Microsoft Gaming
TypeDivision
IndustryVideo games
Founded2022 (2022)
HeadquartersOne Microsoft Way,
Redmond, Washington
,
US
Area served
Worldwide
Key people
BrandsXbox
Services
ParentMicrosoft
Subsidiaries
Websitewww.xbox.com/en-US/

Microsoft Gaming is a multinational video game and digital entertainment division of Microsoft. Microsoft Gaming produces the Xbox brand of video game consoles and services, in addition to overseeing the production, game development, publishing, research and development, sales (hardware, software, and services) of Xbox and the division's three subsidiaries (publishers) worldwide. The three subsidiaries consist of: Xbox Game Studios, ZeniMax Media (Bethesda Softworks acts as publisher), and Activision Blizzard (publishing split between Activision, Blizzard Entertainment, and King), each publish games under their own respective labels.[1] CEO Phil Spencer, who has concurrently overseen the Xbox brand since 2014, is the leader of the division.

Prior to 2022, Microsoft had several areas of video game-related product lines, including Xbox hardware, Xbox operations, and game development studios. Microsoft Gaming was created in 2022 with the announcement of Microsoft's plans to acquire Activision Blizzard to unify all of Microsoft's gaming groups within a single division. With the completion of the Activision Blizzard acquisition in 2023, Microsoft Gaming makes Microsoft the third-largest gaming company worldwide by revenue and the largest video game employer in the United States.[2][3]

Intellectual property owned by the company include some of the most widely popular and highest selling video game franchises of all time, such as Call of Duty, Minecraft, Halo, Warcraft, Diablo, StarCraft, Overwatch, The Elder Scrolls, Fallout, Crash Bandicoot, Spyro, Banjo-Kazooie, Doom, Wolfenstein, Quake, Dishonored, The Evil Within, Fable, Gears of War, Forza, Guitar Hero, Tony Hawk's, Microsoft Flight Simulator, Age of Empires and Candy Crush.[4]

History

Up through 2000, Microsoft had only a limited number of video game publishing efforts. With the announcement of the first Xbox in 2000 and its release in 2001, Microsoft established a division for internal development of video games for the Xbox and Windows, then known as Microsoft Game Studios (MGS). The Xbox hardware remained a separate division within Microsoft. After Steve Ballmer's departure as Microsoft's CEO, Microsoft investors attempted to exert pressure on the company to either sell or shut down its gaming business. However, these efforts did not gain significant traction. Microsoft's gaming division, including products such as the Xbox console, has remained a strategic focus for the company. Under the leadership of Satya Nadella, who assumed the role of CEO in 2014, Microsoft has continued to invest in and expand its presence in the gaming market.[5][6]

MGS made a number of acquisitions of studios to help build out the Xbox software library over its first decade, including Bungie, Lionhead Studios, and Rare while establishing internal studios 343 Industries for Halo development and Turn 10 Studios for Forza games. In 2014 after Satya Nadella was promoted to CEO (combined with the ascension of Phil Spencer to head of Xbox), Microsoft embarked on a new acquisition strategy, starting with the acquisition of Mojang Studios, the developer of Minecraft, for $2.5 billion.[7] Between 2014 and 2019, MGS also acquired several high profile studios, including Ninja Theory, Playground Games, Obsidian Entertainment and inXile Entertainment. These acquisitions were aimed to help position MGS as the company's premier first-party development house comparable to PlayStation Studios for Sony.

Microsoft launched Xbox Game Pass in 2017, marking a pivotal year in which the company reevaluated its strategy to focus on a service-based business model rather than exclusive titles. This strategic shift allowed Microsoft to distinguish itself from other console manufacturers. By prioritizing a service-oriented business model with the Xbox Game Pass, Microsoft differentiated its approach from traditional console strategies that often relied heavily on exclusive game titles to attract users. Instead of competing solely based on exclusive content, Microsoft aimed to offer a broader value proposition to gamers through a subscription service that provided access to a vast library of games.[8] [9]

In 2019, as part of a larger branding, MGS was renamed to Xbox Game Studios (XGS) as to align with the Xbox hardware branding, and further acquired Double Fine.[10] Microsoft acquired ZeniMax Media for $8.1 billion in 2020, the parent company of id Software, MachineGames, Arkane Studios, publisher Bethesda Softworks and others, to further expanding its portfolio of game development studios. ZeniMax remained a separate entity from XGS from its acquisition though overseen by Spencer.[11]

Microsoft announced its proposed acquisition of Activision Blizzard for $68.7 billion in cash in January 2022. Microsoft Gaming CEO Phil Spencer stated that one of the primary reasons for acquiring Activision Blizzard is to enter the mobile gaming market.[12] Meanwhile, Activision Blizzard CEO Bobby Kotick mentioned that they accepted the offer to access more talent, capitalize on the growing demand in the gaming industry, and to compete with rising gaming companies from China and Japan.[13] After several regulatory challenges, the deal was closed in October 2023. This made Microsoft the third largest publisher of video games after Tencent and Sony Interactive Entertainment. At the time of the announcement, Microsoft announced the formation of Microsoft Gaming, which would serve as the parent company to both XGS and ZeniMax, and to Activision Blizzard once the acquisition was complete. Matt Booty headed Xbox Game Studios and Phil Spencer taking over as CEO of the newly created Microsoft Gaming business.[14][15] Shortly after completion of the Activision Blizzard acquisition, Microsoft further reorganized Microsoft Gaming. In this move, the Xbox hardware line was brought into Microsoft Gaming led by Sarah Bond. Booty was made president of game content and studios, which includes oversight of XGS and ZeniMax, while Activision Blizzard also remained directly under Spencer, with Bobby Kotick remaining as CEO until the start of 2024 to help with the transition.[16]

Products

Video game devices and services

Video games

Divisional structure

Executives

Microsoft Gaming leadership[17]
Role Name Details
Chief executive officer Phil Spencer —
President, Xbox Sarah Bond Director of all Xbox operations
President, Game Content and Studios Matt Booty Responsible for overseeing Xbox Game Studios and ZeniMax Media
CEO, Activision Blizzard Bobby Kotick Head executive of Activision Blizzard
Chief operations officer Dave McCarthy Leading the integration of Activision Blizzard within Microsoft Gaming

Business segments and strategy

Phil Spencer, chief executive officer

Microsoft Gaming's strategy in the video game industry is characterized by a commitment to inclusivity and accessibility.[18] The company aims to reach a wider audience and meet different gaming preferences by publishing games on both PC and Xbox platforms. The importance given to the Xbox Game Pass subscription service, which offers a variety of game libraries for a monthly fee, it is at the center of Microsoft Gaming's strategy.[19][20] Xbox's chief financial officer (CFO), Tim Stuart, has stated that Microsoft ceased disclosing the number of consoles sold in 2016 because their focus shifted towards content, services, and increased customer spending.[21] Since Microsoft entered the video game industry in 2001, Sony has consistently been viewed as its main competitor.[22] But, Microsoft Gaming has stated that their main competitors are big tech companies, specifically Amazon, Google and Apple.[23]

Development and publishing of video games

Microsoft Gaming, as of October 2023, is the third largest video game publisher in the industry following Sony and Tencent. Microsoft Gaming owns three major video game publishers: Xbox Game Studios, ZeniMax Media (through Bethesda Softworks), and Activision Blizzard (which includes Activision, Blizzard Entertainment, and King).[24] In addition, Microsoft Gaming also publishes third-party games with Xbox Game Studios Publishing and helps indie video game studios to self-publish their own games with ID@Xbox.[25] Among the gaming franchises owned by Microsoft, Minecraft is the best-selling video game of all time, with 300 million units sold, while Call of Duty is the 4th best-selling video game series of all time with 425 million units across multiple installments sold and $30 billion in revenue.[26]

Microsoft Gaming's video game development business holds a strong position in the video game industry, regularly developing widely played titles. Flagship franchises like Call of Duty, Warcraft, Diablo, Crash Bandicoot, Halo, Forza, Fallout, Doom, and The Elder Scrolls contribute to the company's presence in the gaming landscape. Microsoft CEO Satya Nadella stated that Microsoft Gaming now owns 12 franchises that have each generated over $1 billion in lifetime revenues.[27] Microsoft Gaming is also a major player in the mobile gaming business as it owns video game developer and publisher King and mobile games such as Candy Crush Saga, Fallout Shelter, Diablo Immortal, Warcraft Rumble and Call of Duty Mobile.[28] Candy Crush Saga alone generated $20 billion in lifetime revenue.[29] Phil Spencer has stated multiple times that Microsoft Gaming desire to launch a new storefront in the mobile game industry to rival Apple and Google and break the mobile duopoly.[30] In 2023, Bloomberg reported that Microsoft Gaming is in talks with video game publishers for a partnership to launch a mobile store aimed at competing with Google and Apple in the mobile gaming market.[31] The consistent release of these popular games generates significant financial success for Microsoft Gaming. Some of the most popular video game development studios like Rare, Obsidian Entertainment, Bethesda Game Studios, id Software, Treyarch, Infinity Ward, Mojang Studios, and Blizzard Entertainment are part of Microsoft Gaming. Following the acquisition of Activision Blizzard, Microsoft Gaming doubled the number of video game employees, studios and its revenue with the addition of Activision Blizzard to the company.[32][33] In 2023, Phil Spencer stated in an interview with Famitsu that they are planning to launch a first-party video game every three months.[34]

In certain video game genres such as first-person shooter (FPS) and role-playing games (RPG), Microsoft Gaming has held market dominance, owning popular FPS franchises like Call of Duty, Halo, Doom, Quake, Rage, and Overwatch, as well as RPG franchises such as The Elder Scrolls, Fallout, Fable, Wasteland, Pillars of Eternity, Warcraft, and Diablo.[35][36] Eleven of the twelve best-selling video games released in the United States in the last thirteen years were from the Call of Duty franchise. Microsoft also has a strong presence in the real-time strategy (RTS) sub-genre, as it owns franchises such as Age of Empires, Warcraft (RTS), Halo Wars and Starcraft. With popular platformer franchises and video game mascots like Crash Bandicoot, Spyro, Banjo-Kazooie, Conker, Psychonauts, Ori, Blinx: The Time Sweeper, and Skylanders, Microsoft Gaming is one of the biggest publishers of platformer and family-friendly games, alongside Sega and Nintendo.[37] Microsoft Gaming holds a significant position in the multiplayer gaming, serving as a leading publisher of multiplayer games followed by Tencent. Popular multiplayer titles under Microsoft Gaming's umbrella include Sea of Thieves, Call of Duty: Warzone 2.0, Grounded, Fallout 76, World of Warcraft, Overwatch 2, Diablo IV, Halo Infinite, State of Decay 2, The Elder Scrolls Online, Hearthstone, Minecraft, and many others.[38] The total number of monthly active players of Activision, Blizzard Entertainment, King, Xbox and Bethesda Softworks reached 520 million.[39][40] Microsoft Gaming has had difficulties finding success in the third-person shooter (TPS) and single-player genre, finding it difficult to compete with industry leaders like Sony, Take-Two Interactive, Nintendo, Capcom, and Square Enix in this space. Despite intense efforts, the company faced difficulties in establishing itself and gaining the same level of recognition and market share as its competitors.[41] This competitive landscape presented challenging obstacles that prompted Microsoft Gaming to re-evaluate their strategy and potentially explore other genres or approaches to improve their market position. Microsoft Gaming attempted to gain traction in the third-person single-player genre by developing titles like Gears of War, Quantum Break, Sunset Overdrive, Senua's Saga: Hellblade II and an Indiana Jones game. However, despite these efforts, the company continues to face challenges in competing successfully in this genre, struggling to match the market dominance of competitors such as Sony and Nintendo. The development of these high-profile games signals an earnest push into the genre, but Microsoft Gaming is still navigating difficulties in establishing a significant presence and capturing the attention of players in a highly competitive landscape.[42][43]

Xbox console hardware and software

Xbox brand logo

Microsoft entered the home video game console market in 2001 with release of the first-generation Xbox console, and since has manufactured three successive systems, as of 2023, as part of the Xbox brand. Microsoft's latest gaming hardware, the Xbox Series X and Xbox Series S, were released in November 2020. The Series X is a high-performance console with powerful hardware for native 4K gaming, while the Series S offers a more affordable option with a focus on digital gaming at lower resolutions.[44] Xbox Series X/S consoles sold 21 million units in total by 2023.[45] Microsoft and Sony have been rivals in the console hardware market since 2001. Xbox 360 was biggest competitor to PlayStation 3 (PS3) durning seventh console generation. Sony's PlayStation 4 (PS4) sold twice as many consoles as Microsoft's Xbox One.[46] The eighth generation of gaming consoles concluded with the PlayStation 4 selling 117 million units, the Nintendo Switch selling 133 million units (ongoing), and the Xbox One selling 58 million units. Here they are ranked in terms of sales. Sony's success can be attributed to its exclusive game catalog and marketing techniques. Microsoft initially prioritized multimedia features over gaming capabilities; Sony has managed to exploit the perceptual gap. PlayStation 4 and Nintendo Switch have surpassed Xbox One due to their design and large portfolio of first-party games.[47][48] In 2017, Xbox began rethinking its tactics and placing more emphasis on exclusive content and gaming-focused methods to better compete in the market. The Xbox Series X/S consoles continued to face challenges in competing against the Nintendo Switch and PlayStation 5 (PS5).[49] With a 45% market share for PlayStation system hardware, games, and services, Sony is still the industry leader worldwide. Sony has a 70% share of the global high-end console market, while Microsoft has a 30% market share as of 2023.[50][51]

Xbox Game Pass and xCloud

Microsoft created Xbox Game Pass in 2017. Xbox Game Pass is a subscription service that offers a vast library of games for a monthly fee. This includes a mix of first-party titles, third-party games, and titles available across PC and console platforms. The service has been praised for its value and has become a significant part of Microsoft's gaming strategy.[52] In 2022, Microsoft announces Xbox Game Pass surpassed 25 million subscribers.[53] Microsoft Gaming is investing over $1 billion in the gaming market annually to expand the Game Pass library by bringing in third-party games.[54] Microsoft Gaming launched Xbox Cloud Gaming for Xbox Game Pass Ultimate subscribers on September 15, 2020. Xbox Cloud Gaming is Microsoft's cloud gaming service designed to allow users to play high-quality video games via streaming on a variety of devices. The service uses cloud technology to enable gaming on devices such as smartphones, tablets and PCs without the need for high-end hardware. Microsoft sold Activision Blizzard's cloud gaming rights to Ubisoft for 15 years in 2023 due to regulatory pressure from the acquisition of Activision Blizzard.[55]

Film and TV series production

Microsoft Gaming oversees the management and licensing of esteemed gaming franchises, such as Halo, Fallout, and Minecraft. Microsoft Gaming also owns a motion picture production company Activision Blizzard Studios. The Halo franchise has been licensed to Paramount Global for the exclusive creation of a Halo TV series available on Paramount+. Simultaneously, the Fallout TV series is currently in development, with Amazon Prime Video is involved in its production.[56][57] Additionally, Microsoft Gaming has announced its collaboration with Warner Bros. for the production of a Minecraft movie.[58] Microsoft Gaming has expressed that these partnerships are aimed at bringing the beloved gaming universes to a wider audience through the medium of television.

Subsidiaries and studios

Microsoft Gaming has a major global presence and studios located across the world. Globally, Microsoft owns over 40 studios.[59][60] While the majority of Microsoft's gaming activities are based in the United States, the company has strategically expanded its reach internationally. This global approach allows Microsoft to collaborate with diverse talent and develop a wide range of gaming experiences for a global audience. In addition to the United States, Microsoft has established and acquired studios in various countries such as United Kingdom, Canada, Sweden, France, Spain, Mexico, Germany, Poland, China, Japan, Ireland, Malta, and Australia, contributing to the company's status as a key player in the worldwide gaming industry. In the United Kingdom alone, Microsoft Gaming owns four video game development studios and employs over 1,000 people. Playground Games, Rare, Ninja Theory, and King are among the studios owned by Microsoft in the UK.[61] In Canada, Microsoft Gaming owns five video game studios, including The Coalition and Beenox, making it one of the largest video game employers in the country, alongside Electronic Arts and Ubisoft.[62]

Microsoft Gaming
Game Content and Studios Activision Blizzard
Xbox Game Studios ZeniMax Media
Activision
Blizzard Entertainment
King

See also

References

  1. ↑ Kerr, Chris (2023-10-13). "Activision Blizzard joins Xbox Game Studios following Microsoft merger". Game Developer. Retrieved 2023-11-14.
  2. ↑ Vlessing, Etan (2023-10-24). "Xbox Sales Drop But Microsoft's Gaming Division Grows in Revenue". The Hollywood Reporter. Retrieved 2023-11-14.
  3. ↑ Taylor, Mollie (2022-01-18). "Microsoft to acquire Activision Blizzard for $68.7 billion". PC Gamer. Retrieved 2023-11-14.
  4. ↑ Good, Owen S. (2022-01-18). "Here's everything Microsoft owns after the Activision Blizzard deal". Polygon. Retrieved 2023-11-30.
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