Xbox Was Always An Experiment, Now It’s Failed
Xbox has been embroiled in all kinds of controversy in the recent past. Whether that be being criticised for poor game lineups, tied up in legal battles over the purchase of Activision Blizzard for years, or more recently hiking the price of game pass. They’ve lost the bulk of the employees we’ve come to know as representing the fun side of Xbox, like Major Nelson, and their major games keep getting delayed time and time again. Combine this with poor sales versus the PS5, and it all seems to be coming crashing down for team green over in Seattle. In this video, we’re going to rewind all the way back to the original Xbox, which began the Xbox experiment, and connect the dots to see how the strategy behind each console has culminated in the failure of that experiment today, even though it could have all been so different. The Xbox experiment is over, and this is why.
The Xbox experiment
From the beginning, the Xbox was an experiment. Throughout the mid to late 1990s, Sony’s PlayStation 1 console had flown off store shelves. It was the first real console to embrace 3D gaming, twin sticks, and vibration feedback. Publishers put out games like Resident Evil and Silent Hill, and thus some of the most beloved franchises’ in gaming were born. Sony sold an astonishing 102 million PlayStation 1 consoles, and this caught the attention of Microsoft founder Bill Gates. At the time, he was pushing gaming on Windows computers. Microsoft developers had created their own API called Direct X that allowed them to create better and more lifelike games, and the the financial and technical success of Flight Simulator and Age of Empires – both of which used DirectX – indicated to Gates that that’s where the company’s future lay.
In 1999, when Sony’s playstation 2 was official revealed, it was clear that the Japanese giant was taking shots not just at gaming but the whole of home entertainment. This can be seen in the console’s DVD player, which was astonishingly groundbreaking for such a cheap device at the time. Of course, Gates saw this as a threat to his Windows ecosystem. He approached Sony CEO Nobuyuki Idei to see if the two companies could collaborate, but he was rejected. That’s when he set Microsoft on the path to creating a direct console competitor to the upcoming PS2.
By the end of development, they had a small black rectangle that they called the Xbox, because it utilised the same DirectX technology that their PCs did. Though Xbox was first and foremost a gaming machine, it featured additional capabilities for a consumer’s convenience. Out of the box, the console came standard with four game controller ports, a DVD player, hard drive, and broadband internet access. For all intents and purposes, Microsoft had created a gaming PC in console form that required less tinkering to play on.
The original Xbox console was released in November 2001, which was was still a year and some change behind Sony’s PS2. It had a flashy launch where Microsoft founder Bill Gates took to the stage in a PR stunt that involved Dwayne ‘The Rock’ Johnson, and Microsoft seemed to really get behind the Xbox. The Xbox was graphically superior to the PS2, but it struggled to gain traction, especially outside North America and English speaking regions. In its entire lifetime, the Xbox sold a measly 24 million units. That pales in comparison to the PS2, which sold 160 million units and remains the company’s best-selling console of all time. Despite this, the Xbox kicked off some unique franchises, like Halo Fable, Jet Set Radio, and it was seen as the Sega successor with Shenmue 2.
Gates hadn’t just invested all this time and effort to be beaten though, and work on the Xbox 360 was in full swing. Microsoft had learned some tough lessons the first time around, so they made sure that the 360 would be a people pleaser. Gates was adamant that this time around, the console would arrive early to market, be affordable, and not overcomplicate things their hardware and software. The xbox 360 would hit store shelves in november 2005, a whole year before Sony’s PS3. Because of this, Microsoft had an early lead that allowed them to dominate the market, and it didn’t help that the PS3 was overengineered and prohibitively expensive. The Xbox 360 would go on to dominate that entire generation, and things definitely seemed to be looking up for Microsoft going into the next generation. They had hit on the perfect strategy with the 360, so doing it again should have been a no-brainer. But this time, things would go horribly wrong.
There’s one name that dominates the early Xbox One era, and that’s Don Mattrick. Then the CEO of Xbox, he made numerous fumbles that led to the Xbox One’s downfall. He had an obsession with the Kinect and bundled it with every console. This caused the price of the Xbox One to be much higher than the PS4 at launch, even though it was actually less powerful than Sony’s offering. Mattrick also didn’t want to allow gamers to play used games, and he spent an awful lot of the console’s reveal marketing sports and TV, instead of gaming. Needless to say, he was quickly fired and replaced with Phil Spencer, who quickly stopped bundling the kinect with the console and tried to right the wrongs of Mattrick. This period of Xbox represents the beginning of the end of the Xbox experiment that has had knock on effects today, but we’ll delve deeper into later in the video. Sony’s response was to use Microsoft’s strategy from the previous generation and undercut the competition with clear branding and low prices. It worked, and over their lifetimes, the PS4 sold 117 million units compared to the Xbox One’s 57 million. Microsoft released Game Pass in this generation to try to beat Sony on value. Top Xbox management like Spencer and Major Nelson got behind the subscription service and it became a a core staple of the Xbox experience. While Game Pass was a success, it wasn’t enough to sell more consoles and claw themselves back from the awful start the Xbox One generation had.
This brings us to the current generation of consoles, the Xbox Series X and S. Even though it’s been almost half a decade since these consoles landed, the Series X and S have not gained as much ground against Sony as Microsoft hoped. Forecasts show that Xbox hardware sales have dropped 12.7% year on year, despite still being in what industry analysts call the growth phase. In fact, all signs show that the 8 year old Nintendo Switch continues to outsell Xbox consoles by double. And it doesn’t stop there. There’s no denying that Xbox hardware sales are in the toilet. Statistics show the Xbox Series X and S combined have only just outsold the original Xbox. And they’re still half of that of the Xbox One, which itself sold almost 25 million less than the 360. In contrast, the PS5 has sold 61m units to date, which is almost three times as much as the series x and s, yet Sony ask’s you to pay for $70 exclusives and offers a worse subscription service in Playstation plus compared to game pass. We have to ask ourselves: Why is that? The reason, I think, is because gamers, at their core, just want good games, and to feel like they’re part of a community. Microsoft has eroded all of the community by basing their strategy around an amorphous Game Pass service. How can you phone up your friend and say “you need to check out this new console exclusive” if they aren’t making any? Microsoft is killing their own marketing. It doesn’t matter if your service is – or was in game pass’s case – a good deal, it matters if there’s anything we want to play on it.
Spencer has, however, always made clear that Game Pass is the real money maker and that console sales don’t really matter to the company. An IGN report about the changing nature of exclusivity hits the nail on the head when they talk about how Xbox has redrawn the games industry landscape, which traditionally consisted of walled gardens, where companies like sony and microsoft would keep their audience tied to their platform with exclusives. Since the 360, Xbox has deliberately worked towards tearing down those walls to make a device-agnostic, cross-platform landscape. On the surface of it, that might sound like a great idea, but in reality, it’s led to the erosion of the Xbox community and what it means to be an xbox gamer.
While this issue might have started around ideas of community and Xbox exclusives, Microsoft has made numerous strategic mistakes in recent years that are now contributing to the downfall of Game Pass itself. A Forbes report by Paul Tassi states that Game Pass’s growth has slowed to a near standstill because Microsoft has run out of wells to dig up new subscribers. Tassi points out that all signs indicate that every gamer who wants Game Pass – namely Xbox and PC players – has already subscribed to the service. There isn’t going to be some magic formula that suddenly gets your grandma, whose last game was Wii Sports, to want to play a catalogue of games.
This is now further compounded with the price hikes of game pass. We knew in our heart of hearts that the cost of Microsoft hoovering up all of these studios, especially Activision Blizzard, would inevitably be passed on to us, the consumers. The new base tier of the service called Game Pass Standard doesn’t include day one games or Cloud gaming. While the Game Pass Ultimate subscription price has increased to $19.99/month. PC Game Pass has also gone up in price, and the current Game Pass Console will be discontinued. It’s clear that now that Microsoft has run out of new subscribers, the only way to boost profits is to milk it’s current subscribers for more money, arbitrarily shutting off day one games, something that made Game Pass so enticing in the first place. They’re dividing what’s left of the community, pricing us out of day one games when inflation is rampant and people’s finances are taking a hit everywhere across the globe. And that doesn’t seem very inclusive, does it?
To add insult to injury, despite fighting years of legal battles to buy industry titans like Bethesda and Activision, we haven’t really seen much benefit at the player level, and it only seems to be getting worse, not better. For example, Game Pass usually announces around 6-8 games coming to the service every few weeks, but the first half of August saw just three new additions. So, even though they’ve hoovered up all these companies, they have little to show for it. Where are the games? The fun games? The original games? Where’s my World of Warcraft subscription that should be included with game pass?
The Fall of “Xbox”
There’s no denying Xbox shifting focus from its hardware and exclusives to Game Pass seems to have been born out of necessity. Xbox have fallen far behind in the so-called “console wars” since the heyday of the Xbox 360. And in doubling down on their post 360 losses, they’ve gone generic. Xbox isn’t really a community anymore, it’s an app like Netflix. No longer are there hordes of ravenous xbox fans at midnight launches of Halo, there’s just a game pass subscription.
Directionless, Xbox has been coasting since their hit with the 360. First, Don Mattrick came along and destroyed our faith in the brand by moving further away from gaming. But even after the poor launch of the xbox one, gamers still bought in through blind faith, which is why there was only a 25 million sales drop from 360. Despite Spencer initially seeming like a great guy to turn the ship around, his focus on Game Pass slowly started to eat away at Xbox’s core audience who had remained loyal. I have another video about how Phil Spencer let us down and ruined Xbox if you want more detail, but it’s safe to say that his reign has only ended up adding fuel to the fire due to a lack of exclusives and excitement for the brand.
In the end, Xbox was always an experiment. The original was an attempt to give us a PC in a box. It sold 24 million units compared to the Playstation 1’s 102 million units. Despite only selling 25% of what sony did, they rolled the dice on the 360. It was an experiment to see if they made a more traditional console whether they could beat sony. They happened to strike gold with the perfect strategy, and they were given the keys to future success. If only they’d listened. Xbox One was an experiment in kinect, and it failed miserably. Series X and S have an experiment in game pass, and whether they need to continue making consoles or if they can just get our money from app subscriptions.
Make no mistake, we will all, at some point, be playing “Xbox” solely on a streaming app, whether that’s 5 years from now or 50. We will probably play PlayStation that way too, but they’re smart enough to understand what we want NOW and not keep banging the drum we don’t want to hear. It’s a sad state of affairs for Xbox fans now that the meaning of what it means to be an Xbox fan is gone. What started as a literal box filled with Direct X has now become a place for generic gaming, no different from GeForce Now or or Amazon Luna. The big, black rectangular box in my living room doesn’t really SAY anything. It doesn’t scream fun, excitement, or now experiences. Frankly, I’m not even sure what else Microsoft can do to breathe life into Xbox, and I don’t think they know the answer to that either. And that’s why the Xbox experiment is finally over. They were given the blueprints to success with the 360 – it’s just a shame Mattrick and Spencer have been reading them upside down ever since.
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