The current state of the console gaming market is quite interesting to see. Even dating back all the way back to the 80s and 90s, it has been largely dominated by between two and three big companies in terms of console hardware, and aside from Nintendo being the only real constant since the release of the NES back in 1983, we’ve seen big players come and go. More recent events have indicated that Microsoft – a company that enjoyed quite a dominant position in the industry during the late 2000s – might also be facing a major downturn in its Xbox division.
This is in large part down to major stumbles made by corporate leadership, mixed messaging with some of its console releases, and a failure to provide any real reason to opt for an Xbox these days over any other console. To understand more recent events that might have led to this, however, it is worth going back all the way to the beginning, to look at why Microsoft decided to enter the gaming market, and what road the company has taken since then.
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Chapter 1 — Debut: The audacity to enter
By the mid-1990s, while Nintendo and Sega had both been around for a while, the console landscape was going to get a major shakeup thanks to the entry of Sony into the market with the PlayStation. Through a strange series of circumstances – a story in its own right – a deal between Sony and Nintendo fell through, which would lead to the former company’s original plans to release a CD ROM add-on for the SNES to being cancelled, and Sony instead opting to make use of the technology it had developed for this project as its own console.
Since its 1995 launch, the PlayStation would go on to become a massive hit, with its CD ROM capabilities bringing in an entirely new era of games that finally had the storage space needed to tell stories that the cartridges of the Sega Saturn or the Nintendo 64 just didn’t have. The console also happened to be priced at a downright fantastic point, essentially ruining whatever chances Sega had with its Saturn, which was launching at around the same time. It’s around this time that we get to see major strides made in console gaming, especially in storytelling, with titles like Metal Gear Solid and Final Fantasy 7 being the major flagbearers of this change.
While all three companies at the time were busy conducting R&D for their next-gen consoles which would come out with the turn of the millennium, Microsoft also entered the race in its effort to leverage its PC gaming expertise to also try and take over the console space. Now, it might be easy to forget that, once upon a time, Microsoft was a powerhouse when it came to PC gaming.
"It’s around this time that we get to see major strides made in console gaming, especially in storytelling, with titles like Metal Gear Solid and Final Fantasy 7 being the major flagbearers of this change."
The company had a hand in developing and publishing several major PC titles, be it complex titles in the late 1990s or the Microsoft Flight Simulator franchise. This, along with its experience in developing low-level graphics APIs – better known as DirectX – would help the company with their initial console efforts. At the time, effort was being made at a gaming console – referred to internally as the DirectX Box – that would leverage Microsoft’s expertise.
While Microsoft is getting ready to make its console debut with the Xbox with several killer features of its own, including painless online multiplayer through Xbox Live, as well as the ability to have quicker load times thanks to its built-in hard disk drive, the console space is seeing some of its best years yet. While Sega has unfortunately left the market with the commercial failure of its Dreamcast, and Nintendo is trying to cling on to relevance with the GameCube, Sony has been crushing it with the PS2, thanks in no small part to its critically-acclaimed games, as well as the fact that the console doubled as a cheap DVD player – an important thing at the time.
Eventually, the original Xbox is out. The marketing is downright insane – even Dwayne “The Rock” Johnson is part of one of the stage shows during the peak of his popularity as a WWE pro-wrestler. Along with this, we also have our first glimpse at what would eventually become one of the core franchises that would go on to form the foundations on which the Xbox brand was built – Halo. Microsoft had also done a great job in courting western developers, especially from the PC gaming space thanks to the similarities of the console’s development tools with the DirectX APIs that they would already be familiar with while working on Windows.
Now, it’s worth noting that, while the original Xbox had a lot going for it, it wasn’t really the major dent in the dominance of the PS2 that Microsoft was looking for. By the time the dust had settled, the console only ended up selling around 21 million units, which is still a lot, but when compared to the downright gargantuan levels of success that the PS2 saw, doesn’t really compare. However, all that aside, Microsoft had its foot in the door of the console market, and the company wasn’t about to allow the door to get closed shut in its face.
"Even Dwayne “The Rock” Johnson is part of one of the stage shows during the peak of his popularity as a WWE pro-wrestler."
Chapter 2 — The 360 Rise
In the four year life span of the Xbox, Microsoft hadn’t really stopped its R&D for the next console. The company realised that, while the first console was somewhat successful, it was still operating at a distinct disadvantage when compared to Sony and Nintendo. This ultimately meant that, if Microsoft were to have any real hope of taking on the industry behemoths, it would have to get its next-generation console out before any of them. And with the Xbox 360, this is exactly what Microsoft did. It was launched out the door before the PlayStation 3 and even Nintendo’s follow-up console – the Wii – in 2005.
As anyone could have guessed, this gave Microsoft a massive advantage, since there was already a console gaming fan base that was looking for higher fidelity visuals, since the original Xbox, the PS2 and the GameCube were all showing their respective ages. This was at a time when graphics technology was still rapidly advancing, you see, so visuals of console games starting to look dated quite early on wasn’t unheard of.
The Xbox 360 came out of the gate swinging for the fences with plenty of launch titles to appease the audience that Microsoft had built up thanks to the release of the original Halo. This meant that, while people were waiting for a new Halo to drop, college dorm rooms the world over were already ready for the inevitable next game in the franchise thanks to them already getting an Xbox 360 to play sports titles like FIFA 06, Madden NFL 06 and NBA 2K6. These weren’t the only games available, however, since we also got underrated horror classic Condemned: Criminal Origins, and cult classic racing game Project Gotham Racing 3.
"We also got underrated horror classic Condemned: Criminal Origins"
Along with this, the core systems underneath the games in the Xbox 360 were also quite impressive. The console featured quite a few new things that hadn’t really been seen in the market before, with Microsoft massively expanding on its Xbox Live service with new things like Achievements, a robust party system for online gameplay, and of course, Xbox Live Arcade, which also ended up boosting the early life of the Xbox 360 thanks to several indie developers making it their homes. This is when we got to see games like Braid, Bionic Commando Rearmed, Castle Crashers, Geometry Wars and Shadow Complex.
While the Xbox 360 enjoyed quite a bit of success thanks to its early adoption rates, excellent first-party franchises like Halo, Forza Motorsport and Gears of War, as well as strong relationships that Microsoft had formed with third-party developers, the good times weren’t really going to last. Rushing the console to market meant that quite a few corners were cut during the manufacturing processes. This would eventually manifest in the form of the dreaded Red Ring of Death – or the RROD, as it would come to be called. Microsoft was quick to recover, however. The company quickly managed to build up some goodwill by offering essentially unrestrictive warranties on Xbox 360 consoles afflicted by the RROD, while the company also went on to improve its own manufacturing and QA processes to make sure that future releases wouldn’t suffer from the same problems.
This was also around the time that a couple of key things happened that would shake the console market to its core – the Xbox 360 becoming considered the primary development platform for third-party developers looking to release multiplatform games, and the absurd success of the Nintendo Wii. While the former was great news for Microsoft – with some games started getting earlier DLC releases on the Xbox 360 than the PS3 – the latter would eventually be the impetus for the company creating the Kinect.
"Some games started getting earlier DLC releases on the Xbox 360 than the PS3"
Don’t get me wrong; the Kinect was a wonderful bit of hardware and it even ended up having a few novel games made for it. However, it also caused the release of half-hearted dancing games and low-quality party games aimed at children, since Microsoft also wanted some of that Wii Sports money. The company saw the motion-sensing camera – some truly impressive technology for the time – as such an important part of the overall Xbox identity that it would even go on to haunt the next-generation console.
And this is where quite a bit of the goodwill that Microsoft had garnered with its response to the RROD fiasco, as well as multiplatform games on its console getting first dibs on DLC, would be lost. It’s 2013, and Microsoft is about to unveil the Xbox One in a presentation featuring major gaming companies like EA and Activision.
Chapter 3 — Arrogance & the Xbox One Faceplant
To understand what exactly went wrong with the Xbox One’s announcement, one has to get into the mind of the executives at Xbox who were running the show, and what their vision for the future was. Cable TV, for example, was still a central fixture in most households, and Microsoft envisioned a world where, in these homes, every TV would have an Xbox One and a Kinect underneath that powers the whole thing. Streaming services were just barely getting off the ground at the time, and Smart TVs wouldn’t really be a thing for a couple of more years. This led to Microsoft pitching the Xbox One as being the central thing to your living room experience.
"This led to Microsoft pitching the Xbox One as being the central thing to your living room experience."
The infamous Xbox One event – essentially a meme in this day and age – had Don Mattrick, the president of Microsoft’s Interactive Entertainment Business division, hammering home just how well the Xbox One would work with TV. The event was lambasted for several reasons, from there being barely any games shown off (Call of Duty: Ghosts and that year’s entry in the Madden NFL franchise were the two big ones), to the fact that the new console would be priced at $499 thanks to the Kinect being a mandatory additional thing that buyers would need to pay for, as well as the fact that features like how Xbox One would allow you to control your cable TV didn’t really work outside of the US. But one of the biggest issues with the whole thing was the fact that the console would need to be connected to the Internet to even play single-player games.
In an era where console gamers still largely relied on buying physical copies of games, Microsoft wanted to lock it all down. An Xbox One game, for instance, would come with a code that would tie it to your own Xbox Live account. This meant that you couldn’t even share your game disc with a friend. For players who might not have stable Internet connections, the console did offer a grace period of a few days where you could play without needing an Internet connection to check-in. This, coupled with the fact that Xbox’s messaging around the whole thing largely blamed its potential buyers for not being suitable to get the newly-unveiled console turned quite a few Xbox fans off. Rather infamously, Mattrick noted that Xbox fans who can’t guarantee stable, high-speed Internet connections should get an Xbox 360 instead of an Xbox One.
This was paired with a hilarious ad by Sony, where the at the time PlayStation VP of publisher and developer relations Adam Boyes and president of Sony’s Worldwide Studios Shuhei Yoshida just handed each other a copy of Killzone: Shadow Fall, just to juxtapose how easy it would be to sell used games or even share games on the PS4. Needless to say, the Xbox One got quite a bit of backlash from long-time fans, and its reputation was hurt in the long term as well; even though these always-online and DRM-focused decisions were eventually walked back before the console’s launch, people would believe that these were still things that the Xbox One had years after its launch.
"Throughout the run of the Xbox One, it made one decision after another to bring back the fans that the company had lost, in hopes that it would end up paying off in time for the next generation of consoles."
While Phil Spencer would take over as the face of the Xbox brand in the years following the disastrous launch of the Xbox One, the value of the brand had essentially been sunk into a crater. This isn’t to say that Microsoft didn’t try its best, however. Throughout the run of the Xbox One, it made one decision after another to bring back the fans that the company had lost, in hopes that it would end up paying off in time for the next generation of consoles.
Chapter 4 — “Flip the Switch”
While Sony grabbed a massive market lead with the PS4, Xbox, under Spencer, started making quite a few moves to start earning back some of the goodwill that it had lost when the console was first unveiled. Branding himself as a “gaming first” leader for the division, Spencer would go on to announce one of Microsoft’s most popular services – Game Pass – while also dealing with ways to mitigate the lack of first-party releases behind the scenes. One of the biggest results of this was the announcement of backwards compatibility for Xbox and Xbox 360 games on Xbox One.
These two announcements were eventually met with a third initiative – Xbox Play Anywhere – through which games bought for PC or Xbox One through the Microsoft Store would be available to the buyer on both platforms. This trifecta of consumer-friendly announcements, as well as Game Pass slowly but surely expanding its offering, would lead to the Xbox brand surviving the console generation, despite Xbox One being a distant second place to PS4. These moves, along with Microsoft acquiring several game companies, including Double Fine, made it clear that the company might be starting on the path that Sega previously walked. In the meantime, however, Microsoft still had plans to make more consoles.
"In the meantime, however, Microsoft still had plans to make more consoles."
Chapter 5 — Series X|S and the 2021 High
2020 was the start of what would go on to be a strange few years for just about everyone on the planet. Covid-19 was discovered, and was quickly spreading all over the world, and many countries would announce lockdowns in their densest, most populous urban centers to prevent further spread of the virus. While this is happening, both Sony and Microsoft are once again getting ready to launch their next-generation consoles – PS5 and Xbox Series X/S. Both companies would release their latest hardware kits at the end of the year, and for a bit, it looked like Microsoft’s fortunes were on the verge of being turned around.
While most of the big first party franchises that Xbox used to be known for were still missing, 2021 saw the release of Forza Horizon 5. This, along with most of the world still being stuck indoors also led to a spike in Game Pass subscriptions across consoles and PC, and while Sony also had its brand new console out, it was suffering from a lack of first-party exclusives, as well as hardware shortages all over the world because of the pandemic.
Things were looking up for Xbox, and while it may have lost the console race in the long run, it was still making some major strides thanks to an ever-rising number of Game Pass subscribers, as well as quite a few enticing new games looming over the horizon, like a brand new Halo. This, coupled with excellent software features like Smart Delivery and a responsive Quick Resume made Xbox Series X a powerhouse in its own right, while the low price made the Xbox Series S an enticing console for younger players that might not care about gaming on 4K.
"Things were looking up for Xbox"
Chapter 6 — Slippage, Stumbles, and Strategy Drift
A few things happened that ended up pushing Xbox even further behind Sony and even Nintendo in the console market. Several projects in the works at the company started getting cancelled, and the way that Xbox’s first-party studios like 343 Industries were being managed led to further issues with upcoming games like Halo Infinite. Along with this, the division was also spending quite a bit of money on massive acquisitions; 2021 saw the completion of a $7.5 billion deal for Microsoft to acquire Bethesda’s parent company ZeniMax. Just a year later, the company would also kick off the proceedings for a $69 billion deal to acquire Call of Duty and World of Warcraft maker Activision Blizzard.
With all of this money being spent and a lack of strong first-party releases, Microsoft’s leadership would start paying closer attention to just what Xbox might be doing. Then came a few one-two punches of Halo Infinite seeing mixed critical reception, as well as Sony coming back swinging with a host of strong first-party releases like Horizon Forbidden West. It was around this time that the internal strategies at Microsoft started shifting. A push was made for live-service games to be developed, especially in light of the success seen by games like Fortnite and Destiny 2 at the time. This meant that development teams known for strong single-player outings like Arkane were forced to work on a multiplayer-focused experience.
The result of this – Redfall – was largely panned by just about everyone that played it, and this would eventually lead to the shuttering of Arkane Lyon. Several other developers under the Xbox Game Studios banner, like Tango Gameworks, would also be shut down despite the commercial and critical success of games like Hi-Fi Rush. After facing several lay-offs and studio closures at the time, it was time for yet another shift in strategies at Xbox.
"This meant that development teams known for strong single-player outings like Arkane were forced to work on a multiplayer-focused experience."
Chapter 7 — The Multiplatform Pivot
Much like Sega did at the turn of the millennium, Microsoft decided that Xbox would be more of a brand than a line of consoles. This, along with further expansion of the Xbox Play Anywhere program meant that the company would be more focused on bringing its games to as many players out there as possible, rather than the other way around. The first step in this direction was Xbox’s decision to start releasing games that were formerly console-exclusive to Xbox on PlayStation and the Nintendo Switch. We saw this with Hi-Fi Rush.
Soon enough, just about every major game developed by a company under the Xbox Game Studios banner would start coming out on competing platforms as well, be it racing game Forza Horizon 5, or even Gears of War and Halo. Slowly but surely, the “console exclusive” fine print seen in many older Xbox games would start becoming out of date.
While this is going on, there has also been a mandate from Microsoft leadership to raise the revenue that has been generated by Xbox, thanks in large part to the massive amount of money that had been spent in bolstering Xbox Game Studios with various acquisitions, from smaller developers like Double Fine Studios to titans of the industry like Activision Blizzard. This push to raise revenue would then lead to what we see today.
"Slowly but surely, the “console exclusive” fine print seen in many older Xbox games would start becoming out of date."
Chapter 8 — Xbox and Game Pass Repriced
In a push to raise revenue, quite a few products across the Xbox line-up saw increases in pricing. Even the Xbox Series X/S consoles saw two distinct price hikes – one in response to the US trade tariffs, and another price hike that has seemingly been made just to squeeze a few more dollars worth of revenue from US-based gamers. Similarly one of the most popular things that Xbox offered – Game Pass – was seeing a major hike in its pricing.
Game Pass saw more than just its prices going up, however. Make no mistake; essentially doubling the monthly price of Game Pass Ultimate was far from a popular move to begin with. However, new tiers were introduced that would offer “lesser” versions of the service with more limited game selections. These tiers – Essential and Premium – also lacked one of the biggest selling points of Game Pass subscriptions in the past: they didn’t allow day one access to first-party Xbox games through the service.
Along with this, Xbox also had to make a decision about what it wanted to do in the console space; having control of its own hardware certainly was a major help when it comes to getting games developed, after all. The Xbox brand has also traditionally been tied to consoles ever since its inception, and despite Microsoft’s best efforts with things like trying to bring Xbox Live to Windows through the ill-fated and widely-hated Games For Windows Live program. All of this meant that Xbox would have to continue to have some hardware to its name.
"These tiers – Essential and Premium – also lacked one of the biggest selling points of Game Pass subscriptions in the past: they didn’t allow day one access to first-party Xbox games through the service."
Chapter 9 — Play Anywhere and the Future of Xbox Hardware
Along with general boosts that gaming as a whole saw during the pandemic, we also got to see the rise in popularity of handheld gaming PCs buoyed by the Steam Deck, as well as devices by other companies like Asus with the ROG Ally, Lenovo with its Legion Go, and MSI with its Claw. Around this time, Microsoft started making statements about trying to make Windows more friendly to use with a controller rather than strictly requiring a keyboard and mouse combination. There were also rumours floating around of the company working on its own Xbox-branded handheld system.
These rumours would eventually come to nought, however, with the company deciding to refocus its work on making Windows more usable with controllers, and tying up with another company to release an Xbox handheld rather than making its own hardware. The result of this are the Asus ROG Xbox Ally and the Xbox Ally X – ostensibly handheld Windows 11 PCs that also had a few tweaks made in order to ensure that games got access to more resources for smoother performance.
This renewed focus on PC gaming also saw an even wider expansion to Xbox Play Anywhere, as well as the launch of the Handheld Compatibility Program and the Xbox Full Screen Experience, which would allow Xbox Ally users to navigate the operating system in a more seamless manner, as well as quickly keep a track of which games would run well on their handheld system. The long term ramifications of these moves haven’t yet made themselves clear. However, there is still a proverbial elephant in the room that we still need to talk about.
"The result of this are the Asus ROG Xbox Ally and the Xbox Ally X – ostensibly handheld Windows 11 PCs."
We are at the point of a console generation where there are plenty of rumours going around about what the companies are planning for next. And with Xbox, by all accounts, Microsoft is aiming to go bigger than before this time around. Powered by a beast of an AMD chip, the next-generation Xbox has been described by the division’s president, Sarah Bond, as being a high-end, premium console. Rumours have been seemingly backing this up with the console’s power draw being rated as higher even than that of Xbox Series X. Other reports have indicated that the next Xbox won’t just be a console, but also essentially a pre-built PC that can run other digital stores like Steam, Epic Games Store and GOG as well. What this means for the pricing and even software plans for Microsoft remains to be seen, however.
Finale — What Was Lost… and What Remains
I still remember the time when rumours first started going around of Microsoft planning to enter the console market to compete against the PlayStation. There were plenty of jokes to be had at the time, since Microsoft was largely known for its software rather than hardware, as well as the fact that the PlayStation had an incredibly strong line-up of third-party developers making games for it. Fast forward a few years and the Xbox 360 takes the world by storm, coming in as a major surprise to PS2 owners like myself. The console essentially became the definitive choice in the late-2000s thanks to its strong line-up of first-party games and third-party titles even performing better on it than the PS3.
A few more years later and we have the Xbox One unveiling. Even thinking about it now, in hindsight, it remains a major stain on the reputation of Xbox; one that it could seemingly never come back from despite Microsoft’s best efforts. This was also around the time where digital distribution became a major source of game sales even on consoles, which meant that, by the time we were moving on from the PS4 and Xbox One, most players already knew which console they were getting next; it was going to be the one with all of their last-gen games on it.
"Even thinking about it now, in hindsight, it remains a major stain on the reputation of Xbox"
The entire run of Xbox as a major player in the console market still feels like a strange dream even right now. By all accounts, Microsoft was ill-equipped to enter the market to begin with, but enter it did, and it even managed to grab the crown as the undisputed leader for a few years. Unfortunately, nothing lasts forever, as we would see with Xbox relinquishing the crown back to its competitors in the span of less than a decade.
The current state of Xbox feels quite sad to look at. Trust in the brand is essentially at rock bottom thanks in large part to the company’s recent moves to make things more expensive across the board. Gamers who are more in tune with happenings in the industry also haven’t been keen on various beloved developers having their doors permanently closed, despite the studios themselves having made games that manage to be critical darlings that also managed to make quite a bit of money.
At this point, even trust in the few people that serve as the faces of Xbox – Phil Spencer, Sarah Bond and Matt Booty – has cratered. The trio has seemingly been incapable of little more than corpo-speak, especially when it’s time to lay-off employees and shut down studios despite games like Hi-Fi Rush being considered, in their own words, as being successful.
"The trio has seemingly been incapable of little more than corpo-speak, especially when it’s time to lay-off employees and shut down studios despite games like Hi-Fi Rush being considered, in their own words, as being successful."
Where Xbox goes from this point onwards is anyone’s guess, but if rumours about the company’s next console essentially being a pre-built PC that can run just about any Steam game out there end up being true, it can be easy to imagine the brand slowly phasing out its in-house hardware offerings over time, instead opting to have its branding present on hardware made by other companies, much like we see with the Xbox Ally.
On the gaming side of things, there are still a fair number of great developers working under the Xbox Game Studios banner, be it Double Fine Studios and its penchant to make quirky but interesting games, or Bethesda with its grand, ambitious RPGs, and even id Software with its bombastic first-person shooters with strong soundtracks. However, with the way things are going, it wouldn’t come as much of a shock for anyone to see even more studios get shut down and even more developers losing their job, because that is essentially the kind of reputation that Xbox has fostered over the last few years.
It’s easy to try and pin all the blame on the decisions made during the Xbox One unveiling event. But it was far from an isolated incident, however. There have been plenty of stumbles even during the times when Xbox was in the lead. Few have been as disastrous for the company, however, and things might be feeling even more dire now with reported mandates from Microsoft leadership that revenue and profitability must go up thanks to the amount of money that has been spent on acquiring gaming companies.