Xbox's strategy: more first-party, more targeting, more PC

Also: Steam's new client wishlist changes & lots of game discovery news

[The GameDiscoverCo game discovery newsletter is written by ‘how people find your game’ expert & company founder Simon Carless, and is a regular look at how people discover and buy video games in the 2020s.]

It’s Monday! We’re back and at peak performance. Basically, imagine the classic early ‘80s albums from Steely Dan co-founder Donald Fagen? ‘I.G.Y.’ from ‘The Nightfly’ - that’s how we’re rolling. (‘Ninety minutes from New York to Paris’ - a killer combo of nostalgic optimism, slight misanthropy & pinsharp execution - that’s us.)

Oh, and is announcing you have a 'proper' company webpage embarrassing, since it reveals you didn't really have one until now? 🤣 Either way, the GameDiscoverCo website is up and running, highlighting this newsletter and our consulting work.

Thanks to the Victory Over All design folks (graphics/layout - highly recommend, they also did our new logo), and Jordan (production & text) & Avi (implementation) on our end for sorting that one out. And bonus points for Bitkraft’s Kevin Robertson & his comment on our LinkedIn announce: “Restaurant: ‘Now with menus!’“

[PSA: only 10 days left on our 25% off deal for our GameDiscoverCo Plus paid subscription. If you’re not a Plus subscriber, you missed us talking about BattleBit Remastered on Friday, one of the most interesting Steam success stories of 2023 so far. So what are you waiting for?]

Microsoft’s game strategy: vignettes from ‘not-E3’

It’s very difficult to get Xbox execs like Phil Spencer to go off-message. He’s smart, his team have spent a lot of time workshopping announcements like ‘Xbox’s Bright Future, and How We’ll Get There’, and Xbox doesn’t have a Japanese parent company like Sony which traditionally shows more to shareholders. So you get a lens.

But luckily, there were two opportunities to see slightly more off-the-cuff interviews with Spencer at ‘not-E3’ - a longform chat to Polygon’s Chris Plante, and Jeff Grubb, Lucy James and Tamoor Hussain talking to Spencer and Xbox’s Matt Booty during the ‘GiantBomb at Nite’ streaming show. Here’s some key takeaways we had:

• On Xbox first-party, ‘look at what we’re building’ is key: with misfires from titles like Halo and Redfall, but guaranteed stable revenue from Game Pass, Spencer can take the ‘mea culpa’-tinged long view with GiantBomb: “2022 was a light year for us on first-party, no doubt. But we also knew we’ve got over 20 [first-party] studios building games, and the progress the teams were making.”

• Microsoft is pushing PC Game Pass very, very hard: in the Polygon interview, Spencer notes that PCGP is “the fastest-growing part of Game Pass today.” (Though we presume a much lower percentage of total usage.) But the ‘blue ocean’ is on PC, right? Yep: “Console Game Pass at some point just taps out, because you’ve reached kind of everybody that owns your console… but with PC, there are hundreds of millions of people [with the necessary hardware] who don’t buy games from us today.”

• Cloud gaming is largely being used for ‘Game Pass grazing’ on Xbox: Spencer did tell GiantBomb: “Most of our use of cloud is actually people playing on console”, confirming something we had claimed, adding: “We think a ‘zero marginal cost’ way of somebody clicking on an icon and downloading a [Game Pass] game is is an awesome way for people to try games they might never have played before.”

• Targeting is more important to Xbox than # of games in Game Pass: Spencer notes: “The number one piece of feedback we get from customers is ‘I want the games for me’. We thought early on it was actually going to be ‘I get n number of games for X dollars a month’...” He said that the company marketed ‘over 100 games’ on the Game Pass page, even though there were eventually more than 350 there “because it wasn't actually [about] the number.” (We’ve heard Game Pass acquisition strategy is very focused around covering diverse genres/target markets.)

Where we thought it got particularly interesting was the Giant Bomb interviewers taking Spencer deep into the mechanics of how Game Pass deals work. He said animatedly: “I think about Game Pass as a content fund… That we're creating revenue for us that we can then go put back in the market, to go create a higher floor for teams when they are thinking about how this is going to sell… we don't gauge our Game Pass deals on how many units it sells - ‘when the game goes in, here's the payment that you get.’”

We’ve definitely seen this happening - if you know you can get a fixed $500k to $2 million (or lots more, for some bigger titles, plus spot bonuses) because Game Pass has signed your title a couple of years before release, that allows you to de-risk the project as a whole. It’s a stable, guaranteed funding source, if you can nab it.

We don’t really agree with Spencer’s next point, though, although Xbox has pushed it repeatedly before: “I also like, frankly, when those games ship on other platforms… because then they can really use the community feature of Game Pass to sell more copies on Steam or sell more copies on Switch or PlayStation.”

Yes, ‘network effect’ can help with things like crossplay for multiplayer titles - suddenly your PvP servers are full of players. But we don’t see obvious, large sales upticks on other platforms from Game Pass inclusion. (Equally, we also don’t see negatives - the audiences are largely parallel and separate for now. This could change if PC Game Pass grabs a major foothold.)

Finally, Spencer’s point on Game Pass & strategy to Polygon around first-party game updates is smart: “The fact that I have a content subscription that’s at scale means I don’t need to think about every game monetizing every engagement. Because Xbox Game Pass’ success is enabling us to invest more in driving engagement than in driving the dollars.”

In other words - when you have a bunch of gamers who are saying ‘I’ll pay you $10-15/month, whatever’, there’s all kinds of things that Xbox can try. They are way less profitable than companies with breakout F2P hits ($2.3 billion in 2022 - really, MiHoYo?), but Xbox has so much more flexibility in strategy. They’ve built stability.

And you know what? We are going to end on film director Steven Soderbergh’s quote from that epic ‘state of TV/film streaming’ article: “The entire [Netflix-ish] industry has moved from a world of Newtonian economics into a world of quantum economics, where two things that seem to be in opposition can be true at the same time: You can have a massive hit on your platform, but it’s not actually doing anything to increase your platform’s revenue.”

We’re not ‘there’ for games, particularly because of IAP upsell opportunities. But it is a genuinely great question - was High On Life, the third-party Game Pass standout that GameDiscoverCo estimates had over 6 million lifetime players on Xbox, actually a noticeable net contributor to brand new subscriptions? If so, how many? (We have no idea. We’d love to find out.)

Steam: a major new notification source for sales..

So, you definitely want to pay attention to Steam’s new PC, Mac & Linux client roll-out. Valve has a video showing changes, and also notes: “much of the work went into changing how we share code across the Steam Desktop Client, Big Picture mode, and Steam Deck.”

Still, there’s a lot to look at here, including many usability fixes and improvements & a new in-game overlay & notes. This was all previously in Beta, and tested by a small subset of Steam fans, but has now rolled out to absolutely everybody. And it’ll be news to most regular users.

In particular, we’d like to highlight the ‘richer, more useful notifications’ Steam clent update, since ‘Wishlist Sale’ is now one of these. It wasn’t previously, and is also turned on as default in the Steam client. (See above screenshot for an example.) And, uhh, some people really do not like this:

We don’t think everyone will be quite this grumpy. But these in-client notifications were normally used for things like friend requests, replies on discussions you had started, and new inventory items. So discounts might be a higher-volume item.

For players, we suspect it’s great if you have a few wishlisted titles, but may make you want to mute the notification if you have thousands of wishlisted games. (Will be interesting to monitor if it helps discount conversions? Emails are also still sent out…)

The game discovery news round-up..

Let’s finish things up here by looking at the game discovery & platform news for the week. Things are starting to slow down a bit for summer, but here’s what we’ve got:

• Following up ‘not-E3’, trailer master Derek Lieu created a list of his favorite trailers from a composition & execution point of view, spanning both the highest-profile (Fable), the most surprising (Baby Steps, above), and the slightly under-the-radar, but super-stylish (Resistor).

• Microsoft has filed its opposition to the U.S. Federal Trade Commission’s injunction to preliminarily block the Activision deal, and MS is not happy: “The FTC has never persuaded a court to preliminarily enjoin a merger involving anything close to the facts here… vertical mergers… do not eliminate a competitor from the marketplace and are widely recognized to be procompetitive.” Here’s an explainer for what the FTC has to prove to get the prelim injunction - it’s v.much up in the air.

• We got hit up by the Safe & Sound ‘great music & audio in games’ folks, who are asking for submissions for their Steam sale in September, and then remembered that the HowToMarketAGame crew have a full database of upcoming Steam third-party festivals. Which this sale was already listed on. So keep checking there!

• The folks at Twitch announced a 70% share on net subscription revenue to a select set of its streamers, shifting from a recently imposed 50/50 split. However, Tubefilter explains the context, and it’s both complex historically & in terms of qualifying subs. (Still, it’s symbolic - and better optics for Twitch?)

• Asus’ ROG Ally PC Gaming handheld is now properly out. Reminder: it’s $699, comes with Windows 11 & 3 months of Xbox Game Pass Ultimate. Looks like Tom’s Guide said it’s ‘solid’ but not a Steam Deck competitor yet, and PC Mag liked it a little bit more. There’s some BIOS performance issues being sorted, also.

• Fortnite x UGC news: Preloaded have done a no-combat Fortnite mod (trailer) which “authentically recreates Egypt’s Giza Plateau in the 4th Dynasty, letting players uncover secrets about the lives, beliefs and cultures of its people.” Preloaded’s Phil Stuart: “Yes, we removed the guns… Yes, there is a school lesson plan coming soon.”

• Discord’s Activities - “a feature for voice channels that allows members to play games or watch content together” - will remain free for all Discord users, and won’t be locked behind the Discord Nitro paywall, as many of them were before. (Growth more important than monetization for this feature right now, then? Difficult to get a read on how much they are being used…)

• File this under ‘wha happen?’, but the single dev behind Porofessor.gg, which makes third-party overlays and data collectors for games like League Of Legends & Teamfight Tactics downloadable via Overwolf, with “over ten million app downloads and 800,000 daily active users”, just got his company, Wargraphs, bought by MOBA Network for 25 million Euros up front and up to 25 million more in earn-out. That’s a niche we wish we’d thought of being in!

Finally, regular newsletter readers will know we’re a sucker for weird IP crossovers in games. So how about Ubisoft’s open racing game franchise Trackmania partnering with Assassin’s Creed Mirage?

We quote: “Players will be able to race in the streets of Baghdad… the tracks have been designed to stick to the Assassin’s Creed art direction and use iconic game mechanics such as the Leap of Faith, building climbing and city parkouring.” Okay, then!

[We’re GameDiscoverCo, an agency based around one simple issue: how do players find, buy and enjoy your PC or console game? We run the newsletter you’re reading, and provide consulting services for publishers, funds, and other smart game industry folks.]