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E3 2021 is Microsoft’s make-or-break moment for Xbox

E3 2021 is Microsoft’s make-or-break moment for Xbox

Welcome to Protocol Gaming, your weekly guide to the business of video games. This week: Microsoft gears up to headline E3 once again, PS5 gets another exclusive with the new Ratchet & Clank and Facebook scoops up a Roblox-like platform.

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The Big Story

E3 2021 is Microsoft's make-or-break moment for Xbox

The video game industry's preeminent conference, E3, is a chaotic affair this year, with the pandemic shifting the show yet again to an all-virtual format and scores of big publishers waiting until the last minute to confirm their expo plans. It's been messy.

No Sony for the third year in a row means Microsoft is headlining this year's show. That gives the company a critical stage to pitch its vision for the future of Xbox, with its major showcase scheduled for June 13.

Microsoft will have to lay all its cards on the table this year. The Xbox platform trailed far behind PlayStation for most of the last decade. Its new focus on subscriptions, cloud gaming and cross-platform play have meant a rather quiet six months since new devices arrived last fall. And that means Microsoft has much to prove going into E3.

  • The company launched its pair of new consoles, the Xbox Series X and Series S, in November, yet the company has offered no word to date on sales performance. Sony, meanwhile, is touting 7.8 million PS5 owners as of March 31 and promoting its strong services growth.
  • Microsoft has reduced its reliance on exclusive console games, meaning Xbox players haven't had new titles that can only be enjoyed on new hardware. Sony has released Spider-Man: Miles Morales, the Demon's Souls remake and Returnal, with more exclusives on the way.

Microsoft's big priority isn't console sales. Game Pass subscriptions are at the top of Microsoft's list; the strategy going into E3 will be convincing people that the Xbox ecosystem is worth investing in, not just with a console purchase but also a monthly Game Pass subscription.

  • "We are evolving from a console-centric business to delivering a ubiquitous global gaming ecosystem, underpinned by our investments in content, community, and cloud," the company wrote in an Xbox presentation document shared with Protocol ahead of E3.
  • As of April 2021, Microsoft had 23 million Xbox Game Pass subscribers. Growing that number to 30 million, and onward to 50 million, will mean transforming its gaming business into that ubiquitous ecosystem it's envisioning for the future.
  • Having more Game Pass subscribers also changes the financial incentives, ensuring steady revenue that's not reliant on game sales. That will help justify Microsoft making new releases, like this year's highly anticipated Halo: Infinite, available on Game Pass the day they come out.

All eyes will be on Bethesda. Microsoft purchased the publisher and its many studios last fall in one of the biggest, most consequential acquisitions in the game industry. But Microsoft hasn't yet said what it plans to do about major Bethesda releases, like whether they'll remain available to PlayStation players or become console exclusives.

  • Critical to the Bethesda acquisition is how it can be leveraged to boost Game Pass. If Microsoft makes new Bethesda releases available on its subscription platform the day they release, that could help boost subscribers significantly, and it would be a massive competitive edge for Xbox. Communicating that to players, especially lapsed Xbox fans and PlayStation diehards, is paramount.
  • Starfield is the next major Bethesda release alongside Elder Scrolls 6, both from its in-house Bethesda Game Studios arm. Microsoft has teased new Starfield details for E3, and a release window plus any information on which platforms it will support are likely to be the big events of its Sunday keynote.

We also can't forget Halo Infinite, which was supposed to be Microsoft's big Xbox Series X launch title before it was delayed last year, or xCloud, the company's cloud gaming service that promises to expand the Xbox player base to mobile phones, web browsers and smart TVs. We'll likely hear plenty about both on Sunday.

Microsoft has many of the pieces of success lined up. All we're waiting for now is for executives like Xbox chief Phil Spencer and Xbox Game Studios head Matt Booty to tell us why now is the time players should reinvest in the platform. And there's no better time than a Sony-less E3 to do that, even if there can't be a physical crowd to lose their collective minds at the sight of Keanu Reeves.

Overheard

  • "To give you a sense of how goofy this upcoming 'E3' is—a term I use very loosely—I have been asked to book a single meeting. One! That's it. One meeting. In previous years, I'd have several days of back-to-back meetings locked up. My 'registration' hasn't even been approved yet." —Game journalist and podcast host Patrick Klepek bemoans the state of this year's E3, as the ESA has struggled to evolve its annual conference into an all-virtual format amid the pandemic.
  • "At the same time it's fair to say we want to give as much money back to developers. If those store fees were to change, the majority of that we would give back to the creator community." —Roblox CEO David Baszucki, in an interview with Axios's Ina Fried, said his company would pass on savings to creators if Apple or Google were to ever reduce their app store commissions, though he added that "it's fair to say we haven't filed a lawsuit."

A MESSAGE FROM MICRON

Recently, Micron announced new memory and storage innovations across its portfolio based on its industry-leading 176-layer NAND and 1α (1-alpha) DRAM technology. But what does "1α" mean, and just how amazing is it?

Learn more

Lootbox

  • On Protocol: Sony last week delayed one of its major PlayStation exclusive games, God of War: Ragnarok, until 2022, while also confirming it's now coming to both the PS4 and PS5 platforms.
  • Take-Two Interactive is investing in the soccer market. The publisher has acquired the Serbian mobile developer Nordeus behind Top Eleven Football Manager, a sports simulation game for Android and iOS, for up to $378 million in cash and stock. Given how lucrative EA's FIFA Ultimate Team business has become, it's no surprise Take-Two wants in.
  • Don't miss the inside story of a video game cheat's empire imploding. This fascinating Vice investigation details the story of "Chicken Drumstick," a cheating provider that made more than $70 million selling software for PUBG Mobile until Chinese authorities working with Tencent busted the operation and forced its owner deep underground.
  • The promise of cloud gaming is coming to mobile. Now.gg, a new platform launched last week, lets Android game developers distribute games over the cloud, reports VentureBeat. That way, any low- or mid-range smartphone can play even cutting-edge mobile games that typically require the latest phone hardware.
  • Esports and crypto are combining forces. Esports organization TSM has partnered with cryptocurrency exchange FTX for a $210 million, 10-year naming rights deal. This will fuel TSM's global expansion in exchange for attaching FTX's name to all branded TSM material.
  • Nintendo is getting its own museum in Japan. The building, known as Nintendo Uji Ogura Plant and located near Nintendo HQ in Kyoto, was previously used as a manufacturing plant for playing cards. It will now be dedicated to the video game company's rich history — spanning all the way back to 1889 — when it opens some time before March 2024.
  • Facebook acquired a Roblox-like game. The social networking giant last week bought Unit 2 Games, the maker of game creation platform Crayta, for an undisclosed sum. Crayta was previously a timed Google Stadia exclusive, and Facebook has big plans to incorporate Crayta into its game streaming arm.
  • On Protocol: Riot Games is bringing its tactical shooter Valorant to mobile, before it plans to port the game to consoles. It's a sign of how important smartphones might become to the competitive gaming scene over the next decade.

Look Out for

Another big PS5 exclusive drops this week

The next big PlayStation exclusive, Insomniac Games's Ratchet & Clank: Rift Apart, launches on Friday, providing Sony yet another test of its next-gen console strategy. This comes after the company made waves last week when it said God of War: Ragnarok would launch on both old and new hardware.

But a new entry in the long-running Ratchet & Clank franchise restricted to its new platform will let Sony know the consumer appetite for such releases, and crucially just how many of its 8 million or so PS5 owners will put $70 down for a game they can't get anywhere else.

A MESSAGE FROM MICRON

Recently, Micron announced new memory and storage innovations across its portfolio based on its industry-leading 176-layer NAND and 1α (1-alpha) DRAM technology. But what does "1α" mean, and just how amazing is it?

Learn more

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