Microsoft invested years developing one of the biggest networks of game developers in the business. Xbox spent billions to acquire Bethesda parent ZeniMax and Activision Blizzard to gain access to such franchises as Call of Duty, The Elder Scrolls, Diablo, Fallout and Doom. The strategy in theory suffered from a content empire.
Now the challenge is management. The fact that players can easily switch between major console releases, mobile games, and casual titles like free slots Slotomania puts Xbox in contention in a much broader entertainment market. Fame is great, but only if you’re not diluted by delay, cancellation, or corporate restructuring, are able to put out solid games regularly, and have the studios to back up that process.
Buying Studios Was the Easier Part
There is instant gratification with an acquisition. They bring intellectual property, experienced teams and audiences as one in a single transaction. It’s a lot more difficult to run those businesses successfully.
All the major studios have their own production culture, technology and creative process. A company making an annual shooter is different from a company making a role-playing game in six to seven years. There’s a need for different management structures for mobile publishing, live service and premium single-player development.
Microsoft can’t have every team be like a cork in the Xbox. It’s harder to provide each studio with the proper amount of support, oversight and independence when it owns more studios.
Excessive control can stifle creativity. Too few can cause budgets and schedules to float away.
Game Pass Changed the Definition of Success
Xbox’s subscription approach also makes it hard to gauge the studios’ performance. A big game was the one that traditionally sold millions of copies. Other metrics such as subscriber growth, hours played, and retention were added to the mix with Game Pass. Even if the actual sale is not as high, a game may be worth the investment because it will keep the audience within the service. That can help with odd or limited projects, but it may also result in less accountability.
Studios must be aware of the desired result Microsoft wants to achieve. Does the goal involve sales, ‘subscription engagement,’ downloadable content revenue, or long-term franchise growth? Attempting to do all of these together can result in muddled development decisions.
Individual releases may also not matter as much in the light of day-one Game Pass releases. Players will have an opportunity to play without putting in a lot of money, but leave just as fast. Studios must still create films that matter, not just throw away projects from an extensive and bloated catalog.
Integration Has Created New Pressure
Today Microsoft’s gaming business encompasses teams in multiple countries, platforms, and business models. Adding the Xbox logo is not enough to integrate those companies. Microsoft’s got to get its release cycles, marketing plans, cloud systems, and platform expectations all in sync. It also has to determine which games will stay multi-platform and which will bolster the Xbox system.
That said, these alternatives can create internal tension.
While Xbox hardware and Game Pass might be more appealing due to its exclusivity, a franchise can also make more money if it launches on PlayStation first. A studio might be looking for more development time, or the broader business for a big release in a particular Financial year.
As organizations grow in size, it is easier for creative decisions to turn into corporate scheduling decisions.
Layoffs Damage More Than Headcount
Especially in game development, cutting costs is dangerous because something that can’t be replaced is expertise. Leaving means more than just lost employees for a studio when experienced designers, engineers and producers are involved. It forgets about all the tools, production pipelines and unfinished projects it has.
Multiple restructurings can also make the remaining teams more cautious. Developers may be unwilling to consider ambitious projects if they think that projects may be terminated after years of development. Executives might prefer to go with a certain sequel because experimental games can be difficult for them to back up with money.
That will keep the short-term finances in check, but diminish the long-term value of the studios Microsoft bought. You can’t afford to invest billions in hiring creative talent, and then view it as a normal operating cost.
Major Franchises Need Different Strategies
While Xbox boasts some of the biggest properties in gaming, not all can be managed the same way. Call of Duty relies on frequent releases, huge online communities and ongoing content. The Elder Scrolls are about long development cycles and rich worlds of single-player content. Minecraft is a platform that connects children, creators, educators and long-term communities.
Every franchise should have a separate investment plan. For Microsoft, the problem is that it can’t push all the big clients into the subscription, live services, or annualized content business just because it offers recurring revenues. Some games actually generate value by not launching as often and by turning into cultural events.
It’s the diversity of Xbox’s portfolio that is strong. That is a variety that management should preserve, not standardize.
Xbox Must Turn Ownership Into Output
Microsoft’s success with acquisition is not necessarily going to depend on the number of studios listed on a corporate website. It will be judged by completed games, by stable teams and franchises that get better over the years. Players must be made to realize that Xbox is a platform that can help Development without always having to worry about closures, delays and strategic changes.
Microsoft has a lot of the ingredients it takes to be successful. It has big brand names, technical infrastructure, distribution and a big subscription service. What it still needs to demonstrate is creative consistency at scale.
With the purchase of studios, Xbox grew larger. It’s only a matter of how well they can be run that will make them better.
