Microsoft's next-gen Xbox promise was trouble from the start

Microsoft has, since the launch of the Xbox One X in 2017, been able to claim that it sells “the most powerful console.” It’s a claim that will extend into the next generation, as the Xbox Series X’s CPU and GPU are, in terms of raw compute, stronger than the PlayStation 5’s.

For the Xbox One X, this has meant that cross-platform games almost always look or run better than they do on the PlayStation 4 Pro. You’ll often find a game that runs at 1800p on Xbox One X only hits 1440p on PS4 Pro. In other titles, the Xbox One may better stick to its target of 30 or 60 frames per second than Sony’s machine.

The gap between the Xbox Series X and PlayStation 5 for cross-platform titles will likely be real, though it’s not going to be as severe as the XB1X/PS4 Pro divide. Despite this, though, during the all-important launch window, it’s likely that we’ll see PlayStation 5 exclusive titles that simply look better than Xbox Series X exclusive titles.

You can see this in Halo Infinite, which looks like a 4K remaster of a Xbox One launch game. Now, some of that comes down to art direction and wanting to produce a game that recalls the Halo series’ legacy. There are also promises that it’ll “get better,” but the game looks like an upscaled Xbox One game because it is, in fact, built to run on an Xbox One. Microsoft can’t afford to release a first-party game that struggles to run on its own hardware, which means that the ambition of Infinite has to take a hit.

This might seem nonsensical, but it all comes down to a shift in strategy, and a promise.

The promise

As outlined fastidiously by Sean Hollister at The Verge, Microsoft has, since the Series X announcement last December, been promising Xbox owners that they’ll be able to play all of the company’s AAA titles on their current hardware for the foreseeable future. What the term “foreseeable future” means exactly has varied depending on which executive is speaking, but Phil Spencer, with whom the Xbox buck stops, is on record as saying two years. This means, for example, that Halo Infinite, Microsoft’s big holiday title, will play on a 2013 Xbox One as well as a 2020 Xbox Series X. Unless Microsoft goes back on its word, that should hold true for other titles to come.

Hollister’s article, however, points out that the majority of titles shown at yesterday’s Xbox Games Showcase have not been confirmed for Xbox One. If any of these games come out before late 2022, that would mean a broken promise. In responding to this controversy, Aaron Greenberg, who oversees the marketing for Xbox games, said that the company hasn’t ruled out an Xbox One launch for any title, and instead said on Twitter “we are leading with Series X & each studio will decide what's best for their game/community when they launch.”

I’d venture a guess that Microsoft knows a fair number of these titles aren’t going to hit before that timeframe; we saw a lot of cinematics and not very much gameplay yesterday, after all. But it seems very unlikely that, for example, no Forza game will launch before Holiday 2022. (And if that is the case, that’s perhaps an even bigger issue for Microsoft than lying to some users.)

The Xbox model

Microsoft has been pushing away from the idea of console generations for years now. It started with the notion that gamers have one, singular library that works across generations. Over 600 Xbox 360 and original Xbox games work just fine on Xbox One, and will also be playable on Xbox Series X. Every Xbox One game will work on Series X too.

More recently, though, Microsoft has been moving away from the idea of game ownership; it’s all about Game Pass, its subscription service that gives you access to every first- and second- party game on day one, and plenty of third-party titles too.

Let’s ignore the weighty discussions about ownership versus subscriptions, and whether this strategy is actually good for gaming in the long-run. Right now, Game Pass is a compelling option for Xbox players, and a fantastic strategy for Microsoft. In a market where most of your potential customers already own a PS4 and its major exclusives, what better way to bring people into your ecosystem than offering all of your exclusives they’ve missed for a single monthly subscription? Recurring, guaranteed revenues are hugely valuable, and with over 10 million subscribers, Game Pass alone could be a billion-dollar business already. (10 million subscribers at full rate would be well over $1 billion, but Microsoft has been discounting the service massively over the past year, so it’s not clear exactly how much the service is pulling in right now.)

When your business strategy is selling subscriptions, though, the importance of games and hardware is lessened, replaced by the need to increase retention and reduce churn -- terms more commonly found in the earnings reports of cable operators and wireless carriers. Games and hardware are just ends to that mean. Look at the whole Xbox business from that perspective, and its decision-making starts to make (a bit) more sense.

The problem

There are a few reasons why we have console generations; why every new console has to have better processors, more RAM, more storage. On the “creative” side, toward the end of the six-to-seven year console life cycle, developers have more or less used every trick in the book to make the “best” games that they can for the hardware (in scope and fidelity, at least). This then feeds into the business side, where games are typically sold on the promise of being longer, bigger, better than those that came before them.

A new console rarely makes a lot of money for a company on its own, and in some cases is sold at a loss on the understanding that money lost will be recouped on games and lucrative accessories. (Rumors suggest that this “loss-leader” approach may be in effect this generation, although neither company has yet announced a price for its console.)

What new hardware does, then, is restart the cycle. It gives developers more power to attract gamers to their games, and lets Sony, Microsoft and Nintendo attempt to win over customers from the other side. With the Xbox Series X, developers have more power, but right now, the most important studios can’t make full use of it, thanks to the cross-generation promise.

There are four key upgrade areas for this next generation, which are largely mirrored across Sony and Microsoft’s consoles: CPU, GPU, RAM and SSD.

When developing a cross-platform game, “scaling” is easier in some areas than others. The hardware differences between the Xbox One S and Xbox One X haven’t been an issue, because these changes were essentially “the same part, but more,” or, “the same part, but faster.” When it comes to rendering a game at a higher fidelity, or the same fidelity but at a higher frame rate, that’s all you need.

With Xbox Series X and PS5, we’re seeing a huge improvement in CPU and SSD, though, and, if you want to truly take advantage of these parts, scaling your game is nigh-on impossible. Both Microsoft and Sony have talked about using the SSD as RAM to load highly detailed objects and textures on the fly, and about rich open worlds with instantaneous fast travel. A solid example of all these elements in action would be the new Ratchet & Clank title for PlayStation 5, where the core gameplay loop revolves around jumping between highly detailed environments with no loading. How can Microsoft build experiences like that when it also has to support a seven-year-old laptop hard drive in the 2013 Xbox One? It can’t. Or rather, if it is achievable, making it happen would involve a torturous amount of work.

There’s also the matter of the CPU, which is tasked with telling the GPU what to write. The more powerful CPU in new consoles will allow for richer simulations. That could mean more cars on a racetrack, more NPCs in an open-world crowd, or just a level of AI complexity that we’ve yet to see in a console game. While NPCs and cars are largely scalable, it’s these new levels of simulation quality that can lead to unseen “next-gen” experiences.

It’s worth noting that one of Sony’s major launch-window titles, Spider-Man: Miles Morales, like Halo Infinite, looks like a “scaled” version of a current-gen title, as it’s built on the back of the 2018 PS4 game. Many early cross-platform titles, like Assassin’s Creed Valhalla or Hitman III, are not going to look meaningfully “next-gen” for the same reason. It’s only when developers can leave behind the last gen that we see that leap in fidelity. Just look at 2013’s Xbox 360-supporting Call of Duty: Ghosts versus last year’s Modern Warfare reboot to see what a difference the lowest common denominator can make. Backward compatibility is fairly simple; forward compatibility is a headache.

With its first-party PS5 titles, such as Horizon Forbidden West, Sony is free from those past-gen shackles as soon as it wants to be, and can use its 2021 lineup of games to attract gamers over to its new console. Microsoft, assuming it wants to keep its promise, can’t.

When you’re selling subscriptions, that maybe isn’t the greatest problem, especially when, as mentioned, huge cross-platform games like Call of Duty, Destiny or Far Cry will run just as well or better on Xbox Series X. But we’re at that period in the console lifecycle when people are picking sides, at least for a few years, and gamers are willing to jump ship. Banking on the lure of Game Pass alone to keep your users on side is a risky move. The fact that Microsoft is starting to muddy the waters so quickly suggests it knows it has a problem; that if it wants to build next-gen experiences that keep its existing customers and attract new ones, it needs to cut the Xbox One loose.

The solutions

Nothing I’ve written so far will be news to Microsoft. Its engineers, developers, marketers and community managers know exactly what the issue is with this promise. The question is: What to do now?

There are essentially three ways to fix this problem. One: Bite the bullet and actually produce functional last-gen versions of all of your games until Holiday 2022. Two: Ensure that the vast majority of your users (or, at least, Game Pass subscribers) are using a next-gen console by the time you abandon the Xbox One and Xbox One X. Three: Worm your way out of the promise on a technicality.

The first option is self-explanatory, if costly, for all the reasons outlined already. The second option, though, is more complicated and the key could arrive in Lockhart, the Xbox Series S, or whatever you want to call Microsoft’s long-rumored cheap next-gen console. It’s widely assumed that this console will come in at sub-$300, possibly as low as $250. But when you consider the Xbox business as a subscription play, and pay attention to what Microsoft has been doing with hardware recently, “price” could be the wrong way to look at the Series S.

Microsoft has been piloting hardware-as-a-subscription over the past couple of years, in the form of its “Xbox All Access” program. For $20 a month (over 24 months), you could pick up an Xbox One S, and a subscription to Game Pass Ultimate (normally $15 a month anyway). It’s not hard to imagine the exact same deal being put in place for the “Series S,” offering a $20- or $25-per-month subscription that nets you a next-gen console and every game you want. This offers a fairly painless upgrade, and would likely pick up many of the stragglers that don’t want to buy expensive consoles outright. With the long-term benefits of retaining and attracting subscribers, Microsoft could even afford to “give away” the Series S with, say, a 36-month Game Pass subscription, thus disarming anyone complaining about the broken promise.

For option three, Microsoft can point to the cloud. Specifically, xCloud, the streaming service that’s coming to Game Pass this fall. The company could easily support every Xbox Series X game on the Xbox One S and Xbox One X for years and years to come — once they upgrade their servers. This is an elegant and cheap way of keeping the promise, if a slightly shifty one.

This is all speculation, but I think we’ll end with a solution that involves elements of all three. I believe that Microsoft will release its first- and second-party games on the Xbox One S and X through 2021. I also believe that it’ll be offering subsidized consoles through a program similar to Xbox All Access, and that the Xbox One S will be supported as (and maybe even sold primarily as) a streaming box for xCloud.

None of these solutions end in disaster for Microsoft. But similarly, none of them are likely to give the company much chance to close the gap on Sony or even Nintendo, whose Switch console has outsold the Xbox One despite the latter’s three-and-a-half year head start. That’s a huge problem for a console seller. But for a subscription provider? No churn, no problem.

Correction: This article originally stated that Spider-Man: Miles Morales is a cross-gen game. It has been updated to reflect that the game is a PS5 exclusive, with an engine that expands on the foundation of the original PS4 title, Marvel’s Spider-Man.