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[SlimySnake]

This explains the shortages. Really sad to see MS tout having the most powerful console on the market then undershipping it leaving a 4 tflops underpowered console as the main Xbox SKU for next gen.

Microsoft sacrificed Xbox Series X sales for “long term ambition” in the cloud

Microsoft has used custom Xbox Series X hardware for its cloud.

www.theverge.com

Microsoft has been sacrificing growing its Xbox Series X / S sales numbers since launch as a tradeoff for investment in cloud and gaming content. In an internal email exchange between Xbox chief Phil Spencer and Xbox CFO Tim Stuart in December 2020, the pair discussed the reasons behind lower Xbox console volumes. The email has been revealed as part of the FTC v. Microsoft hearing.

Spencer admits that Microsoft had a “yield miss for Scarlett,” the codename for Xbox Series X / S consoles, but that it and the delay to Halo Infinite weren’t the “main factors in our console scarcity” during the initial launch period. Microsoft had cut the compute units on its Xbox Series X silicon down to 52 from 56 to improve production yield, but the company still missed a target for hardware production of the console. Microsoft also had a strategic bet on cloud that it appears to have been holding back chips for.

The email exchange references a tradeoff on spending money on Xbox console volume or content and cloud bets. “From a strategy perspective I believe in our tradeoffs for Cloud and Content in Gaming over console volume,” says Spencer. “With our strategy and opportunity console volume will still be the thing we constrain to grow our long term ambition.”

Full document in the link.

You can already see that MS is willing to downgrade the experience of its console users in order to grow their cloud business. You have to start wondering what their series s to series x ratio really is because if all those face/offs won by the XSX only impact 20% of the xbox userbase, whats the point?

 

[solidus12]

Monsters eat it for breakfast.

 

[HTK]

It is quite apparent that MS strategy is fully getting behind GamePass. Additionally, recently Phil spencer comments about Series X Pro not being a thing made me think that they won't do a true next gen console hardware and if they do it may not be what we think. Just something that all these events made me think about, I think MS would be a great publishers.

 

[mrmustard]

They sacrificed Xbox hardware sales with day1 pc ports and xCloud on smartphones, tablets, tvs and so on anyways.

 

[Tsaki]

' Microsoft also had a strategic bet on cloud that it appears to have been holding back chips for.'
This doesn't seem like the primary factor. It is one of the factors. This also covers the launch period, not up until now. But it's a Tom Warren article so the headline makes sense.

 

[Topher]

More ammo for the CMA.

 

[jm89]

Why the rush?

You'd think first priority is to get it in the hands of customers where the demand will be higher, then put it on cloud.

 

[solidus12]

With all those Verge reports, I'm starting to wonder whether Tom Warren has gone rogue.

 

[El Sueño]

Why did they even launch them if they are so good at planning? It makes no sense. And obviously again, Sony did not do a good job with PS5 or 4 or whatever.
I don`t believe them anything.

 

[DeepEnigma]

More ammo for the CMA.

Cloud is the "end game." "Always online" was supposed to accelerate that, they just played their cards too early.

CMA sees their end game based on data provided, as did the EC.

 

[Represent.]

You dont say, they don't care about pushing quality next gen experiences?

Gamepass, being able to spread their games thin with a "play everywhere" approach, and "services" being their one and only bottom line?

Just as I have been preaching


Color me shocked.

 

[onnextflix5]

Cloud lol, it’s like 15 years too early too even have a chance, ms if this is the route you are taking, just leave the console market and let someone else have a go.

 

[Three]

So I have a hard time believing this unless Brad Smith, their president, is out there lying. They said in the UK (their second largest market) they have support for 5,000 concurrent users. That's not a whole lot of consoles to have diverted in 2 whole years.

If I had to guess it's more that they wished to move people to cloud by artificially limiting availability so as to not take a loss selling Series X in stores and they couldn't improve their margin due to their poor yield rate.

 

[Thick Thighs Save Lives]

Spencer admits that Microsoft had a “yield miss for Scarlett,” the codename for Xbox Series X / S consoles, but that it and the delay to Halo Infinite weren’t the “main factors in our console scarcity” during the initial launch period. Microsoft had cut the compute units on its Xbox Series X silicon down to 52 from 56 to improve production yield, but the company still missed a target for hardware production of the console. Microsoft also had a strategic bet on cloud that it appears to have been holding back chips for.

Interesting, so the general theory was the the yields were real bad due to the high CU count of the APU; so most of them were either binned into the Series S APU or used in the server blades for xCloud. Also, a full fat 56 CUs Series X would be around 12.9TF.

 

[DeepEnigma]

Remember when the FUD was that Sony was going to have yield problems? Now we know where this all comes from.

 

[Tsaki]

So I have a hard time believing this unless Brad Smith, their president, is out there lying. They said in the UK (their second largest market) they have support for 5,000 concurrent users. That's not a whole lot of consoles to have diverted in 2 whole years.

If I had to guess it's more that they wished to move people to cloud by artificially limiting availability so as to not take a loss selling Series X in stores and they couldn't improve their margin due to their poor yield rate.

It is not for 2 years. This covers the launch period of the consoles and more is being said about the yield problems than the SoCs diverted for cloud. It's a classic Tom Warren piece to cover for the low unit sales of Series. 'Of course they didn't sell well. You see, all those units were going to the cloud. Now the real sales will begin'.

 

[jm89]

More ammo for the CMA.

Wouldn't be surprised if they already knew this tbh.

I think this was something rumored for a while now.

But yeah any attempts to downplay cloud gaming isn't gonna work when the receipts are out there in abundance.

 

[Three]

It is not for 2 years. This covers the launch period of the consoles and more is being said about the yield problems than the SoCs diverted for cloud. It's a classic Tom Warren piece to cover for the low unit sales of Series. 'Of course they didn't sell well. You see, all those units were going to the cloud. Now the real sales will begin'.

exactly, but over 2 years into the gen they only at maximum diverted 5,000 Series X chips to cloud in their second largest market.



ignore Jez's idiocy about it affecting less than 10,000 people. He obviously doesn't understand how concurrent users work.
They thought lets use one chip to serve multiple paying subscribers rather than sell it at a significant loss to serve 1 subscriber because it was better for them. They really didn't like losing money on the X and didn't want to come in more expensive than the PS5. Now that they've upped the price considerably they are less worried about that loss.

 

[MarkMe2525]

I mean, they had a plan and needed to show growth. I don't think anyone saw the chip shortage being as impactful as it was. Then they find themselves in the middle of the chip shortage and see the moves Amazon and Google were making, it makes sense why they continued to allocate their SoC for server use in an effort to not lose ground in the "cloud wars" that ended up not taking place. Yeah sure, things could have always been different, but I don't think framing the decision as "intentionally downgrading the experience of their console customers" is warranted or logical.

 

[James Sawyer Ford]

XSX used to be 56 compute units?

So 13TF?

 

[adamsapple]

You dont say, they don't care about pushing quality next gen experiences?

That's not what the article is about at all lol

 

[DeepEnigma]

XSX used to be 56 compute units?

So 13TF?

They always have more units and keep some disabled in pairs based on yield defects.

They both did it last gen, and they both do it this gen. Same for graphics cards on the PC.

 

[Represent.]

That's not what the article is about at all lol

That's exactly what it boils down to when you beat around the bush

 

[Tsaki]

exactly, but over 2 years into the gen they only at maximum diverted 5,000 Series X chips to cloud in their second largest market.



ignore Jez's idiocy about it affecting less than 10,000 people. He obviously doesn't understand how concurrent users work.
They thought lets use one chip to serve multiple paying subscribers rather than sell it at a significant loss to serve 1 subscriber because it was better for them. They really didn't like losing money on the X and didn't want to come in more expensive than the PS5. Now that they've upped the price considerably they are less worried about that loss.

It seems to me that bad yields and low demand are the issues. They started diverting SoCs to cloud in 2020. But there aren't that many people interested in it so they lowered or stopped sending units there. This explains the low number that Smith gave. Generally there hasn't been strong demand for Xbox consoles (comparatively) and add to that the yields issues means that X units are less common than S (whose chip size is small thus having better yields), so overall you have low total sales.

 

[SlimySnake]

XSX used to be 56 compute units?

So 13TF?

Xbox is still 56 compute units. just like the PS4 Pro and PS5 are 40 CUs, but only 36 are active. The PS4 was 20 CUs. 18 active.

They disable these CUs in all consoles for various reasons. My guess is just in case the CUs are defective, but dont quote me on that.

 

[DeepEnigma]

Xbox is still 56 compute units. just like the PS4 Pro and PS5 are 40 CUs, but only 36 are active. The PS4 was 20 CUs. 18 active.

They disable these CUs in all consoles for various reasons. My guess is just in case the CUs are defective, but dont quote me on that.

It is due to yields, yes. They can't guarantee that all cores will work in every chip. That would be too expensive and a lot of waste.

 

[Bloobs]

 

[OmegaSupreme]

All the facts coming out now. As others have said this is exactly the cma's argument. "cloud is the future"

 

[SlimySnake]

It is due to yields, yes. They can't guarantee that all cores will work in every chip. That would be too expensive and a lot of waste.

Yeah, thats what I remember, but I never understood how they determine which ones are faulty and if they disable them manually or if its the same 4 CUs that are deactivated on all our PS5s.

Would be nice to win the lottery and have them enable all 40 CUs if they aren't faulty. Get a nice 10% performance boost.

 

[Fabieter]

They cant make these claims while talking to cma that cloud isn't important to them.

 

[DeepEnigma]

Yeah, thats what I remember, but I never understood how they determine which ones are faulty and if they disable them manually or if its the same 4 CUs that are deactivated on all our PS5s.

Would be nice to win the lottery and have them enable all 40 CUs if they aren't faulty. Get a nice 10% performance boost.

Yeah, I don't know how they determine it either. Probably lots of % data with laws of probability based on that. I do know if they go under the CUs needed, they are then binned to PC APUs for mostly those emulation boxes people build.

 

[acm2000]

this is not new news as we already knew this, they sacrificed production for series x server blades as they knew they would have to replace them all sooner rather than later.

 

[Astray]

Sacrificing a key pillar of their business for a mere method of delivery that isn't a market smh.

 

[Mr.Phoenix]

XSX used to be 56 compute units?

So 13TF?

And PS5 technically has 40 compute units.

They shut off two work groups (having 2 compute units each) to improve manufacturing yields. Higher yields = relatively lower chip price.

As for this post, its obvious MS didn't want to lose money on the hardware, so it made sense that the already limited number of XSX chips they got (due to the poor yields) would be better served being put in servers where one chip could potentially serve up to 4 or more users.

This is as good an indication as any that MS main focus is not on consoles anymore but rather on gamepass and ultimately, X-cloud.

 

[Bry0]

They sacrificed Xbox hardware sales with day1 pc ports

The money goes to them either way lol, they are both MS platforms but y’all act like windows doesn’t count, why? Most pc gamers really don’t care about consoles.

Betting the farm on xcloud seems hilariously dumb though, but I don’t know how popular x loud really is. I just know anecdotally there is nobody around me who likes to actually use it.

 

[tr1p1ex]

I wouldn't put it past MSFT to do this just to make themselves look weaker to help approval of their ATVI buyout.

It never made sense to me why the Xbox went from stock last summer to no stock this year. Something weird was up and maybe still up.

I don't feel like they blindly killed retail sales for cloud when they had to know cloud wasn't taking off. They are even on record saying cloud will take some time.

 

[Nydius]

But, but, the CMA’s conclusions on Microsoft betting the farm on cloud was flawed and irrational and a lie, all the pro-Microsoft people told me! How could they all be wrong?! /s

 

[jroc74]

So, does this mean the console that was having yield issues was the Series X and not the PS5?

Because at one point yield issues was thrown around for PS5.

Also....are we gonna get BOM numbers from this case? Because that would be amazing.

 

[hepfom]

I wonder how many of the streaming companies Microsoft cut "10 year deals" with use AWS versus Azure. It doesn't seem like any of this is about Xcloud but rather about Azure. Xcloud just seems to be a byproduct of this.

 

[mrmustard]

The money goes to them either way lol, they are both MS platforms but y’all act like windows doesn’t count, why? Most pc gamers really don’t care about consoles.

Money is not the point, although i don't see how Microsoft makes much money with hardware they don't sell and free Windows 10/11, no online sub and no 3rd party cut.

I was just talking about the Xbox sales and with day1 pc ports they sell less of course, because no pc gamer buys one and people who were interested in buying one can go for a pc instead.

 

[Fess]

And functionally it’s still behind Stadia. I’ve never been able to have stable performance on xcloud.

 

[Bry0]

Money is not the point, although i don't see how Microsoft makes much money with hardware they don't sell and free Windows 10/11, no online sub and no 3rd party cut.

I was just talking about the Xbox sales and with day1 pc ports they sell less of course, because no pc gamer buys one and people who were interested in buying one can go for a pc instead.

Those day1 ports are first party. That’s a whole other audience buying copies and Buying into the brand because they seem to want the brand to be more than just a piece of hardware. Personally I don’t like cheering for exclusives. The support they are giving pc is what I always wanted them to do and I think it’s great as pc is my primary platform. It got people playing forza and halo who I known never would have bought an Xbox to play those or really any console exclusive game.

I’m not convinced day1 pc ports for first party are a net loss until it can be proven, but between these shortages on the x and the brand damage from the Xbox one, those seem to be way bigger factors in hardware sales loss than day1 pc ports

 

[Bo_Hazem]

 

[Brucey]

So I have a hard time believing this unless Brad Smith, their president, is out there lying. They said in the UK (their second largest market) they have support for 5,000 concurrent users. That's not a whole lot of consoles to have diverted in 2 whole years.

If I had to guess it's more that they wished to move people to cloud by artificially limiting availability so as to not take a loss selling Series X in stores and they couldn't improve their margin due to their poor yield rate.

Assuming an Xbox series x apu "in the cloud" can be used for four xb series s streams, then the actual number of xcloud units would be 1250 for the UK?

 

[MisterXDTV]

They sacrificed nothing as they can't sell out even the units that have been available on shelves for months

LOL

 

[Three]

Assuming an Xbox series x apu "in the cloud" can be used for four xb series s streams, then the actual number of xcloud units would be 1250 for the UK?

Yeah, it's not clear what is meant so 5000 is the maximum ceiling.

 

[adamsapple]

So I have a hard time believing this unless Brad Smith, their president, is out there lying. They said in the UK (their second largest market) they have support for 5,000 concurrent users. That's not a whole lot of consoles to have diverted in 2 whole years.

If I had to guess it's more that they wished to move people to cloud by artificially limiting availability so as to not take a loss selling Series X in stores and they couldn't improve their margin due to their poor yield rate.

That sounds like some classic tin foil conspiracy my friend.

Anyway, we've known about them converting their infrastfucture to Series X's a while ago, even before these emails. This isn't exactly new news.

 

[Three]

That sounds like some classic tin foil conspiracy my friend.

Anyway, we've known about them converting their infrastfucture to Series X's a while ago, even before these emails. This isn't exactly new news.

What on earth are you talking about? How do you refute something from the horses mouth with this bullshit?

 

[Spyxos]

This cloud expansion doesn't seem to work very well. Every time I want to play Xcloud in the evening, I see a 10 minute wait timer.

 

[adamsapple]

What on earth are you talking about? How do you refute something from the horses mouth with this bullshit?

Microsoft’s Xbox Series X is about to make xCloud gaming much faster

xCloud is also launching on the web soon.

www.theverge.com

We've known about the xcloud infrastructure moving to Series X's for almost 2 years now. I'm saying these emails are't exactly telling us anything we didn't know (for this particular item) about quote unquote sacrificing console sales for cloud.