Can we agree that Xbox aquisition strategy has been an absolute flop?

cebri.one

cebri.one

Member
We can all agree that buying Activision and Bethesda had three primary goals:
  1. Increase Xbox hardware sales
  2. Increase number of exclusives
  3. Increase GP subcriptions
Let's first examine the cost of the acquisitions. Usually when you buy a company you expect to recoup the investment by the free cash flow the adquired company will generate in the future.
  1. Activision was generating about 2.5B FCF before the acquisition. Microsoft paid around 75B for them, so they paid 30x FCF. If FCF grows at 5% a year it means they'll need at least 19 years to recover the invesment.
  2. For Bethesda we do not know how much FCF they were generating but we know they paid 8B dollars for them. I doubt Bethesda was generating even 20% of what activision generating, so let's say they were generating 800M FCF a year, again, highly optismic. They would need 10 years to recover the investment.
This is important because it's Satya's point of view. He doesn't give two fucks about console wars, he knows he spent a lot of money because Phil asked and now he wants to recover the investment.

Now let's look back at the three goals:
  1. Increase Xbox hardware sales: Absolute Flop, not sure if more explanation is needed: https://www.kitguru.net/gaming/mustafa-mahmoud/xbox-series-xs-console-sales-fell-by-almost-50-in-2024/
  2. Increase number of exclusives: Gears of War, Forza Horizon, Sea of Thieves, Oblivion Remaster, Indiana Jones... Not only significant % of new games 1st party games are not exclusive, also massive exclusive franchises have gone multiplatform.
  3. Increase GP subcriptions: OK. Number of gamepass subs we know it has grown from 24-25 million in 2022 to 35-36 million in Q2-Q3 2024. But that growth seems to be stagnating:
vXuVM6rIrmY72YAU.png


This is an additional issue, because everyone in the industry know with 35M subs you cannot cover 1st party cost + 3rd party licenses + opex cost. That's why MS is going multiplatform, they tought they could spend competition into bankruptcy offering a service below the cost of revenue and it has flopped.

Opinions?
 
Last edited:
The fact that the quality of output from Bethesda and Activision has declined this generation is testament to this.

Whoever thought it would go any differently with Phil Spencer at the helm was fucking deluded.

The American gaming development scene seems such a mess right now.
 
Last edited:
They bought bethesda and activision to sustain gamepass except gamepass was failing and stagnating before they even bought them lol. So your strategy was to take two publishers who relied on game sales, dlc purchases, etc and make them put their games on gamepass which in turn kills them financially. Just beyond moronic.
 
Last edited:
I no longer understand what they're trying to do. First get a lot of acquisitions and people thought oh yeah, Xbox is finally getting top tier exclusives. No, they turned out to be multiplatfrom. Ok great, now Xbox is aiming to be a third party publisher and they will generate more money from dropping games on PS. No, lets layoff over 1000 employee from all the studios we acquired. Raise GP prices? Surely they will start offering GP to other platforms and generate every more money. No, raise it only for the current XGP subs and new incomers and keep losing money. Absolute circus that..
 
drganon said:
Everything Xbox has done post 360 has been a flop.
Click to expand...

And everything beforehand, the original Xbox was a huge flop.

360 was a blip, it was a decent console that took advantage of PS3's high price, it became THE place to play the latest FIFA and COD games for that generation and that generation alone.
 
Last edited:
Hideous Snake said:
I no longer understand what they're trying to do. First get a lot of acquisitions and people thought oh yeah, Xbox is finally getting top tier exclusives. No, they turned out to be multiplatfrom. Ok great, now Xbox is aiming to be a third party publisher and they will generate more money from dropping games on PS. No, lets layoff over 1000 employee from all the studios we acquired. Raise GP prices? Surely they will start offering GP to other platforms and generate every more money. No, raise it only for the current XGP subs and new incomers and keep losing money. Absolute circus that..
Click to expand...


They got themselves in so deep with gamepass that they can't get out of the hole they're currently in. Gamepass is like a slow quicksand that is swallowing their studios alive, and yet they keep sinking deeper without doing anything about it. They think that charging people 80 dollars for their games going forward will just drive people to subscribe to gamepass when in reality they're maxed out on how many people give a shit about the service. The potential for gamepass to grow is non existent.
 
Last edited:
Crazy after all that, console sales declined even more! No wonder Microsoft were done and threw in the towel. They fast tracked the shit out of killing Xbox after that and wasted no time. I think those massive publisher acquisitions was their last attempt at gaining market share. Who remembers when satya nadella said " let us have competition". Lol
 
Last edited:
RetroGamingUK said:
And everything beforehand, the original Xbox was a huge flop.

360 was a blip, it was a decent console that took advantage of PS3's high price, it became THE place to play the latest FIFA and COD games for that generation and that generation alone.
Click to expand...
The 360 came out a year before the ps3 also. That was huge. I bought a 360 and loved it until I got 3 RROD's. I got a ps3 and promised myself to never get a Msoft console again.
 
cebri.one said:
How is acquiring companies at 30x their price a good strategy? they made bobby kotick look like a genius.
Click to expand...
The acquisitions made sense. Microsoft didn't have a library of strong IPs or were able to build and grow talent, so they bought it. You can make curry at home, but if you don't know how or don't have the ingredients, you need to buy it at the store. Microsoft bought lots of curry, red, green, massaman, but they don't know how to cook it to make it sing. They put it in the microwave.
 
Last edited:
So far, yes it has flopped, a new TES and Fallout plus Dishonored3 might change that for me, IF they are really good, but i have lost faith in Bethesda at the minute, so the jury is out and i don't see Microsoft making these studios do them properly.
 
Last edited:
I guess that OP doesn't get strategies

- Xbox is not just a console brand, it's a service. Wanna play Forza on a Samsung TV? Steam Deck? PS5? Xbox wins. They're not into exclusives anymore, and it's been a while actually
- when you buy a company, it's not really expected to have profits from the get go. A cost is a billion? They think in like ten years if they can make just a little more. Public companies turning into private are expected to get profit in like 20 years for comparison
- Even thou the company can be established as a whole, Xbox thinks it's more from the IP perspective than the production team
- Microsoft, Apple and Nvidia surfs in the podium of biggest companies in the world. Ego talks a lot, and this means buying other smaller companies just because. It's not normal to kill in this scenario. I mean, Shazam is from Apple since a few years, and they're not killing since is a very popular app, but we are seeing a lot of layoffs. Take the last three years and you see that this is very normal on the industry
 
deriks said:
I guess that OP doesn't get strategies

- Xbox is not just a console brand, it's a service. Wanna play Forza on a Samsung TV? Steam Deck? PS5? Xbox wins. They're not into exclusives anymore, and it's been a while actually
- when you buy a company, it's not really expected to have profits from the get go. A cost is a billion? They think in like ten years if they can make just a little more. Public companies turning into private are expected to get profit in like 20 years for comparison
- Even thou the company can be established as a whole, Xbox thinks it's more from the IP perspective than the production team
- Microsoft, Apple and Nvidia surfs in the podium of biggest companies in the world. Ego talks a lot, and this means buying other smaller companies just because. It's not normal to kill in this scenario. I mean, Shazam is from Apple since a few years, and they're not killing since is a very popular app, but we are seeing a lot of layoffs. Take the last three years and you see that this is very normal on the industry
Click to expand...
It's the same reason people can't understand why ps would release helldivers on Xbox or why ps management aren't popping champagne and swinging from the chandeliers because they've won the console war.

These are publicly listed companies invested in by people that largely don't have an6 emotional investment in what exclusives are available on what platforms or which ip ends up where. They want to see share price go up … no matter what
 
Last edited:
No because absolutes are for extremists. There have been a few decent games. Also it is convoluted with their dying console brand which started with the Xbone and the subscription service and overall mismanagement. Acquiring these studios was a good idea, how they managed them after is where they are fucking failing. Cancelling shit years into development is either a cancellation that came too late on something that sucked, or throwing something good in the trash along with the thousands who made it for some short term gains.

Bethesda is doing all the wrong things that they would have done regardless of the acquisition because Todd Howard has an enormous ego.

Obsidian is doing OK. I liked Avowed and their next game looks better than its predecessor.
 
They should have dropped GP and pc, and returned to full exclusivity.

Even though they were ordered to release COD on other platforms, but they could have made bonuses and DLC exclusive to Xbox at least.
 
Last edited:
It's hard to tell. The problem is that they lost brand loyalty over for ip loyalty. The problem now is if Xbox is still a strong enough brand to warrant an Xbox app on all devices or will they just fizzle to another third party on steam? If they do at some point they will start selling off all these ips they bought.
 
This is what many people wanted, and the media seems to be unaware of M$'s track record and how it operates. Now, let's see how it gradually destroys all the studios and publishers it has bought.
 
cebri.one said:
We can all agree that buying Activision and Bethesda had three primary goals:
  1. Increase Xbox hardware sales
  2. Increase number of exclusives
  3. Increase GP subcriptions
Let's first examine the cost of the acquisitions. Usually when you buy a company you expect to recoup the investment by the free cash flow the adquired company will generate in the future.
  1. Activision was generating about 2.5B FCF before the acquisition. Microsoft paid around 75B for them, so they paid 30x FCF. If FCF grows at 5% a year it means they'll need at least 19 years to recover the invesment.
  2. For Bethesda we do not know how much FCF they were generating but we know they paid 8B dollars for them. I doubt Bethesda was generating even 20% of what activision generating, so let's say they were generating 800M FCF a year, again, highly optismic. They would need 10 years to recover the investment.
This is important because it's Satya's point of view. He doesn't give two fucks about console wars, he knows he spent a lot of money because Phil asked and now he wants to recover the investment.

Now let's look back at the three goals:
  1. Increase Xbox hardware sales: Absolute Flop, not sure if more explanation is needed: https://www.kitguru.net/gaming/mustafa-mahmoud/xbox-series-xs-console-sales-fell-by-almost-50-in-2024/
  2. Increase number of exclusives: Gears of War, Forza Horizon, Sea of Thieves, Oblivion Remaster, Indiana Jones... Not only significant % of new games 1st party games are not exclusive, also massive exclusive franchises have gone multiplatform.
  3. Increase GP subcriptions: OK. Number of gamepass subs we know it has grown from 24-25 million in 2022 to 35-36 million in Q2-Q3 2024. But that growth seems to be stagnating:
vXuVM6rIrmY72YAU.png


This is an additional issue, because everyone in the industry know with 35M subs you cannot cover 1st party cost + 3rd party licenses + opex cost. That's why MS is going multiplatform, they tought they could spend competition into bankruptcy offering a service below the cost of revenue and it has flopped.

Opinions?
Click to expand...
Can you write it without using AI?
 
Fanboys really turning this thread into hate. It would be nice to hear some counter arguments. "Its AI", "You hate MS" (I do), you need to do better than that.
 
You must log in or register to reply here.

Similar threads

Xbox Game Pass has been absolutely incredible in 2025
2 3 4
177
4K
QuantumThermos replied
[Pure Xbox] Xbox Design Lab Has Now Been 'Temporarily On Hold' For Six Months
News 
27
28
KenaiPhoenix replied
Dreamsettler has been canceled. (Hypnospace Outlaw sequel)
8
305
StereoVsn replied
  • Poll
If you run XBOX division, what strategy would you pursue?
2 3
117
204
EverydayBeast replied
Has public perception or outcry ever been an effective deterrent?
26
494
poppabk replied
Top Bottom