Always-on Xbox could be Microsoft’s final flop

10 Apr

red-ring-of-deathIt’s been trendy for the past few years to harp on Microsoft and its many failings – last year’s temporary hype blip notwithstanding – but it looks like things have progressed well beyond that. It’s becoming increasingly clear that there is something really wrong with the company.

Last year was a big one for the Redmond-based software giant, with major relaunches of its ubiquitous computer operating system, mobile phone platform and, for the first time, its own computers in the form of tablets. A few months into 2013, it’s looking like none of those efforts have really turned out.

Windows 8, the company’s bread and butter, didn’t exactly set the world afire upon its debut last fall. The New York Times was considering it a flop as far back as December, with more recent analyses seconding that. The operating system’s uptake slowed for a third straight month in February, meaning Windows 8 has zero momentum behind it.

In phones, even the most positively spun stories can’t help but point out that Microsoft’s ascension to the number three position in smartphones in many countries has come largely because of the decline of BlackBerry. When you’re number three simply because you showed up to the race while other competitors were busy imploding, well… that’s not exactly a good sign. And now that BlackBerry is actually putting out new devices again, how long will Windows’ sort-of momentum hold? Moreover, the bigger question surrounding both is how long will new phone buyers continue to shell out for devices that don’t do nearly as much as those from Apple and Android?

Turning to tablets, it would actually be charitable to call Microsoft’s first endeavour – the Surface RT – a flop. Indeed, the term “mega-flop” has been bandied about, with low sales combining with high return rates making the RT the worst-received tablet since the original BlackBerry PlayBook. Other Windows vendors are slashing prices on their own RT tablets in an effort to move them, but who knows if that’ll work.

What about the Surface Pro, Microsoft’s second, recently released, higher-powered Windows 8 tablet? The company hasn’t announced sales numbers but estimates in mid-March pegged it at selling about 400,000 units, or short of predictions. There was also the sell-out controversy, where critics charged that Microsoft had artificially sold out the device’s inventory by producing only a small amount. As some Apple watchers humourously put it, the Surface Pro may have sold out, but so did the Zune back in 2009.

That brings us to what is perhaps Microsoft’s most successful business, or at least the only one with any real positive momentum: the Xbox. The company can’t seem to steer clear of controversy here either, with Microsoft Studios creative director Adam Orth recently sticking his virtual foot in his virtual mouth with a Twitter tirade about always-on games. The next Xbox, which could potentially be unveiled in May, has long been rumoured to require a constant broadband connection for games to work on it, which is a potentiality Orth contributed to by mocking complaining gamers and rural residents (who can’t get broadband). The company even had to go so far as to apologize for his comments.

Now, the latest sign that something is really wrong with Microsoft – and Xbox – is explained by a solid Wired feature about how independent developers are fleeing the platform to the warmer confines of Sony and its PlayStation. With the likes of Journey, Retro City Rampage and the just released Guacamelee! (from Toronto’s Drinkbox Studios) exploding in popularity, indie games are quickly becoming a strong differentiator for console makers, a fact that Sony seems to have realized but that Microsoft doesn’t seem to care about. As the story puts it:

Indies were once a fringe group of rogue developers who were often happy to get any sort of attention from a console manufacturer like Sony or Microsoft, but today they’re an industry force that will help shape the next generation of games and gaming machines.

It’s hard to read this account of indie developers’ mistreatment at the hands of Microsoft and not get a sense of arrogance from the company, which seems to backed up by the likes of Orth in his attitude toward gamers.

The fate of the company may indeed come down to that one simple decision, of whether or not to force broadband connections on all next-generation-console games. With a gamer revolt likely to result, Microsoft’s last good business could be dealt a deadly blow. With all the other failures circling, where will that leave the company?


Posted by on April 10, 2013 in microsoft, video games


10 responses to “Always-on Xbox could be Microsoft’s final flop

  1. Marc Venot

    April 10, 2013 at 1:15 am

    The industry has decided that broadband connections will be mandatory on the next (this year) consoles. Those customers that resist will have to buy the “classic”.
    Maybe you can analyse why Microsoft spend so much on the launch on Windows 8 but have now to use the stop of support of Windows XP to pull the professionals ahead?

  2. jdh5153

    April 10, 2013 at 1:49 am

    An online console might upset a few gamers, but they can easily make up for it by selling it as an all around entertainment box like a Roku that also happens to play games. I don’t think they have anything to worry about. I’m certainly still excited for it no matter how it turns out. 80% of the time my Xbox is used as an entertainment device…It’s on playing in the background right now.

  3. Jason Koblovsky

    April 10, 2013 at 2:37 am

    The move to indie developers doesn’t surprise me. In game development realm I know quite a few that are getting a bit frustrated with their hands being tied on exactly what they want to do and the time constraints publishers are putting on the developer. Robert Bowing’s departure last year and his comments during this time are representative of that.

    Since around 2010 I’ve seen a decline in the quality of code coming from the major developers. The PS3 version of the first Black Ops wasn’t even properly beta tested and rushed to release. The game didn’t work properly for almost 7 months after release. There seems to be a sense that gamers will look the other way when they buy games on release day expecting problems. There’s no reason for that when servers can be properly stress tested, and if analysis is done correctly you usually triple the demand from pre-orders, than scale back what’s not needed. You never say “Oh well we didn’t expect the game would do this well”, when you have the pre-release numbers.

    The PS3 version of Black Ops 2 came and still has potentially fatal system freezes due to the lack of quality testing. That has nothing to do with the servers, and everything to do with shotty code and a lack of beta testing to ensure product is released without causing damage to the systems due to hard freezing. Any other professional software developer would be sued out of existence if they provided software that has the potential to cause fatal system errors. I’m pretty sure with this current generation of consoles we can find many examples of games not working properly during release due to major problems with server or untested code.

    As a qualified systems analyst and coder, the problems on release should be extremely minor. Yes you can’t be expected to catch ever single bug, however the major bugs are very rarely missed if proper beta testing is done internally and publicly. The only thing you should expect on release is “minor” glitches, not hardware freezing or severs crashing. Somehow the majors have, and keep getting away with breaking very basic and fundamental rules of software development. Combine that with the protectionist behaviors of the big developers and you are prime for some sort of industry and market revolt.

    I think the revolt will be in 3 area’s. First hardware. There are a lot of hardware manufacturers like Nvidia getting ready to release their own mobile gaming systems. I think Samsung and Apple will also follow suit with something in the next few years. Hang off on buying that next gen console. Give it a year before you buy in. I think we’re in for a few surprises that will shake this industry with respect to hardware. OLED and Smart TV’s over the next few years are going to greatly impact the way we consume media, in the same way touch devices have. It’s only a matter of time before your phone becomes the console. I think we’re already there. The market need seems to be there too from what I can tell.

    Second software developers. I think you touched up on this in this post. A lot of effort is going into Sony courting indie developers. A lot of game developers working with the big publishers are leaving for indie. Robert Bowling of Infinity Ward is the most visible. A lot of developers signed with the big publishers are getting fed up with creative constraints, and tight deadlines built less on quality and more on return. Plus the indie game market is booming right now. Lots of competition, meaning coding quality is usually pretty high in the indie game market, and there is less creative constraints.

    Third Gamers. Graphics have gotten better, more defined and more responsive, but it’s not a HUGE jump as we’ve seen in the past, and I don’t think it’ll be the main selling point for the new consoles. Gates actually explains this quite well himself: (starting from time index 3:03)

    I personally think if consoles have any daylight in our future, they have to meet the market demands out there for a device that will be interoperable with your current entertainment platforms, and not restrict users from current generation uses.

    Than of course you have the UBB issue, that the EASC has remained virtually silent on.

    • Jason Koblovsky

      April 10, 2013 at 2:49 am

      Sorry that should have been the ESAC or the Entertainment Software Association of Canada. UBB will definitely have an impact on consumer purchasing power from these next gen consoles. They are planning on releasing bandwidth heavy devices, when currently most consumers are capped.

  4. Infostack

    April 10, 2013 at 8:31 am

    MSFT has never understood how it both benefited from and was hurt by the lower layers of the stack. In the mid to late 1990s I used to say, “if you want to break the MSFT edge processing monopoly, break the Bell monopoly.” Well I was right; as broadband took hold, by the late 00s it became apparent that edge processing was no longer the only game in town and there was this thing called the cloud. Then mobile came along and it was game over. Now they show their total ignorance of the trade-offs (from the consumers perspective) between the upper and lower layers, and the edge and the core (distributed vs centralized).

    Hello? Does anybody in Redmond understand the Infostack?

    MSFT’s only hope is to disrupt the wired and wireless broadband market. It should go fully metal jacket into a horizontal model that leaps over GOOG and Apple, the former relatively open, the latter relatively silo’d, and shreds the vertically integrated service provider model (telco, cable, mobile). In fact that strategy would benefit all 3 simultaneously as well as the entire tech sector and every economy around the world as digital becomes pervasive.

    It has the assets and cash to do so.

  5. El Presidente (@elquintron)

    April 10, 2013 at 10:15 am

    With regards to the “always-on” requirement, it reeks of entitlement by big studios and console makers, and I think Ouya, and other newer hardware makers are going to eat their luch, if not on this generation of consoles then the next one.

    Steam’s recent porting to Linux is another example of where next gen hardware could go, a console is fundamentally a computer running a closed OS, so when not Steam directly atop the Linux kernel?

    I think Microsoft’s going in the wrong direction here, simply because consumers both have a choice, and always online is not really an appropriate requirement for a single player game.


  6. rbn

    April 10, 2013 at 12:20 pm

    The thing that really gets me with all of this is that the underlying products they’ve been putting out have actually been great, but they’ve been hamstrung by foolish business decisions. Microsoft has a lot of really smart people working for them, and in the last few years they’ve done more innovation than most other companies in this space. Unfortunately, when the people at the top are making silly moves they’re just tying an albatross around their own necks and holding all of that awesome work down. It doesn’t matter how innovative a product is if it has a critical limitation that will regularly get in my way – I’ll take the less exciting choice that gets the job done any day.

    – The underlying platform in Windows 8 offers a lot of benefits over 7, but the insistence of trying to force a tablet UI onto the desktop/laptop markets where it doesn’t make much sense has weighed it down. Having one kernel and set of APIs for both mobile and desktop platforms is a good thing, but the way that you use the two is fundamentally different and the user interface needs to reflect that. They made this mistake back when Windows XP Tablet PC edition came around and they’re still making it, just doing it from the other direction. Had they just left the start menu alone and offered the metro interface as an option for hybrid devices Windows 8 would be doing a lot better right now.

    – The Surface RT is a really good tablet, but it is priced too high for what it offers relative to the competition. Had they sold it for $100 less and thrown in the keyboard, I think we would have seen a *very* different picture here. Given the BOM numbers we’ve seen, they had more than enough margin to do that with and still be profitable on the hardware (even ignoring the revenue from their cut of software sales for it). They needed a slam dunk product to build a foundation for their ecosystem deep enough to compete with their heavily entrenched competitors, but instead they worried too much about pissing off commodity OEMs. Unfortunately, now they are sitting on sand and it will be extremely difficult to build on top of that.

    – Now this always-on nonsense with the new XBox is fouling up all the good work they’ve done with the 360 this console generation. It was one thing when the PS4 was going to do the same thing, but going it alone with a consumer-hostile feature like this is just crazy, especially when your new platform likely won’t be backwards compatible (ie there is little to no downside for current 360 owners to switch to Sony this generation). The really silly thing about all of this is that it’d be easy to fix, but the longer they stay silent and let it fester the harder it will be do dig out of this mess if they do elect to do the right thing.

    They seem to have this misconception that they can sneak in changes that actively piss people off, but despite that repeatedly blowing up in their faces they just keep doing it. I can understand why they wanted to do all of the above, but when you go too far and you get hit with backlash over and over again you’d think they’d learn their lesson and be a little more careful. Instead, they just seem to get more and more brazen with each step they take. Partner relationships are certainly important, but only in as much as they help you improve the relationship with your customers.

  7. cko

    April 10, 2013 at 3:07 pm

    Perhaps it shouldn’t be surprising given the size of the company, but the fragmentation between business units is really hampering this company’s efforts.

    As other commenters have pointed out, the Surface tablets aren’t bad products per se, but given their price point in the market they’re notably lacking in some key ways. Shipping Surface RT without Outlook is baffling to me. Today’s ZDNet article ( – which may or may not be accurate – points to a late 2014 release for what I see as the company’s bread and butter application. Though I no longer personally use the Office Suite, I would have to assume that for corporate users the main reason to choose an MS tablet would be integration of the Office apps. Why on earth they’d leave out such an integral piece of the puzzle – and potentially the only real differentiating factor between Surface and its competition – is beyond me.

    (You’d think they’d have learned from the debacle that was the BlackBerry Playbook which shipped without integrated email functionality, and we all know how well that product has done)

    It’s also concerning how many users are still operating Windows XP. The fact that the company hasn’t been able to convince customers to upgrade to Vista, Win7, or Win8 over the last several years should be a red flag internally but they still haven’t found a way to make a solid case despite pouring millions into various marketing efforts.

    The Xbox news of late on the other hand has just plain pissed me off. The arrogance that Orth displayed in his ill-advised ranting simply shouldn’t be on public display. It will be very interesting to see how this next generation of console wars plays out. I know I’m not planning on upgrading anytime soon.

    On a completely unrelated note, does anyone have any insight into whether there’s a correlation between BlackBerry’s mysterious million unit BB10 order and Export Development Canada’s “loan” of 200 Million Euros to Spain’s Telefonica?

  8. Adrian

    April 10, 2013 at 5:50 pm

    Online-only is basically stupidity incarnate. It requires a technological level and saturation that just doesn’t exist here. I mean, it cuts out rural consumers, it cuts out privacy-paranoid consumers, it pisses off everyone who is already mad at invasive DRM, it even cuts out people who do not have limitless internet plans just because aware parents (and other bill-payers) do not want an always-on connection that makes monitoring data used a lot more difficult.

    And @ jdh5153: Selling it as an all-around entertainment device solves nothing; it is not the new X-Box’s lack of uses/functionality that is the problem, it is the unnecessary and actually damaging always-on function. Having always-on internet connection actually makes it impossible to use the device in a rural area, or if you do not have broadband, which is telling those people Microsoft doesn’t want their money. Which is not only a bad business decision since it reduces their market artificially (I am from a small city that is surrounded by farms and ranches, and a number of friends had consoles as their only form of electronic entertainment, which would be impossible for them if a broadband connection was required then, AND would still be a problem today), but it’s also bad for Microsoft because it pisses off people due to that flagrant uncaring attitude towards customers.

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