Why Xbox Is Acquiring Gaming Studios

Microsoft, a tech giant and one of the world’s largest brands, has been acquiring various gaming studios for its Xbox division in the last few years. It doesn’t come as a surprise since Microsoft is one of the wealthiest brands, and it has money to spare for developing exclusive titles for its own console. But is that the only reason behind all these acquisitions? What do Microsoft and Xbox hope to achieve from these investments in the future?

Xbox is part of the Big Three that dominate the console market, alongside Nintendo and PlayStation. However, despite Microsoft being a multi-billion dollar company, their Xbox is the weakest one compared to the other two brands, at least for now. Its competitors, Nintendo and Sony, aren’t exactly smaller companies either. Both companies have built their empire and gained massive success in the gaming industry.

Nintendo has been one of the first companies to enter the console market. It has developed several home and handheld consoles over the last few decades that have been well-received by fans globally. The thing that sets Nintendo apart from the rest is that it doesn’t focus on trends but instead seeks to chase innovations and doesn’t hesitate to take risks.

On the other hand, PlayStation has been dominating the home console department ever since Sony stepped into the gaming industry. Ever since the launch of its very first home console, PlayStation 1, the brand has established itself as a force to be reckoned with in the console market due to its exceptional collection of exclusive titles, giving tough competition to the Xbox and Nintendo.

Compared to PlayStation and Nintendo, Xbox is a relatively newer console. The original Xbox was launched in 2001 and was able to compete directly during the sixth generation of consoles. But over the years, Xbox lost its touch for many reasons and continued to spiral downward. Check out the video below to see how Microsoft plans to deal with the entire Xbox situation.

A Brief History Of Xbox

One of the reasons that made the original Xbox console a success back in 2001 was the introduction of the Xbox Live Service and the console’s ability to support internet connectivity directly, compared to its competitors. Halo, an Xbox exclusive, also played a massive role in building the console’s reputation. Halo is easily one of the most iconic titles that set the standard for many upcoming FPS titles in the coming years.

Later on, Halo 2 also helped establish the original Xbox as a worthy competitor in the console market by topping $125 million in sales in the UK alone. Overall, the Halo franchise helped to build the foundation for the upcoming Xbox consoles.

Xbox 360 was launched in 2005. The Xbox 360 built upon the success left to it by its predecessor, losing only to Sony’s PlayStation 3 by a few million units in sales. However, despite Xbox’s initial success in the console market, Microsoft failed to build upon the one thing that made their console unique in the first place.

Xbox’s Downfall

While everything was going well for Microsoft and Xbox, the days of impending doom were approaching quickly as Xbox failed to maintain its uniqueness as a console in the gaming industry with the launch of Xbox One. Microsoft failed to realize that to make its console successful; it had to feature exclusive titles that would convince the customers to purchase its product over its competitors.

Microsoft didn’t think to invest in high-quality exclusive titles, unlike Sony, which had been releasing tons of profitable exclusives for their PlayStation over time. While both Xbox One and PlayStation 4 featured a limited library of exclusive titles at launch, Sony was still a step ahead. Sony continued to release banger after banger in the form of exclusive titles, while Microsoft failed to put anything worth on the table for the Xbox One.

Microsoft did release a few good exclusive titles for their Xbox One, such as Sunset Overdrive and the Ori series. However, none of those titles were half as popular as what Sony had been offering with Spiderman and God of War for their PlayStation 4. Microsoft also had to cancel some of their more ambitious projects: Fable Legends and Scalebound, which further added salt to the injury.

The Solution

The answer Microsoft managed to come up with to deal with the lack of exclusives for Xbox was to throw money at the problem. But, how it decided to go about it is much different than anyone might think. Microsoft decided to buy off gaming studios that were available for purchase instead of investing money in new startups and cultivating new talent to make games by themselves.

As soon as Phil Spencer was appointed head of Microsoft Studios in 2014, he started working on expanding the Xbox division. One of Microsoft’s first big steps in this direction was to buy Mojang, the studio behind the insanely popular game Minecraft. Phil Spencer bought Mojang for $2.5 billion, which was one of the biggest acquisitions in the gaming industry back then.

Microsoft Studios then went on to acquire many other studios, including big names such as Ninja Theory, Double Fine Productions, Playground Games, and Obsidian Entertainment. All of these acquisitions were nothing controversial until Xbox Game Studios decided to acquire ZeniMax Media in 2020 for a whopping $7.5 billion. The ZeniMax Media deal formally went on for $8.1 billion and is still one of the most expensive acquisitions in the gaming industry’s history.

What set apart the ZeniMax Media deal from the rest was that Microsoft now had claimed all their upcoming titles, including DOOM, The Elder Scrolls, and Fallout, as Xbox exclusives. The ZeniMax acquisition also brought all their subsidiaries under Microsoft’s wing, securing multiple high-profile IPs, including the upcoming highly anticipated title, Starfield.

The Activision Blizzard Acquisition

If you’ve been following the gaming industry in recent years, you must’ve heard about Microsoft’s acquisition of Activision Blizzard, which would easily dwarf the ZeniMax Media deal by a huge margin. In January 2022, the company announced that it was looking to acquire Activision Blizzard for $68.7 billion. Yes, you heard that right.

While Microsoft would love to get its hands on Activision Blizzard as soon as possible, the deal had come across a few antitrust issues that needed to be addressed. The Activision Blizzard deal is massive and can affect the gaming industry in a way that no other deal could ever do it. For that reason, the deal came under review by multiple government commerce bodies globally to ensure Microsoft doesn’t receive an unfair advantage if the merger were to be approved.

Till April 2023, things were looking good for Xbox Game Studios as many countries had approved the acquisition with zero regulatory concessions, and many others were expected to do the same in due time. However, things took a turn for the worst for Microsoft when UK’s Competition and Markets Authority (CMA) decided to block the deal from going through on their end.

CMA claimed that ‘the evidence available to the CMA currently indicates that Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service (or only available on other services under materially worse conditions). Microsoft already accounts for an estimated 60-70% of global cloud gaming services and also has other important strengths in cloud gaming from owning Xbox, the leading PC operating system (Windows) and a global cloud computing infrastructure (Azure and Xbox Cloud Gaming).'”

While the CMA report had made a completely valid point, Microsoft still wants this deal to go through, and it won’t stop at anything for that. Vice Chairman and President of Microsoft, Brad Smith, released a statement and revealed that the company is still committed to the acquisition and will appeal against the CMA’s verdict.

We remain fully committed to our acquisition with @ATVI_AB and will appeal today's determination by the CMA. Here's our statement. pic.twitter.com/ylvDP5RUqQ

— Brad Smith (@BradSmi) April 26, 2023

Note that if the merger were to go through, Microsoft would easily become the biggest fish in the video game industry, and the balance of power would greatly shift towards Xbox. The acquisition will bring many popular franchises under Microsoft’s wing, including but not limited to Diablo, World of Warcraft, Guitar Hero, and the most popular one, Call of Duty.

Call of Duty is easily one of the most popular FPS franchises of the current era. Despite its shortcomings, the franchise sells millions of copies for every game they release. People desperately want to play Call of Duty, and it is not difficult to imagine that everyone would buy an Xbox console if Call of Duty were to become an Xbox exclusive.

Anyhow, all of this is nothing but speculation at this point. The merger might not go through at all, and even if it did, it might not bring about the expected changes. Despite that, Sony is still trying to do whatever it can to prevent the deal from happening because if it were to go through, Sony would lose their competition in the console market.

Plans For The Future

All this talk about acquisitions and deals raises another question: what does Microsoft intend to do with all these gaming studios? Besides expanding the Xbox’s player base and selling more exclusives, Microsoft also features a subscription service called the Xbox Game Pass. As it stands, the subscription service is easily one of the best deals compared to other cloud services, as it gives players access to a huge library of games, including Xbox Game Studio exclusives.

The Xbox Game Pass allows players to play AAA-exclusive titles on launch day, and all you have to do for it is to buy the subscription. Note that Xbox Game Studios intends to make all future exclusives available for Xbox Game Pass users in the same way, including the upcoming action role-playing game, Starfield.

Microsoft has spent millions to secure the rights to put the games onto their cloud streaming service. It firmly believes that subscription services are the future and is willing to invest a hefty sum in theirs to ensure the biggest titles are available on the service on launch day, which is quite the deal for an average gamer.

Xbox Game Pass lets you pay as little as $10 to enjoy their vast library of titles for the entire month, which is easily more than anyone could ask for at that price. However, Microsoft has insisted that the subscription price may not increase in the future, but even if it does increase a little, it will still be a lot better than whatever any other subscription service offers.

Takeaway

The only issue with Microsoft right now is that it doesn’t have anything to show for as a result. Yes, they have acquired some of the biggest studios in the industry, but these studios have yet to produce a ground-breaking AAA title. There are a few upcoming exclusive titles that might be able to solve that problem for the company, but so far, Xbox doesn’t have anything to show.

On the other hand, Sony doesn’t hesitate to pump out a major banger every once in a while for their PlayStation 5. If it wants to stay alive in the console market, Microsoft will have to pick up the pace and do the same for Xbox Series S and Xbox Series X.