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Xbox As a Service: Spinning off the Xbox

Microsoft's Three Screens and a Cloud

Earlier last week the internet echo chamber exploded when it was inaccurately reported that Bill Gates was reluctant to sell off Microsoft’s Bing services, but reportably had no problem throwing Xbox under the bus. This comes at the same time you have entities writing that the Xbox One is “DOOOOMED!” because Sony is selling more PlayStation 4’s in the first year of its life. Anybody who knows how integrated Bing is into Windows, Office, Xbox, and Windows Phone can certainly understand why Microsoft could never spin off Bing, and anybody who has lived through more than one console generation knows that the first year of any console’s life has little bearing on how it can do down the road. A lot of Microsoft faithful have disregarded the comment defending the Xbox hardware and many anti-Microsoft pundits have used it as another means to attack the company, but what if we look at the issue more pragmatically about gaming in 2014 and Microsoft’s redefining role of a software and services company? I think looking at it in that light will help us to explore what Bill Gates may have been thinking. More likely than not it was just him supposing his mentee, but let’s ignore that for the sake of this thought experiment.

The Microsoft of old was centered around Windows as the platform. This is why they rose to be such a juggernaut in the technology industry in the 1980s to early 2000s. When people’s interactions with a computer was typically limited to one, maybe two PCs on any given day (work and home PC), it was understandable to have Windows as the centralized platform for all of this. With the rise of Google, Facebook, Amazon, and other web companies in the early 2000s, individuals embraced the web services that they could use at home or at work. With the introduction of the iPhone in 2007, and the rise of Android consumers were able to take their computing experiences with them and apps powered by cloud services like Instagram, Vine, Twitter, and Snapchat have change the way people compute forever. More and more the operating system does not matter anymore when data and services are powered by the cloud.

The Microsoft of 2014 is a company who has generated news for itself solely by its cloud and mobile applications. Office for iPad, Xbox apps for iOS and Android, SharePoint, OneDrive, Yammer, and Azure have been getting the force of Microsoft’s attention over the last few months. Satya Nadella being from the Microsoft server group does not seem to care what client operating system runs his services, he simply cares that people are using Microsoft’s services. With all of that in mind, if you divorce Xbox from the hardware, one can envision what Xbox as a service could be.

When people think of Xbox, they think of video games and they typically think of the iconic controller and Xbox Live. Series like Halo, Gears of War, and Fable come in mind as does Netflix and Hulu and chatting with their friends in party chat. The problem right now is that this experience is still very much of the Windows XP era of computing that you have to go and sit down in front of a box to interact with your Xbox friends. In a world that the Xbox operating system is a service, you would be able to communicate with your friends on your smartphone, tablet, gaming console, PC, and the web. This just not just extend to gaming though, the activity stream on the Xbox One could easily be promoted to the main stage of the Xbox One user experience and become a media-focused social network for consumers to use to share what music, games, TV, movies, comics, and books they enjoy in their free time. Allow cross-posting to Facebook and Twitter and Microsoft could create a network just as deep as a Facebook or Twitter. This would also help them maybe win back some PC gamers from Valve by creating a community that comes with them throughout the day. By opening up the Xbox experience already present on the console and SmartGlass, they could open the Xbox community up to a much broader audience.

When you boil the Xbox One down to parts, it is a Windows PC running three operating systems. It has a hyper-v layer to manage the other two, but on one side you have the stable Xbox OS and on the other end the dynamic Windows 8 component for applications. Ultimately, this experience could be replicated on other hardware is varying levels of success. If Microsoft open the Xbox OS up to other hardware in much the same way Valve is doing with SteamOS, they could embrace a wider audience of gamers. An entry-level Xbox could cost $99 to $199 and be the size of an Roku. It could solely run all of the multimedia applications and accept Miracast video streams for people to play their mobile games on their phones or tablet to the TV. The traditional Xbox One could be the experience Microsoft markets and sells as a great all-in-one box between the basic box and a separate gaming PC. This would appeal to the widest audience and provide the most integrated experience. At the highest level Microsoft could let the Xbox OS run on Windows for enthusiasts to build high-end gaming PCs or encompassing home media server systems for their entire house. The entry level would introduce more people to the Xbox ecosystem while the highest level would keep enthusiasts happy and singing the praises of Redmond.

Mobile gaming is one field that Microsoft could take over across iOS, Android, and Windows if they played their cards right. Introducing Xbox Live for these mobile platforms as an alternative to Apple’s lethargic Game Center and Google’s me-too Google Play Games. Having cross-game chat, leaderboards, challenges, and achievements could help to Xbox the Xbox Network and keep people playing within the Xbox Live network.

Xbox Music and Xbox Video are Microsoft’s media services that power the Xbox One and Windows now, but they have soundly been in the “hobby” realm as Microsoft has essentially used them as pillars for their traditional platforms strategy. A separate Xbox company would make these services a priority across Windows Phone, Windows, Android, iOS, and the web. Selling content would be like greasing the gears for their Xbox network machine. Expanding their offering to books, audio books, and comics could bring in more people into the fold. Microsoft would want to use the Amazon and Office strategy here though and spread the experience to every hardware device they could support. Everything from Xbox to Roku or even the Kindle Fire would be a good way to bring people into the Xbox ecosystem.

I am not saying any of this is what Microsoft should do or that any of this is the right way for Microsoft to go, but just some thoughts I had on the topic of the Xbox division being run as a separate company like Skype is today. If I had all the answers I would be running the Xbox division, but since I do not you can take this article as you will. I felt like it was a fun thought experiment and perhaps others would enjoy thinking about some of these possibilities.