 It's time for another episode of Outside the Box and today I'm going to talk about Microsoft in specific about the Xbox One and whether or not Microsoft is about to become the next SEGA. So first we need to clarify what it means to be the next SEGA. SEGA was obviously really huge back in the day as a platform creator. They had the Genesis, the Sega CD, a bunch of stuff in between and then finally the Dreamcast which ended up being their last system. They also had the Sega Game Gear which I loved but the battery life was even more atrocious than the original Game Boy. So you had to have quite a big battery budget back then if you wanted to keep playing the Game Gear. The thing is I loved the Game Gear. It was vastly superior to the Game Boy in many ways but it was also really bulky and again a battery hug. So SEGA, when people say, you know, like over the years I've heard start with all the Nintendo is going to be the next SEGA. What they're talking about is that SEGA used to make consoles and eventually they abandoned the console space to become a third party publisher on everyone else's platforms. So they went from a hardware creator to just a strictly software maker that makes games for a multitude of platforms be it Nintendo, PlayStation, Xbox, PC with the Total War series. They became a publisher, they became a game maker for multi-platform games, they became a third party publisher like Ubisoft and EA and Square Enix and all the other publishers out there. So that's what it means to become a SEGA, it means you originally created platforms then became just a software company. And Microsoft's an interesting situation because Microsoft itself is not a video game company. Microsoft is a software company. They've always been a software company. They got huge thanks to Windows, thanks to MS-DOS and those are software packages. Those are operating systems which are pieces of software that help popularize the home PC concept. And to this day, Windows is still the most popular used platform on PCs, more popular than Linux and PCs are overall still more popular and more affordable than Macs. So by and large, Windows kind of owns the market on PC and they make a whole multitude of other things. They built off of that. They built server infrastructure off of it. They built email infrastructure off of this that, you know, they still they brought back, they got rid of Internet Explorer, created Microsoft Edge, which is better. It's not as good as Google Chrome, but it is better. So Microsoft was in the software creation space for a long time already. And when it came to video games, they were making PC video games for, you know, quite some time. If you remember the Age of Empires series with Creative Assembly and they had a lot of other games they created for the PC platform as well. And it made sense because since Microsoft own the PC platform, they should obviously have some game development studios making video game software for the PC. So Microsoft, when it came to video games was originally a software creator. They were not a hardware manufacturer. They didn't make the PC parts. They didn't make video game home consoles or portables. They were a software maker. So Microsoft already by definition can't really pull a Sega. But let's just let's just stick to the script you're talking about Microsoft moving forward. The idea is that they you know, to become a Sega that they are a hardware maker now and they will stop being a hardware maker eventually and just go the route of Sega and create games for all platforms. And even if Microsoft stop making hardware, I do not think that they are going to become a software maker strictly for all platforms. I think if Microsoft stops making video game home consoles, they're just going to go back to making PC games, which again, that's not what a Sega is like. I don't think Microsoft is interested in pulling a Sega and becoming a multi platform creator. I think they're just going to retreat to their primary platform that they make all their money on. And that is PC and they can continue the Xbox live as a service on PC and require it to play all of their games. And if they allow their games to be on Steam or whatever, they can still make you have to log in to play the game with an Xbox live account and keep that subscription service going. Although they'll have a hard time justifying that subscription service without a platform having it on, you know, exclusively that you have to use it to play like Madden online and Call of Duty online, you don't have to do that on a PC. So we'll see maybe they have to reduce the price of the subscription service. I don't know. But Microsoft makes a ton of money off that subscription service. That's like the bread and butter when it comes to Xbox. It's not the sales of consoles. In fact, it's arguably never been the sales of consoles that's been the bread and butter for Microsoft with Xbox. I believe in someone out there can correct me if you're wrong. Based on my own research, Microsoft has never made money off their home consoles like ever, be it with software or hardware. It's never been a profitable venture for Microsoft in terms of just the sales of software, just the sales of hardware. And that's kind of astonishing when you consider the last generation, the Xbox 360, pulled ahead of the PlayStation 3 and sold 80 million units, which the PlayStation 3 ended up catching up to eventually, but it still sold 80 million units and Halo sold well and Gears sold well and a whole bunch of Microsoft produced games sold very, very well. And the reason that this conversation comes up, the reason we're even talking about Microsoft becoming a Sega at all is because of the relative failure, I guess, of the Xbox One to capture a significant portion of the gaming market. And it's an interesting conversation because the Xbox One has sold over 30 million units. It's probably around 31 or 32 million units lifetime to date at this point at the end of August in 2017. And it's not selling well this year, PlayStation 4 is continuing to have strong sales, Switch, this is the launch year for Switch and it's kind of caught on, so Nintendo Switch is selling extremely well, 3DS is still kind of chugging along in the background, and then there's Xbox, and Xbox is falling behind in the North American territory, which is why some people are worried. But then this news came out about the Xbox One X, they finally had pre-orders open for it and guess what, the pre-orders have sold out at almost every single retailer at this point. In fact, the pre-order numbers supposedly have the Xbox One X already outselling the lifetime to date sales of the PlayStation 4 Pro, which released last year. Now, the PlayStation 4 Pro has never had very good sales in the first place, but now you have to wonder if the Xbox One X was the reason it did not have very good sales because we've known, even before the PlayStation 4 Pro came out, that the Xbox One X was going to be more powerful. And the primary reason to buy a PlayStation 4 Pro or to buy an Xbox One X is because you're someone who owns a 4K TV. Now there are benefits for people with 1080p TVs and those benefits are going to be worth it to some people. But for tech enthusiasts, generally the reason to grab a PlayStation 4 Pro or to grab an Xbox One X is because you want to play your PC, your console games in 4K on your local TV without having to hook up a PC. That's fine. That's great. And I think what we're seeing with the Xbox One X sales is that Microsoft, because the platform is so powerful, regardless of the fact it doesn't have any exclusive games like big holiday games launching this year, it's going to have the best version of Call of Duty. It's going to have the best version of Madden. It's going to have the best version of Assassin's Creed Origins. All these huge branded, multi-platform, third-party games, the best versions of them are going to be running either on PC or Xbox One X. And if you're a console holder, that means the Xbox One X is the platform to be to get the very best version of some of your favorite games. And I think that's why the Xbox One X is taking off in terms of pre-orders and why the PlayStation 4 Pro is always kind of lagged behind. Because everyone knew the Xbox One X was coming and they were just waiting for that. Because tech enthusiasts want to play the best version of the games they can. PlayStation 4 Pro doesn't provide that. Now obviously it provides that for exclusive games to Sony, but if you primarily buy consoles for those multi-platform games, Xbox One X is not that bad of a proposition, especially since the cost of it is what an Xbox One itself costed at launch. And the Xbox One X is actually interesting because for $500, it's actually really hard right now to build a comparable PC for $500 to the power offering of the Xbox One X. And it's one of the first times in over a decade now that it's been really hard to build a PC for the same price as a console that isn't more powerful. So what does that mean? It means that Microsoft is not going to become the next Sega. They're not even close to becoming the next Sega. While I've talked about how they haven't been profitable as a hardware maker or a software maker, what has been profitable for them is Xbox Live. And Xbox Live is a huge, huge money maker. Heck, I've been, you know, for most of the past decade, I have been subscribed every single year to Xbox Live, and I don't even play an Xbox every month. In fact, there's some time, there's moments in the past 10 years when I didn't even own an Xbox, but I still had an active Xbox Live subscription. Because when I do own an Xbox, I have to have that subscription to watch Netflix, to play Madden Online, which is something I like to do a lot, to play Call of Duty, to play Halo, play any of those games online. I have to have that subscription. And yes, they have games of gold, just like PlayStation Network gives away games as well, and that's really nice too. I'm not going to complain about getting, you know, they call it quote unquote free content. It's not free because you have to pay a subscription fee to get it, but it's a value add to your subscription. And that's fine. That's dandy. But that's where Microsoft makes all their money. They make it off of Xbox Live. It's actually a really brilliant move by Microsoft to invest in subscription service instead of investing in having to own the hardware market, having to own the software market. You just need to own the subscription market. And they kind of do. So what's nice about the Xbox Live subscription is there's people who use it on PC, there's people who use it on Xbox. And it's important for them to have the Xbox platform, because that's going to ensure there's always millions of people paying at least $60 per year, if not more. And Microsoft isn't going to give up that revenue anytime soon. In order to keep that revenue going, they have to have a platform to put it on. Because as I said, they're going to have a tough time trying to sell Xbox Live at $60 a year to just PC users. In addition, I think Microsoft is in a unique position because of their hold on the PC market where their next system after the Xbox One X is going to be advertised instead of as a purely video game console, they're going to advertise it as a media PC that you hook up to your TV. They're going to advertise it as a system that, no, you don't run your cable through it, like, you know, like the HDMI in that they have on the Xbox One. No, it's going to be a system that you, you get, you know, they'll partner up with somebody for a TV service, they'll partner up with like direct TV now, right? I have direct TV now myself. So they'll partner up with direct TV now, and you can get it cheaper if you have an Xbox One X, like, I think the top package on direct TV now is 70 bucks. We'll say if you have an Xbox One X, you can pay, you know, $60 a year. And if you're an Xbox Live subscriber, you can get direct TV now for, say, the top package for $30 because they already do bundles with people who also have AT&T phones because AT&T owns direct TV now. So if they partner up, that's just an idea out there where they're going to release a system that is going to become a media hub, like what they wanted the Xbox One to be, but unfortunately, they did not advertise the Xbox One very well when PlayStation 4 capitalized on the bad messaging from Microsoft and made their system seem like, like a joke. And as an Xbox One owner from day one, I have never felt that the Xbox One was a joke. I think what sucks this year and what has people so fearful or so willing to write Microsoft off is they don't have a lot of exclusive games. And you know, because of that, the Xbox One itself hasn't been selling very well. But I think what you're seeing with the pre-order numbers of Xbox One X is it's just people, if you're going to buy an Xbox One, you're going to wait for the X. You're going to wait to get the best versions of the games, of the multi-platform games. If you're buying an Xbox to play multi-platform games, you might as well buy the Xbox One X and get the best version of those multi-platform games. And two of Nintendo, or Nintendo's, two of Microsoft's big franchises are not really franchises. Big games that they had coming out, Crackdown 3, that was delayed. And I'd rather than delay it and get it right then rush it out just because the Xbox One X is launching and scale bound. That I think Microsoft was banking on that being a big game for them this year. And they had to cancel the project for a multitude of reasons. It just wasn't coming together behind the scenes over at Platinum. Which is strange to say because Platinum is a very reliable developer. I mean, look at Bayonetta, Bayonetta 2, I mean, the copious amount of games that Platinum has put up. But for some reason, scale bound for as awesome as the little bit of gameplay we saw looked, it just didn't work. And it sucks that they had to be scrapped. But without scale bound, and without Crackdown 3 this year, Microsoft kind of was left without not a lot of exclusives. And I think that's why the Xbox One doesn't have a lot of sales right now. I mean, if you think about the PlayStation 4, what's one game the PlayStation 4 has that's going to keep sales moving during the summer in the United States? MLB, the show. It's the only baseball game, a real baseball game on the market. And it's exclusive to the PlayStation 4. The Xbox doesn't have anything to compete with it. The Xbox doesn't have any summer game to keep it going. Whereas the Switch had arms come out, Splatoon 2. Now they have Mario plus Rabbids. So Nintendo's had a pretty healthy slate of games for the Switch during the summer. Xbox hasn't really had anything but a couple of exclusive indie games. And indie games don't typically move units. So at this point, the only reason to pick up an Xbox is multi-plats. And if you're going to do that, Xbox One X is the way to go. In fact, I want an Xbox One X if I'm being honest. But I'm also a tech enthusiast, so yeah. Microsoft isn't in trouble as people think they are. This is a lost generation for Microsoft in general. They're not going to be able to recover the Xbox One brand. But what they can do with the X and moving forward for the rest of this generation is reinstall faith into what Microsoft believes. And Microsoft as a PC first company needs to believe in being a driving factor and having some of the most powerful hardware on the market and be a driving factor for online play and be a driving factor for third parties to be able to have the best versions of the games on their system. And I think as long as Microsoft continues to target a premium market with the Xbox One X and the Xbox Two or whatever the next generation of systems is for Microsoft, then I think they're going to be just fine. So maybe this isn't the take people thought. Maybe people thought I would automatically throw Microsoft under the bus because their sales haven't been very good this year and they lost an exclusive title and another exclusive got pushed back. And Microsoft just doesn't have a lot of exclusive games. But that's not what Microsoft's about, right? Subscription service, online play, powerful hardware, driving a combined factor between their PC and their console space. And I think they're going to continue to do that. And I think it's going to be profitable and successful for them to go down that route. And it's a route that Sony can't do. It's a route that Nintendo can't do. It's very unique to Microsoft's position. Anyways, folks, I am Nathaniel Ruffeljantz from Nintendo Prime and that was another episode of Outside the Box. Subscribe if you like this video. Subscribe if you don't like the video. Like it, dislike it. You know what to do, folks. I'll just catch you in the next one.