Xbox to use PlayStation and Nintendo to build multiplatform, cross-network gaming empire

Microsoft is using its competitors to sell games and re-invest in its burgeoning video games empire.

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During the FTC v Microsoft case of 2023, Xbox's Phil Spencer said something very interesting about PlayStation's exclusivity practices, going so far as to call Sony a hostile competitor. "Every time we ship a game on PlayStation, going back to the 70-30 split, Sony captures 30% of revenue that we do on their platform. And then they use that money among other revenue to do things to try to reduce Xbox's survival on the market," Spencer had said at the time.

Microsoft, however, has a different tact: Rather than keep games off its platforms, it wants to open the floodgates and release as many of its popular games to as many platforms as possible. The rationale is simple. Xbox wants to sell more games, make more money, and further cement itself as a vital partner to its competitors. Every sale on a competitor's platform is more money that can then be reinvested into Xbox.

The reasoning was explained by Xbox gaming CEO Phil Spencer. It's all about ecosystem, flexibility, and a long-term vision of gaming--one that far outstrips the limitations of the console, PC, and mobile trifecta of today.

Sales are just the beginning, though. Microsoft's ecosystem of products runs deep, especially with its games, many of which are online-oriented experiences with additional purchase options. The game is a kind of entry point for initial and continued spending, especially Microsoft's prime lineup of billion-dollar franchises like Call of Duty, Warcraft, Diablo, Overwatch, Doom, Halo, The Elder Scrolls, Minecraft, etc.

Remember that Microsoft currently has 20x video game franchises that have generated over $1 billion in revenue.

In a recent interview with Destin Legarie, Spencer outlined Xbox's core business model:

"We are finding that our games shipping in multiple on multiple platforms is a good thing for Xbox.

"It makes Xbox stronger, it lets us do shows like we did with Showcase, with great games. It lets us give our teams the time they need for us to invest in platform, for us to invest in hardware.

"I think all of this is part of what Xbox is going to be when we go forward. There are Xbox games that have shipped that we're not going to put on other platforms, some of the things we'll look at how they do.

"But you're going to see more games, not just shipping on PlayStation, shipping on Nintendo too. We'll continue to support Steam the way that they ship.

"We want our games to be in places that people play. We think that enables us to do more on platform, do more on hardware, and it's a it's a good system for us that works."

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Then plan appears to be working.

Based on Microsoft's latest reports, Xbox delivered higher gross margins in Q2FY25, indicating that the games division was more profitable this Holiday 2024 period than in Holiday 2023.

There's a many reasons for this, including a combination of aggressive cost-cutting and boosted sales from Xbox games showing up on PlayStation (and in April 2024, Microsoft had more first-party best-sellers on the PlayStation Store's top 10 list than Sony did).

"It doesn't mean every other company's got to do it that way, but it does mean I think that measuring our progress is different than maybe we measured the progress of Xbox or a console-only platform 10 years ago.

"It's why we talk a lot about players. I think a lot about the hours that people play on our platform, where we're seeing growth, and this has enabled us to grow in places that we don't normally. Our fastest-growing region right now is Asia in terms of players.

"And you may think about hours, our fastest growing hours is on cloud.

"It's us finding players in places that people want to go play. They want to buy a console, they want to buy a gaming desktop. Great, our games will be awesome there. Consoles will be a great place to play.

"But let's let games live where players want to play them."

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Is there any one singular game or franchise that is exempt? Maybe Starfield? No, Spencer says. Starfield is fair game.

"There's no specific game that I...this goes back to my red line answer, like there's no reason for me to put a ring fence around any game and say 'this game will not go to a place that it would find players where we'd have business success for us.'

"What we find is we're able to drive a better business that allows us to invest in great game lineup, like you saw. That's our strategy right, our strategy is to allow our games to be available.

"Game Pass is an important component of playing the games on our platform, but to keep games off of other platforms...we don't think is the path that we're going to. That's not a path for us.

"What we're doing now, we think really enables us to build the best platform for the world's best games because the world's biggest games are available in multiple places and more and more creators are asking us, 'How do we stay connected when our game might be playable in all these different places?'

"And we want Xbox to be absolutely the platform that enables that. We think that makes us unique most of the other platforms out there are single platform on single device, whether that's PC, whether it's mobile, whether it's a console, and we want Xbox to be a platform that enables creators across any screen that people want to play on."