping. At least ask him to prescribe you some meds.

I can get my 60fps+ for MS games on PC thanks to Phil.

@blueinheaven: again, only fanboys think by having more people play a game that it devalues a console purchase. "Oh no, people on PC can play a game that I can. Oh well that means I can't play and enjoy it on principal." Sad, but I can't expect better logic from someone who has to resort to name calling, because their point is so paper thin.

Anyone with half a brain knows that MSoft aint giving up the living room.

During 4th of July week we probably rented $35 worth of videos alone.

They have one of the best stores going.

@mprince131: sadly thats the life of a fanboy....

I guess so.

The guy is like the reverse Nostradamus. Everything he predicts ends up being the opposite from reality.

Shit... better go buy a Switch or PS4 now.

People care way too much about who wins or who loses...lol. Some people need to wake up, it's irrelevant...

Patcher just jinxed the Xbox.

Well I for one will say thank you Phil Spencer for bringing MS Exclusive games to PC now and why the hell should they limit to those who aren't interested investing on there consoles? Not saying there console is crap or anything but more choices is always better for those who care about gaming on there PC's like me and like BassMan said, there is nothing wrong MS releasing there games for PC.

MS only cares about making money through Windows 10 and that's fine by me.

"Phil Spencer to Gamespot: 'Why would you want 60 fps?"

He was referring to the core console gamers only, not aiming for those who have PC like me.

pretty much.

and if any company is close to bankruptcy right now, it's SONY.

while PS4 is profitable, virtually everything else but TVs has cost them a LOT of money.

Halo 5 is still exclusive for Xbox One.

Oh man, you really got him there RonBot

Welcome to the better side of life ;)

I contest otherwise. MS has obfuscated their financials over the past couple of years by lumping Xbox and all its revenue into the "More Personal Computing" category, so it's hard to dissect what the actual gaming revenue is when it's presented alongside the revenue generated by - for example - Surface tablets. MS have also been less willing to share numbers about how their platform or their games perform at market, instead focusing on MAU (monthly active users) which, to my recollection, has never once dropped. How they calculate that number and decide what constitutes "active" is still ambiguous.

Even while the "More Personal Computing" group generates $40b in revenue, its operating profit is just over $6b (per 2016). To produce hardware is to live by slim margins. For a company MS' size, the amount of capital required to return a 15% profit margin (before taxes) is not great.

Granted, I don't think they'll wake up tomorrow and throw in the towel. There are too many barriers to entry for newcomers and they already have themselves a comfortable spot in the market with a valuable brand, generating profit. What remains unclear is how Xbox synergizes with the rest of MS' pursuits (hence why I feel the Xbox team has, to their reluctance, been forced to accept Windows more fundamentally in their publishing decisions) and whether the division is worth more being sold than it is staying in the MS family moving forward. But it's easy to see that the requisite capital might be better spent elsewhere creating markets than living in this one.

@blueinheaven: well actually it works like this, Spencer takes over for Xbox One that had horrible message delivery at launch and received poorly. So focus is on the Hardware. We ditch Kinect, bring out Xbox One S, add EA Access and game pass, BC adds to the hardware to make it more attractive. Work on the X1X, commenses. Games were already in development like Halo 5, Gears4, SoT, Crackdown, Scalebound. One of those games wasn't up to snuff got canceled. Latest E3 shows tons of games and diversity, Spencer him self said there are more games on development and coming but doesn't want another scalebound situation on their hands. Fanboys still complain, can't please people that don't care about the system any way ¯\_(ツ)_/¯

Lol, don't think so.

I do I love play anywhere and wish for more game to join the fold. just finished gears of war 4 with a friend of mine playing on his xbox1 I and excited for the new halo 6 going to play with my sister on her xbox 1. play anywhere a way to keep playing with my friends and get the best performance I love that

Xbox should never quit the market, else Sony will no longer have competition.

The Xbox brand is losing steam and you can tell. The competition has just many more and much better games. Microsoft should step up their game if they want to remain relevant. Actually maybe Atari now with their new console could start substituting them if they actually focus on games unlike Microsoft is doing.

.....and now whatever Pachter says wont matter.

Please...........guys...........stop quoting Pachter when it fits your argument.

Just looks silly

They have never been reluctant to accept Windows. It's been their vision from the start. Microsoft is using Xbox to push their gaming efforts on the Windows Store on PC, Tablet and Mobile (via turning PC into a Mobile device) and later VR/AR. Those initiatives are MUCH more important that a single device.

You're an idiot if you think people and companies buy Office 365 just for Word, Excel and PowerPoint. it's clear you have no idea what Office 365 overall is. Windows 10 and Office 365 are tightly linked together. Both being integrated tightly is what makes the ecosystem so strong for people and companies.

30 Mil. Consoles and 55 Mil. Active xbox live users is a lot of money. Also companies earn more money from their services than by selling consoles.That's why Nintendo put a subscription for online play.

This is bull.

For years Zune and the Surface line hurt the devices division and Xbox was the one carrying those divisions. Xbox has been profitable since the 360. Before you say RROD costs them a Billion you need to know that XB Live subscriptions alone during the 360 era was making Xbox 500 million a year. That doesn't include profits from Down loadable games, Music and Movies. Xbox is making Money and Lots of it. The financials are posted quarterly.

Agreed

I think the math might be fuzzy for his assertion. We don't really know how profitable the XBox business is by itself because it is lumped into the Devices division which shares corporate financing with the Surface business. The Surface is a very popular product from MS.

Patcher being 100% wrong, not sure what to make of this.

This is not news? This fact is well established. Only Playstation fanboys think otherwise we had arguments about this already.

@EG101: you're advancing a straw man argument. The debate is whether it is so profitable that MS would never consider exiting. As illustrated, there exists a scenario where it might happen, especially given the trends of a contracting console market and the growth of mobile (but more importantly, their respective margins).

WTF does that have to do with anything? He is head of Xbox not Head of PC and in that capacity he has done a terrible job. The fact PC gamers have benefited with a meager handful of games by default is absolutely irrelevant to what he has failed to achieve in his position.

He does not give a shit about 60fps to him it's secondary to reaching fake 4K on the Xbox One X so you are admiring the guy who pisses all over your own personal gaming philosophy. Nice double standards there from someone who spends his entire life bleating on and on about 60fps.

BC and 4K bluray players etc is all well and good but every platform needs its own supply of must have games. Games matter, seriously, everything else pales into insignificance. You are basically saying because they had Halo 5 and Gears 4 when he took the job he could happily forget about games for the foreseeable future? Seriously?

So we get to E3 and he shows a couple of multiplats and a ton of indie garbage and reveals he hasn't been working on one single solitary AAA first party title this whole time and you're fine and dandy with that? Did we miss the memo where it was decided that's not part of his job?

He may have talked the talk and walked the walk when he got the job and yelled 'I hear ya' to everyone promising this and that but that was a terrible E3 showing by MS and it's all down to him. The man's a fraud.

I get that people mostly play multiplats and exclusives aren't everything but they give a platform an identity. PC, PS4, Switch, people gravitate towards the one that sells them with the games you can't play anywhere else. Xbox has next to nothing, it's a dead platform outside of multiplats and the X with its Untrue 4K really isn't going to change that.

@daniel_su123: what stopped MS from publishing on Steam or other storefronts before now? Why, when GFWL crashed, did they retreat from PC entirely? They wanted the PC market to behave like Xbox and once it didn't, they withdrew back to Xbox. Now they are conceding to enrich Windows at their own expense (by devaluing Xbox from having exclusive games and letting Steam take 30% off the top of its sales, when they do publish there).

@blueinheaven: you under the narrative of because Xbox One games are on PC Xbox One is a dead platform. I'm the complete opposite, PC is a work platform and playing games on them is rediculous. Obviously your a PC guy and if you don't see a need for Xbox don't get one, they aren't marketing to you.