Microsoft has invested a great deal in gaming, and it’s Xbox console system is the crown jewel in it’s gaming platform.
Satya Nadella, the CEO at Microsoft, is clearly committed to gaming, calling it “the single biggest digital life category.” Nadella has also put his money where his mouth is. For example, Microsoft coughed up $2.5 billion to buy Mojang, the maker of the popular game “Minecraft”, just over four months ago.
That said, industry analysts at Nomura point out that Microsoft is actually losing money on its Xbox division when you take sales ad marketing ad R&D into account..
Price discounts helping to boost Xbox sales
The tech giant has tried to make the Xbox One console more attractive to consumers by reducing the price. The Xbox One sold for $499, then slashed the price by $100 for a consoles without the Kinect motion sensing device. The firm cut also reduced prices by another $50 for the holidays last year.
The good news is that the price cuts seem to be working. Microsoft recently noted ago that for the last two months of 2014, the Xbox One was the best-selling console in the U.S.
The future of Xbox
However, the critical question for investors of how exactly Xbox fits into Microsoft’s broader business strategy remains unanswered.
Microsoft originally saw the Xbox console as a way to dominate the living room of the American consumer. It was hoped the device could become the central hub that consumers looked to for gaming, movies or music.
That dream long given up, Microsoft seems to be trying to find the right niche for Xbox. For instance, Nadella officially shut down Xbox Entertainment Studios last fall, bringing the firm’s foray into original video programming to a close.
“Xbox doesn’t necessarily fit into Nadella’s cloud and mobility strategy,” noted Patrick Moorhead, president of Moor Insights & Strategy. “Right now, I think there is a reassessment going on about where Xbox strategically fits.”
Moorhead continued to say, “They can’t just pull the plug on it tomorrow. They have a huge installed base of people, and most Xbox users have Windows PCs, as well.”
It’s role still evolving, it’s also obvious that Xbox provides a lot of potential benefits to Microsoft.
The gaming console attracts many young fans. Lewis Ward, IDC’s Research Director of Gaming, estimates that the firm sold around 12.5 million of Xbox One consoles in 2014.
Moreover, thanks to Xbox Live, Microsoft keeps valuable data about its users that it can use to cross-sell other services and products.