Is Microsoft preparing to do more with the Xbox brand?
While Microsoft has seen many of the brands that it gave birth to come and go — Zune, Kin, MSN, HotMail, and countless others — other brands have withstood the test of time, and along with Windows and Office, one such brand is Xbox. And a recent letter by CEO Satya Nadella suggests the company may be getting ready to do a lot more with this brand.
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"I also want to share some additional thoughts on Xbox and its importance to Microsoft," wrote Nadella. "As a large company, I think it’s critical to define the core, but it’s important to make smart choices on other businesses in which we can have fundamental impact and success. The single biggest digital life category, measured in both time and money spent, in a mobile-first world is gaming. We are fortunate to have Xbox in our family to go after this opportunity with unique and bold innovation. Microsoft will continue to vigorously innovate and delight gamers with Xbox. Xbox is one of the most revered consumer brands, with a growing online community and service, and a raving fan base."
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There's also a nod of the hat to how gaming technologies have helped productivity:
"We also benefit from many technologies flowing from our gaming efforts into our productivity efforts — core graphics and NUI in Windows, speech recognition in Skype, camera technology in Kinect for Windows, Azure cloud enhancements for GPU simulation and many more. Bottom line, we will continue to innovate and grow our fan base with Xbox while also creating additive business value for Microsoft."
I've seen a lot of pundits point to this paragraph as proof that Microsoft is committed to Xbox, and that the rumors that Microsoft might sell or spin off that division are just crazy talk. But buried in that paragraph is a nuance that's easily overlooked [emphasis added]:
"The single biggest digital life category, measured in both time and money spent, in a mobile-first world is gaming."
This isn't traditional "sit on the couch or bed in front of a TV" console gaming that Nadella is talking about, but mobile gaming, the sort that is currently dominated by iOS and Android devices, along with devices such as Sony's PlayStation Vita.
Don't believe me? Well, in the paragraph immediately following the one with all five mentions of Xbox, Nadella has this to say [emphasis added]:
"While today many people define mobile by devices, Microsoft defines it by experiences. We're really in the infant stages of the mobile-first world. In the next few years we will see many more new categories evolve and experiences emerge that span a variety of devices of all screen sizes. Microsoft will be on the forefront of this innovation with a particular focus on dual users and their needs across work and life."
Think it's coincidence that these two paragraphs are together? I don't.
Is Microsoft getting ready to carry out a rebranding exercise? Well, a rumor is already circulating that the Surface brand could replace the Lumia brand. While there may be come logic to that, if Microsoft really wanted to increase the profile of a consumer-orientated tablet, then a far better way to do that would be to slap the Xbox brand on it.
What better way to leverage that "raving fan base" the Xbox has?
Could Xbox-branded smartphones, tablets, smartwatches, smartglasses, and home automation devices be Microsoft's "mobile-first world" strategy? Putting aside the fact that the "Xbox" word itself sounds — to me at any rate — awkward, a brand born at the same time as Windows XP and when the PC landscape was dominated by boxes, there's no denying that the brand is a strong one. And expanding Xbox out of gaming and into productivity would fulfill that criteria for "focus on dual users."
There's certainly room for Microsoft to expand Xbox into a broad ecosystem, and in many ways this is what then CEO Bill Gates seemed to have in mind for the platform when it was originally released. Somewhere this idea got lost, but it could be getting ready for revival.
Another possibility is that Microsoft is looking to carve off the Xbox brand. Back in 2010, Goldman Sachs wanted Microsoft to consider a "break-up of the consumer businesses" because that "could potentially unlock hidden value, or more discipline on cost could turn the businesses into contributors to profitability and shareholder value." Xbox was what Goldman Sachs had in mind:
"For example, the Xbox products could be an appealing stand-alone entity, given the historical success of the Xbox and the products’ brand strength, and the business could show unlocked value with forced cost discipline compared to as a piece of Microsoft. To date the company’s comments suggest that management still sees significant value in combining the consumer and enterprise efforts, but we view a foot in both camps as preventing a successful focus on one strategy, a la Oracle in the enterprise or Apple for consumers."
That was in 2010, and now in 2014, Nadella's single reference to "consumer" in his missive was in relation to Xbox.
Coincidence? Maybe not.
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