Microsoft Enters New Space

By Anthony J. Bauer, Head of Private Equity at Hennessy and Associates

Microsoft is changing a big part of its customer experience by bringing Xbox Game Pass cloud streaming to smart TVs, which means that users no longer need a console. The Xbox app will be introduced to Samsung’s 2022 smart TVs before distribution is then expanded to other manufacturers. With this move, the company is trying to bring its gaming services to people who don’t have consoles, and gamers will be able to play the Xbox app with Sony’s Bluetooth-connected DualSense controllers, as well as Microsoft’s wireless Xbox controllers.

The company said the app will be available starting at the end of June and will rollout to 27 countries, and analysts are proclaiming it a very bold move for Microsoft, after Xbox’s hardware revenue jumped 92% last year. This move indicates that the company is now focussing on picking up revenue from gaming content and services, as opposed to just consoles, an area where Microsoft is behind Nintendo and Sony, after its big splash in this sector earlier this year, when it announced its plans to buy game publisher Activision Blizzard for $68.7 billion.

The gaming category is Microsoft’s fourth-largest major product category, and the company is actively trying to attract more users to its Game Pass subscription service, which comes with an option for people playing on PCs and streaming via the cloud. The hardware business started to pick up in 2020, as the Covid pandemic hit and people started to spend more time playing games while offices and schools were closed. However, recently, component supply shortages and more lockdowns in China have hurt Microsoft’s ability to produce new consoles.

Microsoft is now entering a new era.