Microsoft's multi-platform Xbox strategy faces risks, rewards

Xbox Live stock

It has been an interesting couple of years for the Xbox, ones in which we've witnessed a shift from a hardcore gaming focus to a world of casual gaming with Kinect, avatars, and cross-platform Xbox games and services. Microsoft's Kinect sensor introduced the concept of controller-less gaming to the masses and Microsoft has started to push its Xbox Live services to devices outside of the console with Windows Phone and SmartGlass for iOS and Android.

"We're no longer just competing with the traditional console companies..."

This emerging trend isn't new, but looking at it broadly it's easy to pick out the future of Xbox as a brand and as an increasingly important tool for Microsoft to win back mindshare and consumers. Microsoft's VP of the Interactive Entertainment Business, Phil Harrison, has admitted that the company's game development teams are now multiformat studios. "We're no longer just competing with the traditional console companies, but our competitive landscape includes the likes of Google, the likes of Amazon, it includes obviously the likes of Apple," said Harrison at the London Games Conference this week.

This competition is pushing Microsoft into increasingly crowded markets to ensure that the Xbox brand is one that consumers look to for entertainment as well as games. "We think that's great. We think it's good for us, we think it's good for the industry and we think it also moves us into this network generation more aggressively and with more determination," says Harrison, who recently joined Microsoft after holding a variety of management and executive positions at Sony for over 15 years."We think of Microsoft as now being a devices and services company."

"There will be times when we build specific devices for specific purposes."

This focus mirrors Microsoft CEO Steve Ballmer's admission of "a fundamental shift" in Microsoft's business. Ballmer says Microsoft will "build specific devices for specific purposes" and it appears that a recently announced London-based studio will form part of that work. "It will be making products largely based on the Windows 8 platform and technologies," says Harrison. "And it's more about exploring new business models and pioneering new ways to play on devices that we think are going to be powering the future of our industry over the next five or ten years."

The Verge has detailed a variety of future devices that Microsoft is currently preparing under the Xbox brand, including an Xbox set-top box, 7-inch tablet, and a wrist-worn fitness device. These devices are all strategic moves to compliment a focus on multi platform games and entertainment services and will appear to casual and hardcore gamers. Xbox Music recently launched for Windows 8 and Windows Phone 8, but Microsoft will also release iOS and Android clients in early 2013. Likewise, Xbox SmartGlass is an early look at how Microsoft plans to leverage existing devices to connect to a variety of Xbox services and the company's existing and future consoles.

Increasingly, it's clear that Microsoft is positioning Xbox at the heart of its consumer play with a broad backing from its research teams. Future service integration with Skype will also serve to entice consumers to the ecosystem as a whole. Sources close to Microsoft's Xbox work tell us that the company is focused on building a platform for Xbox that will allow it to scale a hardware and software combination in a similar way to Apple's iOS model. The strategy is taking shape and the core of Windows 8 underpins this approach. Ballmer is focusing on devices and services and has removed Steven Sinofsky from the Windows division, a key adversary to Microsoft's various business units working in harmony.

The strategy is clearly taking shape, but it's not just a matter of creating devices. Microsoft's challenge is to capture a wider audience without alienating hardcore gamers. The risk is real, but the rewards are plenty, and either way, as Ballmer says, "it truly is a new era at Microsoft."

The Verge
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