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Microsoft (NASDAQ: MSFT) made waves in the video game industry recently with the acquisition of Bethesda Softworks owner ZeniMax Media for $ 7.5 billion. It’s a big deal, given the major game franchises Bethesda produces, which will bolster the exclusive titles that will be available on Microsoft’s Xbox Game Pass subscription service.
Here are three reasons why Sonyis (NYSE: SNE) The PlayStation business may face a real battle in the next console war that begins this holiday.
Image source: Microsoft.
1. Microsoft has cash and is willing to spend it
CEO Satya Nadella isn’t playing games when it comes to investing in the video game industry. As games shift to a subscription model, Sony’s PlayStation Now and Microsoft’s Xbox Game Pass are in a race to gain new subscribers, and the main way to do this is by offering the most attractive list of exclusive titles for their respective services. games in the cloud.
Microsoft is emerging as one of the top favorites in this race. You have a huge financial advantage over Sony that you can use to shop for new studios. Microsoft ended the most recent quarter with $ 73 billion of net cash, compared to $ 17.6 billion at Sony. Microsoft also generated $ 45 billion in free cash flow during the last four quarters compared to Sony’s $ 9 billion.
Microsoft was quick to put this money to work in the gaming industry under Nadella’s leadership in recent years. There have been a number of deals in recent years to build Microsoft’s Xbox Game Studios with more talent in game development.
In 2018 alone, Microsoft acquired several studios, including Compulsion Games, Undead Labs, Playground Games, Ninja Theory, Obsidian, and inXile. But these were small deals and didn’t come close to the magnitude of the Bethesda acquisition, making for leading titles like Fall out Y Ancient documents exclusive to Xbox Game Pass.
2. Xbox Game Pass is already in the lead
Tellingly, on the eve of the pre-order launch for the upcoming Xbox Series X, Microsoft announces that Bethesda is now part of Xbox Game Studios. It’s a smart marketing tactic to let buyers know that Xbox Game Pass will be well-stocked with several of the most popular titles in the industry, including Wolfenstein, Condemn (2016), DishonorY Dam, Among many others.
At the end of June, Sony’s PlayStation Now streaming service had 2.2 million subscribers. But Xbox Game Pass had 10 million members. Microsoft is already winning the race and stepping on the gas with the acquisition of Bethesda.
3. Microsoft is creating a wide selection of titles
Prior to the Bethesda acquisition, Xbox Game Studios had 15 studios under its wing. She is now 23. Sony increased its internal studio count to 14 by acquiring Insomniac Games in 2019. Insomniac Games is the studio behind the hit title. Marvel Spider-Man, which was a PlayStation 4 exclusive.
Microsoft aims to supply its service with many exclusives in the future. Sony has a long history of delivering quality proprietary titles to gamers, which explains why Xbox has never managed to outsell a PlayStation console, but the tide could be turning in Microsoft’s favor.
The future of the video game industry is gradually moving away from dependence on consoles. Nadella successfully transitioned Microsoft to a software as a service model using cloud services. You’re following the same playbook with gaming, which could open up the addressable market for the Xbox platform to more people.
Of the roughly 100 million people who could be PlayStation 5 or Xbox Series X over the next five years, there are roughly 2 billion people who play games around the world. Microsoft joins its xCloud gaming service with Xbox Game Pass, which will allow users to stream the best titles to a mobile device and thus open the market to a wider audience.
The era of cloud gaming could significantly grow the market for big-budget games like the ones coming from Bethesda. By acquiring more studios, Microsoft is trying to get a head start on the breadth of selection to offer a host of games that appeal to everyone’s taste. This strategy worked well for Netflix in video streaming, and it may lead to Xbox Game Pass becoming the must-have game streaming service.
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