Forget Console Wars: Sony & Microsoft Can Both Win Next Generation

Congratulations, gaming fans. You can do it!

All of you.

After Sony’s somewhat messy reveal yesterday of many things PlayStation 5 plus Microsoft’s announcements last week regarding the Xbox Series X|S platforms, the foundation of gaming’s next console generation are starting to fall into place.

With these announcements and a subsequent trickle of details, both manufacturers are solidifying their individual strategies. Sony with its more direct platform marketing and big-budget exclusive software compared to Microsoft’s two-tiered hardware plan plus service as an ecosystem play.

And I believe that both of these can, and will, work out for them.

Starting with Sony, the Japanese tech giant shared that the PlayStation 5 base version starts at $499 with a Digital Edition set for a quite competitive $399. The only difference being the latter doesn’t have a physical disc drive. Both release on Thursday, November 12th in seven markets, then November 19th in the remainder. Launch lineup includes games like Demon’s Souls and Marvel’s Spider-Man Miles Morales (which now has an Ultimate Edition with a remastered version of 2018’s Marvel’s Spider-Man), with the most notable point being increased prices compared to last generation. The broad video game price increase is officially underway.

Sony’s showcase also had brand new announcements like Final Fantasy XVI from Square Enix and Warner Bros’ Hogwarts Legacy then capped off teasing a new God of War title in development from its Santa Monica Studio. Overall, it was a tight, informative presentation albeit missing a number of key details for things like software release windows and pre-order timing.

Messaging from Sony has been all over the place in the time since this reveal. First off, Sony allowed retailers to dictate when pre-orders went live despite saying that they would provide “plenty of notice” previously. Also in the past, executives like Sony Interactive Entertainment’s President & CEO Jim Ryan have stressed how the company believes in generations. That is, targeting games for strictly the new console as opposed to cross-generational type releases.

Then yesterday, the garbled communication accelerated. The team said PlayStation 5 games including Marvel’s Spider-Man: Miles Morales, Sackboy A Big Adventure and even next year’s flagship graphical powerhouse Horizon Forbidden West will also have PlayStation 4 releases. An inconsistency with seemingly its underlying strategy of established generations. Now, this makes all the sense in the world from a business standpoint. There are 112 million PlayStation 4 consoles in the wild, most owners of which won’t upgrade for a number of years. A clean-break generational move is antiquated in 2020, when backwards compatibility and maintaining a library is important.

Early adopters are going to buy the shiny new box regardless. It’s more about people six months or years from now that will determine the trajectory of sales. These companies have to consider those just as much as the enthusiasts.

In another twist, Ryan said in a couple interviews with media that the overall catalog of games is less significant than having “new, great” software offerings. Combine this with the massive $100 million or more budgets for its first party projects, Ryan doesn’t think that launching games into a subscription service is sustainable.

The irony is that I believe bridging the gap between PlayStation 4 and PlayStation 5 is one of the reasons why Sony can be successful in the upcoming cycle. Maintaining continuity with its legacy owners and their libraries will allow people to upgrade without fear of losing access to their favorite games, especially with many titles being live services now and not providing clear upgrade paths. Early adopters are going to buy the shiny new box regardless. It’s more about people six months or years from now that will determine the trajectory of sales. These companies have to consider those just as much as the enthusiasts.

Another reason I believe Sony can achieve is competitive pricing, especially the Digital Edition at $399. This model comes without sacrifice in the power department, it’s just that it only allows for digital downloads. Sony apparently had locked in the idea of getting at least a version to the same launch price of PlayStation 4, and they succeeded. The question comes down to availability, and anecdotal evidence says the digital version is much harder to find despite Sony saying that the PlayStation 5 will have more units overall at launch than its predecessor.

Finally, and it’s no secret, Sony’s software prowess is near unparalleled in modern game development. Its studios are among the most talented in the business. With projects like Horizon Forbidden West and God of War 2021 in the pipeline from internal teams, Sony seems to be leveraging a similar software strategy as last generation in quality, single-player experiences.

It’s also making key partnerships with external publishers, such as the aforementioned deal with Square Enix for Final Fantasy XVI console exclusivity plus its work with Bluepoint Games on major remakes, to round out the portfolio. There’s also a new service offering as part of its PlayStation Plus membership: PlayStation Plus Collection, where legacy titles will be available for PS5 owners.

That’s how Sony can win. Solid hardware pricing to sell volume of both editions, new foundational games on console then PlayStation Plus and even PC on the back end down the line. It just needs better and more honest messaging, clean up the pre-order process ahead of November and share information on upgrade paths like it has with Marvel’s Spider-Man: Miles Morales in that the game moves with players from PS4 to the upcoming generation.

Switching to its main competitor in Microsoft of course, its Xbox Series X and Xbox Series S consoles debut a bit earlier the same week on November 10th in a simultaneous global launch, for $499 and an utterly aggressive $299 respectively. Both are also available via what’s called the Xbox All Access financing program, for $34.99 and $24.99 per month each. This comes with a subscription to Xbox Game Pass Ultimate, an immediate library of software. Which is a key part of enticing especially new buyers, not having to drop so much money up front like generations of the past.

As I’ve stated before, the American software and cloud conglomerate’s modus operandi is ecosystem and services. Lowering the barrier to entry, offering games and subscriptions on a variety of devices beyond its consoles, embracing cloud as a complement to traditional gaming plus connecting everything in its Xbox brand. Its Xbox Game Pass catalog of games monthly subscription service is arguably the best value in the industry, considering that all new first party titles launch simultaneously into the service on their retail date.

Then there’s Project xCloud. Microsoft formally launched the cloud streaming offering just earlier this week for Xbox Game Pass Ultimate members in various countries for use on Android phones and tablets. It’s a play on the future direction of the industry. Despite some critics prognosticating otherwise, I don’t believe it’s a replacement for traditional games. It’s a complement that will offer yet another way to play console and PC quality software. Which means it won’t cannibalize sales, it will be accretive to the business line.

“We really built this strategy around that – play the games you want, with the people you want, on the devices you want or already have,” said Phil Spencer, Head of Xbox. “The high-level goal for us is can we build a platform where more people want to play more games more often?”

What this means is that Microsoft is foregoing one-time purchases up front to make it up in volume, monthly fees and player engagement. It hopes to monetize on an ongoing basis, and keep people in the ecosystem whether using hardware, PC or even mobile via cloud.

So, what does this have to do with winning? Everything.

A holistic approach makes Microsoft less dependent on core hardware sales and major, blockbuster exclusives than ever before. Its hyper-competitive pricing tier for Xbox Series S gives the most realistic entry point for various slices of the market: lapsed gamers, those on the fence about an upgrade and even PlayStation owners looking for a way to try games not available on that platform. Sure, the company is chalking up a loss on hardware and even generating less revenue up front with service discounts. It’s still built up a user base of 10 million strong for Xbox Game Pass as of last month, many of which have or will renew even when their discounts expire. And according to various accounts, this leads to people not just playing more games but also buying them, bumping up software sales alongside the subscription.

Xbox has also been much better about messaging and marketing, sending a clear signal with both its pricing and retail packaging. Its social media team is on fire, rolling with the punches during leaks and summarizing perfectly the contrast between its console models. While some argue that offering two models with similar names is confusing, I strongly disagree and think that tech consumers are more knowledgeable than that in the age of multiple iPhone models and countless TV iterations. The pricing alone tells the story: Xbox Series S is for those looking to enter next gen at an affordable price, Xbox Series X is for the enthusiasts that are much less sensitive to cost.

A holistic approach makes Microsoft less dependent on core hardware sales and major, blockbuster exclusives than ever before. Its hyper-competitive pricing tier for Xbox Series S gives the most realistic entry point for various slices of the market

The main question (and it’s a big one, no doubt) surrounding Xbox is its software lineup, at least early in the cycle. Without games like Halo Infinite, Forza Motorsport or Senua’s Saga: Hellblade 2 at launch, it will lean more on smaller titles like The Medium from Bloober Team and Ebb Software’s Scorn, older first party games like Gears 5 and Gears Tactics plus external, multi-platform releases such as Assassin’s Creed: Valhalla and Destiny 2: Beyond Light. With the amount of studio acquisitions and announced games like the aforementioned bunch plus Rare’s Fable and Everwild, I anticipate a more beefed up portfolio within two years of launch. Which is really the time that’s most make-or-break for sales.

Microsoft is one of the world’s largest companies, and while Xbox is a key brand segment, it’s a small portion of the overall business. We’re still talking about an $11.5 billion or more annual revenue generator here, one where Microsoft is clearly investing in parallel to its Cloud offerings. The firm can sustain a hit from discounted Xbox Game Pass and All Access programs, as long as the opportunity is there to keep players over time. These are meant to build up the audience base and benefit over the longer term, even if shorter term it appears to be slower than its competition.

As noted throughout, we now know how both Sony and Microsoft are throwing down aggressive pricing this holiday season for some powerful next generation boxes. Both are investing internally, mapping out marketing, purchasing studios and making partnerships in attempts to win mind-share and, most importantly, dollars.

Sony promises more PlayStation 5 consoles at launch than PlayStation 4, offers an enticing Digital Edition upgrade for PS4 owners while also solidifies a more impressive launch lineup of software even if its messaging has been jumbled. Microsoft’s message has been direct: Its Xbox Series S is the most affordable of the bunch and both consoles are available via a financing option for folks that might not want to pay up front or have been impacted financially by coronavirus.

It’s not quite time yet for my detailed forecasts, though this piece should give an early indication of where I’m at in that I expect both manufacturers to sell out of launch stock then move into the later years of this generation with unique offerings that absolutely will attract buyers. Even some that will overlap. If I had to pick, I’m slightly more bullish on Sony’s prospects especially if they can supply enough Digital Editions to the market at that extremely attractive $400 point.

That doesn’t mean its competition can’t also win. Each has something the other doesn’t, which means victory is attainable for all. Most of which, console gamers. Even if they’ll probably continue to fight among themselves for eternity.

Stay safe all. Thanks for reading!

All prices reference above in U.S. Dollars. Local pricing available at manufacturer websites.

Sources: Fast Company, GamesIndustry.Biz, Microsoft, Sony, TechRadar, Washington Post, Xbox Wire.

-Dom

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