Explaining Xbox (What is going on?)

what the heck is going on with Xbox let's try to make sense of all of it to say that Xbox fans are feeling a little rejected under the weather saddened or just honestly unsure about the future I think would pretty candidly be an understatement through the past I don't know a couple months here basically in 2024 Xbox has been been hit with blows left and right kicking things off with layoffs of about 1,00 people and then there were some studio closures this week and sort of a reshuffling of the deck if you will the future feels uncertain if you're going to be honest here it felt like we've kind of completely shifted from this Rocket Ride after Microsoft was able to close its Activision acquisition to like they put away the credit card and they've pulled out the blade right they went from spending money to chopping things off and so for those of you who are trying to make sense of all this I've done I've really like laid out I think hopefully the whole narrative and I'm going to try to explain this from the perspective of hopefully m now I don't want people to think well this is just Brad trying to defend a trillion dollar company I would like to remind you that I am the reason that this tweet exists the intent of this to tr is to try to understand what is going on in the world of Xbox from a business perspective that would think make make them think that cutting Studios that that just released high-fi Rush which was one of their best received games lately is the right move it is a challenging and tricky environment Microsoft Xbox has put itself into a a corner if you will and they're they can't spend their way out they now have to justify everything that they have done so let's spin Back The Wheel of Time here just a little bit and kind of group up on what is happening so far so if several years ago everybody will remember this Microsoft closes the 7.5 billion doll Bethesda acquisition at the time it was a blockbuster purchase for Microsoft it made shock waves it was such an expensive purchase for the Xbox org and wow we had no idea what was actually coming but at the end of the day Microsoft spent $7.5 billion on Bethesda and we also know that they've also spent nearly $70 billion on Activision and that's not even including things like Mojang and compulsion and Ninja Theory and the list just goes on and on and on Microsoft opened up the checkbook and just started buying up Studios which was clearly part of a strategy which I don't think many of us would say is a bad strategy it was very clear that Microsoft sat down and said look we bought Minecraft it was huge for us I bet we can replicate that success and let go all in and so they said we're going to send it and that's exactly what they did by buying up these Studios and trying to create a Content Factory of AAA titles right they said look if we can get to a position where we're launching multiple AAA titles per year we can launch a subscription service which we know as Game Pass and it will be a phenomenal hit and everybody who's sitting around the boardroom because again Phil Spencer can't sign off on a on an acquisition just like this it's got to get board approval and they all said yeah we buy that theory I think it makes sense that this is how we can take Xbox from being a nice business inside of of Microsoft into being a growing and healthy and thriving business and potentially try to own the market and so that is what we have seen is that Microsoft just reaching its arms out swiping the credit card bringing these things in house for years after years after years and this was likely phase one of their actual model here right they they clearly said this is the business model we buy we optimize we sell and that was probably and sell I mean sell Game Pass subscriptions I don't mean spin out Xbox and so that is kind of where 2023 ended was the end I guarantee that at the end of 202 you're like we're not buying any more Studios you now have to work with what you have we have given you all the resources financially that you're going to get an Xbox needs to start growing after this massive investment from the the treasury box from Amy Hood Amy hood is the CFO over at Microsoft if you want money you go to Amy hood and then she will give it to you but you better be planning on to give it back and now we are in the give it back backstage and Xbox needs to it needs to solidify itself as a business so when you're in the position of say Matt booty or Phil Spencer or any of the Xbox leadership and you're saying look we've got all these assets we've got all these Studios how can we become more efficient and actually start delivering because let's be honest there's been some major fails um redfall is a notable title that just completely flopped Halo infinite did not meet expectations and these were big budget titles these were big budget titles that did not deliver on the expectation of the investment that was given to them so what does Xbox do what what would you do well you got to start trimming we've already seen it on the Halo infinite side they cleared the deck of management and said you guys clearly can't do this you've you've hurt this brand and so you're gone and that has happened on the Halo side and they're trying to recover from that and candidly the latest multiplayer update is actually pretty decent although we're hearing again that the The Narrative the story playing story playing storytelling side of it is has been canned you know to be determined on what actually happens there but at least multiplayer is still getting love at the end of the day however Xbox is not just about doing okay right you can't put this kind of money in continuously and expect things to just go well and so as the time continues to turn here we're in this phase two and phase two means it's starting to optimize and so we're starting to see things like this optimization really means headcount reduction if anybody's listening to this and thinking that Xbox was going to buy up all these Studios and be an Arbiter of society and not lay anybody off you have never seen a big company acquire another it is given I have I said it many many times leading up to the Xbox Activision deal I said look Phil Spencer is spending all this money his feet are going to be to the fire to then not to optimize streamline make things more efficient and so earlier this year 1900 Activision Blizzard staff were let go that is that shouldn't have surprised anybody and it it sucks I'm not trying to say those 1900 people aren't humans like getting laid off sucks there's no other way to describe it it hurts it's painful you put your life into a company and they come one day and just say you know what you're not worth it and I've been on the receiving end of a layoff before it is horrific and those 1900 people have my deepest empathy for this sort of thing but that that if you didn't see this coming then you need to really look at how every single acquisition in history has gone down if you buy a company for $70 billion and they have a full accounting staff you don't need that you don't need the over overhead for these sorts of things it's unfortunate but you're buying the the revenue generating assets not the people who are doing the accounting it's it's just the way it is and anytime there's going to be an acquisition of nearly any size layoffs will happen it's almost a guarantee at the end of the day and then there's the news from just this week so earlier this week Xbox sent out the memo and and announced and says hey we closing uh the developer of Arcane and Austin which was redfall then the interesting one the high-fi rush developer Tango game works and more other cuts across Bethesda and elsewhere now redfall is not all that surprising we all know what's happened with redfall the the more interesting thing for me at the end of the day is that redfall was such a disaster that they are just they're they're giving up like they are just their ending development of the game of redfall that is how bad it was and that they looked at it and said is if we shipped an update that might make this more viable to people do we think we could ever recover the investment we put in and the answer to that was no and that that tells you how bad redfall was for Microsoft Xbox internally because they're just it it's done it's done like that's it and they're actually going to give a refund to people who bought some of the like the battle pass or whatever the equivalent Game Pass or the battle pass equivalent or season pass they're doing refunds like that is how bad that went for Xbox after spending all these money on these Studios so just kind of keep that in mind that things were bad now it doesn't make sense how Microsoft approached this and there's a lot of blame to go around people will absolutely start pointing their fingers and saying was this an Xbox problem was this uh assigning the wrong type of genre game to Arcane uh out of Austin which is a very real inv viable statement at the end of the day like hey the the firstperson shooter probably wasn't the best thing to assigned to them I suspect that the reality is um talented developers can make talented games but I also suspect that there was some timeline issues right building games is increasingly hard especially when you have big budgets big budgets just mean big problems at the end of the day you have more people you have more management you have more Logistics you have more things going on you have higher expectations and so that's why this Narrative of like maybe we should make smaller Games should start is starting to come out because these big budget Blockbusters are not there's no model for guaranteed success it's not like they're going to go build another X-Men movie or Transformers movie that you know will do well building a blockbuster game if you can't get it out is it's just a very hard thing to do and obviously Microsoft is learning that and and unfortunately a very hard way so what is Xbox actually going to be doing here this is this is where you know people like myself who have been following the company for a while start to understand so if you've ever seen an acquisition like this for Microsoft they do they generally follow one one or two models right there's sometimes the model of like what we're seeing where they acquire they slim and then they try to optimize and then they try to ship um there's also other models where they say look you're just an independent company Skype is an example of this I believe you can just sit over there continue to do your thing and then you're going to be able to run yourself and that's not what we're seeing here it looks like from these big titles from these big companies even Activision which is you know kind of running itself when you're that that expensive you're you're not running yourself you're still reporting up through the org and you still have um that sort of stuff so Xbox has said this and I believe this came directly from Matt booty he says to double down on these franchises to invest and build new ones requires us to look across the businesses to identify the opportunities that are best position for Success the rep prioritization of these titles and resources means a few teams will be realigned to others to get some of our colleagues and and you know some of our colleagues will be leaving us and blah blah blah this is Corporate speak at the end of the day of we are cutting things that we don't think can make us money we are going to put more money and I say money in quotations here because we don't exactly know what this means but they're going to put more attention into the titles that they think will actually do well like the easiest example is Call of Duty it makes sense for Xbox to put more money into Call of Duty because it has a guaranteed formula to generate its returns it's not risky they know what to do they just need to make it a polished experience ship the title and they will reap that in however along the way Xbox has been saying we should start making smaller games and we need to be more critical of our investments but that doesn't really make sense either because Hi-Fi Rush which was a and please do not attack Aon Aaron is a very nice individual um Hi-Fi Rush as Aaron said uh about a year ago in April was a breakout hit and it did exceptionally well it got very good Metacritic scores it was by all means the perfect Shadow drop for Xbox and then we kept word that like hey uh Tango is being shut down now there's some confusion around this a little bit because there's the rumors and flying around that the leadership of that studio uh Left Right which I think that's a known quantity and the confusion right now is like when the leadership left did he take a bunch of assets with him assets I meaning uh people the people that were building the game I don't know why I called them assets assets don't have feelings people absolutely have feelings I apologize to those people uh but when he left he took some people with him and what was left of Tango after highi rush has just kind of been a shell and so is shutting down Tango really shutting down Tango at the end of the day you know the opinions on the internet go both ways that Tango is not what it used to be um even though Hi-Fi Rush was really good it doesn't really matter at the end of the day the optics for Microsoft are terrible however from an internal perspective Ive they may look at this and say Tango isn't what it used to be but more importantly I guarantee they sat down they said look if we build high-fi Rush 2 if we build high-fi Rush 2 are we going to recover our investment will is it a good game would it make us money and I suspect that the answer to that was probably not what fans want to hear that that's the only thing that makes sense the other potential option here is that Xbox may have said look we can Farm out tank or high-fi Rush 2 art assets and style is all there they just got to go make new levels and add some new storyline we can do that in house or to anybody else we don't need a dedicated studio and if Tango isn't going to be building high-fi Rush 2 what are they going to be doing do we want to just give them creative freedom well we don't really have that capacity right now and so they got chopped I'm not saying I agree with it I'm just trying to add some context about how and why this may have happened at the end of the day and so the the problem that Xbox finds itself in and this is a pretty genuine problem after spending all this kind of money if you're going to launch a new title if you're going to launch a smaller game and that's something Matt booty has suggested even though uh what we're seeing here kind of goes in the face of that is how much money does a title need to make for it to make sense you got to remember Microsoft itself is a two you know a couple trillion dollar business so if they're going to let's let's use let's use Tango in a theoretical example here we have a title that Tango can make it's not highi rush 2 a new title or whatever we will give them $7 million and in two years or 3 years three years is probably more realistic they're going to put out a title that we expect will add it'll will make $10 million pick your number whatever I don't know what the number is let's say they will make $3 million that they can put into the bank is that worthwhile for Xbox to do if you're a small Indie shop absolutely it's worthwhile doing because $3 million is your next $3 million investment into your next title but when you're Xbox and $3 million on that sort of an investment it may not make sense anymore because you're so large there's a term in the you know too big to fail like Microsoft is in this or Xbox is in this weird thing it's like too small to succeed right because oh yeah you you shipped this small game you shipped it quickly and it did well but it it's not moving the needle for the overall Xbox orc which is a very real problem that Xbox has backed itself into a corner and you you have to understand that when they're looking at Investments right it it's an old worn buff statement says it's easy to find a stock that will make $10,000 but I need to make 10 billion for my investors well how is Xbox going to invest in a title that doesn't make 10,000 but makes 10 billion not literally 10 billion but you guys understand what I mean and so this is what's happening these are very real conversations that are happening inside of Xbox and obviously they have things like Call of Duty World of Warcraft Diablo those sorts of Fallout is doing exceptionally well like these Big Brand titles and it's like that what Microsoft is going to latch on to because they know that they they at least have the option of getting to that massive return rather than those smaller releases that may not even though Xbox is signal like smaller games make sense when we think small games might be very different than what actually Xbox thinks is a small game for it so what is like you know what is next for Xbox here is a very interesting question so and like two weeks time roughly something rounding an error like that hellblade 2 will release now there's already a lot of discourse on on Twitter and x and Reddit it's like is Xbox prepared for hellblade 2 to be a success or is this another redfall we don't quite know it looks like it's better than what we expect from a redfall I think that's a a given at this point especially the marketing campaign that is behind it but let's pretend that h hellblade 2 comes out and doesn't do well I don't even want to think about what that actually means for Xbox because that is that is a huge black eye again for the Xbox or it has to succeed much like Starfield had to be well received which it mostly was it's not perfect perfect I don't expect hellblade 2 to be perfect either but it has to do exceptionally well and so then we get this and this is what I've alluded to it says I believe this was from Matt booty oh yes it was he says we need smaller games that give us Prestige and awards well you had that you you had that along the way with uh what was it high- five Rush here whoops wrong one with high five rush and so like that formula existed and then you dunk the studio out into the ocean and you're not pulling it back on Shore and so there this is the problem it's not that Matt booty said this is what we need to do smaller games it's the fact that Microsoft now has a contradictory success story that they're no longer grappling on to because now anytime they bring up high-fi rush it doesn't matter be like oh yeah we released high-fi rush it was a great Stu it was a great title every Xbox fan and gaming fans be like yeah and then what did you do you shut down the studio and so this is what I mean that Microsoft has backed itself into this weird corner of saying this is what we need to do which is a small title and then small title succeeds but it's not good enough for the overall org and so you shut it down and this is the conversations that are going on like here's a real sort of thought experiment for you um would Microsoft have been better off for Xbox I should say have going to Activision and saying look we'll give you a billion dollars to put Call of Duty on Game Pass would that have been a better investment for than $70 billion I don't know what that $1 billion would get you but Microsoft clearly had the the checkbook and they knew that game pass growth is the defining characteristic of success would they have been better off it's kind of hard to say because I I lean towards it would have been there would have been a lot less drama doing that at the end of the day and just investing purely in Game Pass rather than Studio production because let me break something down for you when people look at these game studios Boulder Gates 3 great example they say look at these little independent Studios how did they create such highquality games and then kick them out and make tons of money cuz that's what everybody wants to do when your only chance at success in livelihood resist results in a single title release you put your heart and soul into that and that's how you get these quality polished games from small shops it's not because they because they have a huge backing right if you're an Xbox studio and maybe this narrative is changing and that's why we're seeing some things shut down if you're a big studio and you fail you're like well Papa Microsoft is going to go you know open up the checkbook they're not going to let us fire us all but if you're a small indie and you say we released this title and it doesn't do well what happens you are out of a job your dream is literally dead and so those motivational characteristics are vastly different than what is now inside this massive Xbox publishing arm that has just continuously propped up all these Studios I suspect that going forward um we are going to start to see we're going to start to see Microsoft look at Studios as independent businesses and they're going to say look if this title comes out and the re revenue from that title now granted game pass muddies that up and they probably have some formula if this independent Studio cannot support itself on the revenues generated from its title what are we doing supporting them and it's going to result in some terrible conversations and some very hurt feelings and it's going to be very bad for Xbox the problem that Xbox has right now is that they have to become better viable and grow faster and how are they going to become more viable and grow faster with specifically with Game Pass is is the metric remember they told us to judge them by we have to be efficient we have to launch effect L we have to launch consistently and they have to be high quality that is the mandate to all these Studios and we already know that shipping games is hard Starfield was late uh literally like every Big title I can think of coming to my head for the most part has been delayed in some capacity which is rough which is leading to this and I can confirm that this is accurate so Xbox staff is still not done cutting cost uh there's some voluntary buyou offers uh to some zenax staff and I can confirm what Jason is saying here is accurate one thing to keep in mind here is that June 30th is Microsoft's end of fiscal year when Microsoft typically does like wider scale layoffs or reorgs or everything it's always tied to their fiscal year their fiscal year ends in June 30th which means in July and August when reorgs happen that's typically when we see it some of this information here like these layoffs and everything else uh where's that happening out of band from the fiscal year is actually somewhat uncharacteristic it's not completely uncharacteristic um but typically these things would happen in July and so the pain inside of Xbox is not over for developing Studios and Xbox staff the the good times of the past three years of like Hey we're buying up Studios we're going to launch all these great games all of those promises that Xbox has made are now coming due and they have to start delivering and if Studios can't delivering more hard decisions are going to be made because at the end of the day Microsoft just spent nearly 80 billion dollar buying Studios with promises that they could create this Factory if the factory doesn't materialize the future of Xbox is going to look a lot different than what we expected this time last year so you know there's there there's everything I just now I have a brain dump whoops a brain dump onto what I believe is sort of the Microsoft view of what is going on this is a very business Centric company these are very business Centric decisions and they are not taking into account the blowback that they are receiving from fans the fans have been supporting Xbox and now Xbox is saying like look if we want to continue to do what we're doing we got to make these cuts and they're not sitting well with their with their fans how is Xbox going to recover it's a great question it either time will tell us that hey slimming up and streamlining their output is the right maneuver to make sure these studio is actually released on time with high quality or it's going to get bad it's going to get Rocky from here on out and we'll see I I wonder in my mind a lot of times candidly and we'll end with this is is Game Pass a sustainable model for gaming is it I don't know it works very well for Content delivery which is like linear content things like Netflix Hulu Disney plus because it's just streamlined right there's it's they're not games games are inherently harder to build require potentially bigger budgets I mean there's movies with big budgets but you know a AAA title is a couple hundred million bucks movies can be made for a lot less than that so the question that I will end with for here dear listener is is game pass a sustainable model for Xbox and the gaming industry so as always my friends that wraps it up for this video make sure to keep it subscribed here cuz the only BS on this channel is me

Channel: Brad Sams

Views: 24,329

Keywords: Xbox, Xbox Games, Xbox Future, Xbox studios, Xbox health, Xbox news, New xbox hardware, new xbox games, gamepass, xbox live, xbox gamepass value, should i get gamepass

Id: tSeBFSNJF5g

Length: 23min 17sec (1397 seconds)

Published: Thu May 09 2024