A sucker is born every minute

It is a nice expression; it is one that those who live by the rules of ‘opportunity knocks‘ rely on. In slow times you need the occasional sucker to infuse the grounded capital with lose change and they are all for it. Then there is the expression of ‘there is a hustle Smurf nearby’, where the experienced player creates a new account to amass gear from inexperienced players and newbies.

It comes down to the status on how something is seen. Some Investopedia page passed in front of me this morning and woke me up instantly. It linked to Barron’s (at https://www.barrons.com/articles/microsoft-stock-videogame-streaming-cloud-xbox-xcloud-51560373000) where we see: ‘Buy Microsoft Stock Because of Its Videogame Opportunity, Analyst Says‘, the entire setting is like a rewrite of the Divine Comedy, as Inferno is all that Microsoft seemingly delivers on a whole (as I personally see it). They went from an innovative system (Xbox 360) to a flawed concept and in the three iterations we see basic shortcomings that have never been fixed over the space of 6 years.

The beginning is already fun to work with: “Microsoft stock will rally because of its strong position in the videogame industry, according to Evercore ISI” No! It does not have a strong position, Microsoft degraded from 2nd to third position, and they could end up fighting over 4th position. The strongest console of the world got surpassed by the weakest one; the Nintendo Switch system surpassed them as they truly comprehend gaming and gamers. They got there in 2 years; it took Microsoft almost 7 years to get to this stage and ending up decently below 50% of the share that Sony has with its PlayStation. Microsoft games survives through marketing and bad decisions, with the optional good decision every once in a while.

The Microsoft stage of pushing for online, whilst basic shortcomings are frustrating gamers more and more, so when we see: “Ultimately, we believe gaming can become the next major narrative as it relates to Microsoft’s long-term growth opportunity” my response is: ‘Not Really, whilst the exclusive range of games is not impressive, the shared stream (Xbox and PS4) are often shown to be PS4 gems, whilst Microsoft is merely nice (with Assassins Creed Origins being a clear exception). The PS exclusive range is still growing and whilst the larger part of Microsoft IP is done through buying software houses, it has been in history the first step towards a more complete level of failing. There are examples all over the world for over 20 years.

Then the final part: “Materne is also optimistic over Microsoft’s cloud gaming offerings, where gamers can stream gameplay over the internet. Its XCloud service is slated for release this fall“, this is not a given. Microsoft decided to stay very quiet on the entire xCloud during its E3 and in addition, it is a soon a more direct competitor to Google Stadia. With the basic failings that Microsoft has shown to have, the audience is willing to take a look at Google Stadia, new brands have that effect, and it will gnaw directly on the Microsoft slice of the gaming cake. Apple is another contender, but there are still questions on that front for now. In short Microsoft got surpassed by Nintendo Switch, it is at less than 50% of the Sony PlayStation stage and it has disappointed gamers too often in their need for online dependency, a side that gamers do not like to relate to at all. There are enough indication that the next project (Project Scarlett) is more likely than not to hold onto the flaws of Xbox One, Xbox One S and Xbox One X. Its mixed media on mentions given in E3 2018, whilst giving less or no clarity on E3 2019, loaded with one liners that are implied to be connected but are regarded to be seen as separate statements show the flaw of Microsoft to a much larger extent. So as we see that ‘Microsoft is the Netflix of gaming‘, whilst not realising that there is more to that, we might go with the quote: “Xbox Game Pass is described as the ‘“Netflix of video games” and lets Xbox and PC users play a range of Xbox One and Xbox 360 games for $9.99 per month. xCloud will essentially be an upgraded version of this pass, and will work on more platforms, so it will likely cost more than $10” (Source: Inverse)

This entire setting only works well if there is enough bandwidth, in this stage the chance of congestion grows close to exponential as there will be no solid large 5G in many places until 2022, This means that it will be select in the US, Europe and outside these two. So as such the market slice will collapse overnight, Google Stadia will have a similar issue. Yet whilst Microsoft is about the marketing Hype and WOW factor, Google has been playing a more cautious long term game; it will pay off for them. All whilst the solid information that is essential was not given at E3 merely hinted at. It implies that Microsoft has not figured out how to best maximise on the revenue (read: an implied stage to exploit gamers). That in itself is the recipe for disaster. It is like the silent ‘always online‘ push that was tried in 2012 and pushed an angry mob straight towards the Sony solution. I personally believe that Microsoft has not learned its lesson yet and will give more disappointment soon enough. that whilst the bulk of the frustration could have been avoided in more than one place and never was, that alone convinces me that Microsoft might be an option, but it will be a risky one, one that is flawed and dangerous to boot, but then some investors like the rough stuff.

Now we get to the part that Investopedia has (at https://www.investopedia.com/microsoft-s-strategy-to-become-the-netflix-for-games-4691138): “One of the things Microsoft has going for them, unlike say Amazon, Verizon and Google, is a popular gaming console and a host of already super popular games, such as the entire series of “Halo” games. At the recent E3 video-game conference in Los Angeles, the company unveiled 60 new blockbuster games for both its console and PC, including “Gears 5,” “Batman: Arkham Knight,” “Cyberpunk 2077,” and “Star Wars Jedi: Fallen Order.”” Now consider that this list of 4 only has one exclusive and for the most 50% of that list has nearly everyone desiring it on PS4 and optionally PS5 as well. The fact that ‘Batman: Arkham Knight‘ is a 2015 game giving rise to some people not doing their homework #JustSaying.

It is true Gears and Halo are Microsoft exclusives and they do have a large following, no one denies this, yet two titles don’t make for a victory (they also have the Excellent Forza IP which was oddly missing in that list).

Yet overall the entire matter of being surpassed by the weakest console is a much larger issue. The matter of change is upon them and their play is to not do this implies that there is a larger online need and the people a shivering back from that stage. They feel a little more powerless. Even as xCloud is all online, the push to completely be there will backfire, if only to be able to game when the internet congests, a part that too many have not considered to the degree it needs to be considered.

Until 5G and 5G speeds are commonplace, the gamer will be confronted with ISP’s that will react towards congestion through bandwidth throttling, when that happens, you do not want to be in a multiplayer game like Fortnite losing your connection, any promise that this will not happen is bogus from the very start. It is still a tool used, even within the last 24 hours we see throttling in combination with ISP’s all over the world, because it is a tool they need to minimise congestion. The moment throttling hits, the game is quite literally over for these players. So how often does this need to happen for people to trade in their xCloud (and optional Google Stadia) solution?

When that crystalizes in front of you, what will the losses be? I believe that there is a clear future for this kind of gaming, no one denies that, yet until there is a much stronger 5G presence, I am not sure how it will actually properly work (outside of a staged test phase). And for now that stage is for the larger global gaming population 2-3 years away.

 

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