Is Microsoft Struggling to Support the Devices and Services Objectives of Its July, 2013 One Microsoft Announcement?

After a string of marginally successful hardware device announcements, Microsoft seems to have fared poorly at the E3 Gaming Expo, 2014 held in Los Angeles. Given the amount of effort the XBOX team evidently put into Microsoft’s appearance at this event, (anyone who did not attend the event can watch a recording of Microsoft’s Press Conference at the E3 Gaming Conference, 2014 online) it should be a fair question to ask whether the potential return is worth it.

According to the latest 10-Q report Microsoft has filed with the US SEC, Gross Margin for the Hardware segment of its Devices and Consumer business, for the first three months of the calendar year, declined by 34%, from 2013 to 2014. Of course, during this period Microsoft announced the release of a new version of the XBOX product, which would incorporate the next generation features of the XBOX One, but would not have the Kinect® features.

Just after the end of the quarter, Microsoft also made a formal introduction for the press of the new Surface Pro 3, so some of the costs incurred during the quarter immediately prior to the announcement may likely be attributable to this tablet “designed to replace your laptop”. But, regardless of why funds were expended on these devices, at some point, sales of these hardware products have to start contributing, positively, to Gross Margin.

A number of reviewers from prominent publications — including the New York Times, and the Wall Street Journal — came away from the XBOX press conference at the E3 expo with the impression the new strategy is all about “shooter” games. Anyone reading the press lately would question whether this type of branding will really benefit Microsoft over the long term.

Further, while Phil Spencer provided a preview of what was to come for the audience for the Press Conference, in short, a presentation all about games, reviewers from the gaming community didn’t come away with the kind of “shock and awe” one would have hoped would have been the case.

Even worse, while analysts were also noting how Microsoft’s communications had de-emphasized the XBOX’s considerable feature set as a home entertainment control center, Sony, the market leader, in turn, specifically emphasized similar features on board the PlayStation 4 console.

It would seem Microsoft has a pretty clear set of objectives for the near term future of the XBOX — either get it right and, as Mr. Spencer also informed the press, take back market leadership, or carefully rethink the branding for this product, or, perhaps, spin it off.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved


Has Microsoft Rebranded the XBOX Into a Pure Gamer’s Console?

A lot has been written about one short sentence included in a statement made by Phil Spencer, Head of XBOX at the start of the XBOX Global Briefing during E3 Gaming 2014, which was held in Los Angeles. Mr. Spencer set the stage for the balance of the briefing with a simple announcement: ‘Today we are dedicating our entire briefing to games.’

These 9 words have prompted thousands, if not tens of thousands of words in analyst commentary on what they imply, and even signify. Is Microsoft trying to rebrand the device as a pure gamer’s console? What about the home entertainment potential of the product? Why all the emphasis on “shooter games”? Is this a capitulation to the better sales performance Sony has achieved with the Playstation? etc.

But what if Mr. Spencer meant no more than what he said? What if product branding hasn’t changed, but the communications opportunity presented by the Global Briefing was better served with an absolute focus on one of the benefits of the device — its capabilities as a gaming console? Further, wouldn’t this focus be entirely appropriate given the venue, meaning the E3 Gaming 2014 event?

I think this last set of assumptions makes the most sense, and, further, is just another example of how Microsoft has fine tuned its marketing communications and public relations since Satya Nadella took over as CEO. The XBOX One is still a very full featured home entertainment control center, and Microsoft is likely to use appropriate opportunities to highlight these capabilities for the market. But electronic games are a very big market in and of themselves. If nothing else, all of the commentary published in the aftermath of Mr. Spencer’s presentation and the video tour of new games may help boost sales of the XBOX One.

Even better, if the intention is to disrupt a market, which is, I believe, Microsoft’s plan to open opportunities for its hardware devices (for the tablet, smart phone, home gaming console, and home entertainment center markets) then provoking a bit of controversy certainly can’t hurt. If nothing else, everyone seems to have heard the same consistent message. Clarity never hurt anyone.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved