Microsoft, Nintendo, and Sony have been embroiled in a decades-long power struggle that audiences have dubbed as the "console wars." Yet, Microsoft, in a surprising turn of events, has conceded defeat in court, stating unequivocally that it has "lost the console wars."
"Xbox has lost the console wars," the company states with a disheartening certitude. The document, as per The Verge, goes on to portray the Xbox as the runt of the console litter, perennially occupying the third spot behind the PlayStation and Nintendo in sales, revenues, and installed base. The stats don't lie – with just a 16 percent market share and a 21 percent share of consoles in use, Xbox indeed seems to be trailing its rivals.
Stepping back, let's appreciate the dramatic backdrop against which this narrative unfolds. Microsoft's confession comes up from its court tussle with the FTC, which seeks to halt the proposed acquisition of Activision Blizzard by the tech behemoth. The regulators fear that this mega-merger could potentially skew the balance of the gaming market, possibly making Call of Duty, and other popular franchises, exclusive to the Xbox platform, which is a claim Microsoft vehemently denies.
Microsoft's strategy, a curious mix of humility and defiance, aims to cast itself as the underdog, the disadvantaged player in a field dominated by Sony and Nintendo. This defense has had a mixed bag of results in previous regulatory battles around the globe. While the EU approved the Activision Blizzard deal back in May, the UK's Competition and Markets Authority threw a spanner in the works, leading to an appeal slated for July.
In the middle of this legal kerfuffle, Microsoft's self-professed failure in the console wars begs a crucial question – is this a calculated move to make its acquisition seem less threatening? The answer leans towards yes. The company is betting on a different strategy that focuses on game sales rather than console sales.
Microsoft is essentially shifting gears towards becoming more of a software provider, substantiated by its efforts to expand the Xbox Game Pass subscription service. In essence, Microsoft is positioning itself as the gaming industry's Netflix rather than vying for the top spot in the hardware race.
A fascinating twist lies in the company's strategy of selling consoles at a loss. By doing so, Microsoft subsidizes gamers' hardware purchases, hoping to recoup this deficit through game and accessory sales. In other words, Microsoft is waging a war of attrition, betting on the long game rather than immediate console supremacy.
Then again, it's not alone in doing so, as both Nintendo and PlayStation have sold their consoles at a loss for years as well.
In any case, despite its self-confessed defeat, the company shows remarkable audacity in its bid to acquire Activision Blizzard. Its dogged pursuit of the $70 billion deal, even in the face of staunch regulatory opposition, suggests a company that refuses to back down. If successful, the acquisition could be a significant shot in the arm for Xbox, offering a path to recoup lost ground. But, if not, Microsoft has officially shot itself in the foot with its latest admission, which is a shame.
The next few years could potentially be good for the Xbox platform, with plans to release multiple exclusives for the Xbox Series S/X every year, including Starfield, Avowed, Fable, Forza Motorsport, and MachineGames' Indiana Jones project, as well as so much more.
As Xbox finally improves its position in Japan, it remains to be seen how waving the white flag will affect sales as we move forward, especially with the looming price increase.
Ultimately, we'll likely find out more about Microsoft and what its plans are for the future as the court proceedings with the FTC continues, among others. Aside from the FTC, Microsoft will also have to deal with the UK's CMA and New Zealand, which remain opposed to its planned buyout.