People may be flooding into vertical integration, though the history of that isn’t great. (Look at AOL/TimeWarner or Verizon/AOL/Tumblr/Yahoo)

All it takes is missing one generation and the house of cards gets written down. Someone can create the next generation blockbuster for a lot less than $69bln.

To argue against myself, they’ve become a lot better at picking trends since Balmer left too.

AOL/TimeWarner was a failure because because it valued AOL at $200B and TimeWarner at $164B. AOL was just way over-valued. It wasn't really an integration failure so much as paying too much for something. If Time Warner had bought AOL for $2B, it would have been fine. The problem is that they merged valuing AOL at 100x that when it wasn't worth it and later sold for $4.4B to Verizon.

Likewise, Yahoo/Verizon bought a lot of properties at inflated values. Tumblr wasn't worth $1.1B, but Yahoo wanted to buy one of the hot up-and-coming properties to feel relevant.

I think the big issue is the price one is paying and whether one has a plan for the purchase or if the purchase is more "but if I don't make a big move, what am I doing? I can't go wrong following trends, right?"

For example, AOL/TimeWarner was a situation of over-paying because TimeWarner was afraid that the internet was going to eat the world and they needed to stay relevant. AOL was so hot and it's easy to get swept up in the moment thinking "I need to get on board now or I'll miss it!" Likewise, Yahoo feared becoming irrelevant as Google took over the internet and thought buying Tumblr would make them the hip forward company once again.

Activision Blizard seems like a reasonable add-on for Microsoft. $69B isn't that much money for it given it would represent a P/E ratio of around 26. Apple's P/E is 30, Amazon 62, Microsoft 34, Google 26. So they aren't paying an absurd amount given Activision's profits. Even if they did no integration or strategy, Activision could simply continue doing its thing and contribute favorably to Microsoft's bottom line.

With a tiny bit of strategy, it seems clear Microsoft could get even more value out of the company. Maybe a few Xbox exclusive titles to push their console business. Maybe some stuff for their game streaming service.

If Disney has shown us something over the past few years, it's that owning IP that people like allows you to keep spinning new versions of that IP. Activision has lots of that kind of IP in the gaming space so Microsoft should be able to use that to its advantage.

I think there's a big difference between buying Activision at a price whose P/E ratio is better than your own and where there are clear strategies that could offer you even more value compared with the "omg, I'm getting left behind! I'll pay anything you want" panic purchases/mergers of other companies.

Tumblr could easily have been Instagram, Yahoo just had no idea what to do with it and completely missed the boat on mobile.

A lot of people thought Zuck was insane when he paid $1B for Instagram, and I think we'd all agree that bet paid off pretty handsomely.

Tumblr was dead the second they turned porn off. Simple as that sadly.

How did they monetize it? I've worked in digital advertising and I can't imagine the adult content would get the same CPMs as general interest.

Did Instagram avoid that fate by never allowing porn in the first place?

Instagram has porn.

It just blocks some body parts.

See also: Flickr.

AOL bought TW not the other way around.

Sure, but Time Warner shareholders accepted AOL equity at an over-valued price. THAT's the fleece - Time Warner kept being a company despite AOL's failure, but the ownership shifted dramatically toward former owners of AOL.

Also worth noting on the AOL/Time Warner comparisons everyone is making: Everyone knew dial-up was on the way out in 2000, they just assumed AOL would 'figure it out' because they were the current market leader. Not clear to me (other than maybe metaverse, controversially) what MSFT's looming problem they need to 'figure out' is.

Microsoft's "looming problem" seems to be the $130B+ in cash they're sitting on, and finding something to spend it on?

Yeah, at least in traditional financial theory, if they can invest it in a way that has NPV of <$1, then they should invest that dollar, and if not, they should just return it.

There's obvious optics to draining the cash balance, but it's not a problem per se, because worst case, they just return it to shareholders and Net Income/EV should be unaffected.

They can give the cash back to shareholders.

Or their workers.

I dont think MS employees are complaining about salaries, if they dont like it they can easily switch to FANG companies.

the same people thanks to RSUs

MSFT has to figure out how to justify a 2.7 trillion market cap when their revenue is on the order of 170-180 billion. That’s a lot of sustained profitable growth.

Conveniently ignoring the fact that on that $180bn revenue, they generate $90bn in net income, resulting in a 30x P/E multiple (the actual way companies are valued), which is only slightly elevated vs. the S&P 500's historical average.

Conversely, what's wrong with McKesson, if their revenue is $250bn and growing, but their market cap is $40bn?

The larger you get, the harder it is to justify outsized PE multiples. Plenty of theory and empirical research supports this.

Even with their recent 11-12% correction their PE is ~33.5. [0] That’s higher than today’s S and P PE, and more than double the long term median (~15) and mean (~16) PE. [1]

This means that the market is betting on some combination of margin expansion and outsize revenue growth.

McKesson is in another industry with different margin and growth, and is valued differently.

[0] https://finance.yahoo.com/quote/MSFT/

[1] https://www.multpl.com/s-p-500-pe-ratio

I think vertical integration tends to win when the floor is built atop of commodities. The new consoles have similar hardware[0] and it really comes down to allocation of those hardware resources, which makes first party studios ways to differentiate your product from the competition, as you can justify the extra cost to make sure your first party console is optimized for in its unique ways, where cross publishing houses don't always do that, for example. This can differentiate gaming experience, even for titles that are cross platform, if one is optimized for say, the Xbox ecosystem, but its PlayStation port does not have the same kind of optimizations. How much this matters may remain to be seen, for now.

Having highly optimized flagship titles though is what makes these vertical integrations so appealing in this market, in my estimation.

[0]: https://www.tomsguide.com/news/ps5-vs-xbox-series-x

FWIW I don't endorse everything in the link to toms guide, I just wanted a reliable source for hardware specs

Intel has also been feeling the pain of vertical integration. Like with most things, double edged sword.

They fabricated their chips - not sure if they still do. Initially this was great, they owned the equipment and got things 'at cost'. However, they had trouble refining their tooling to get < 14nm for several generations.

This made them less competitive for a while, while having a pile of expenses a more lean design house wouldn't have. They'll surely be fine, but it's not the same sprint they've had for quite a while.

Intel still fabricates their own chips. Though notably, their new dedicated GPUs are made by a third party.

Two years ago I would have expected this trend to continue and for Intel to stop in-house fabrication, but with their new CEO and some prodding from the US government, they are now investing many billions of dollars into new fabs.

It probably means more to keep the Blizzard catalog off of Oculus than anything else. IMO many games in their catalog would be ideal in that environment and keeping them off of it goes a long way towards buying time.

To argue in favor of your point. Big vertically integrated firms often become insulated from economic, technical, and business realities. This eventually leads to politics winning out over technical or business savvy. At the extremes you'll have companies burning 10s of billions on pet projects going nowhere, or software engineers producing 0 lines of code per year.

I wouldn't be surprised if this effect could even be mathematically quantified.

At least for Xbox, the biggest positive change in leadership has been the replacement of Don Mattrick with Phil Spencer in 2014. Xbox as a brand was in real bad shape when he took over.

Don Mattrick might as well have been a plant by Sony he was so effective at destroying all the good will Microsoft had built with gamers during the 360 era.

Introducing Xbox One as a media center with no ownership through physical media was a disaster.

Then again, Xbox branding is a total disaster anyway. The Xbox Series X vs the Xbox One X vs the Xbox 1 are all very different things but aren’t that far apart in name…

Don't forget one of the Xbox One's key innovative features: tight integration with your cable box. You know, that worthless piece of hardware tied to a $100/mo subscription that your Xbox 360 helped you replace entirely with its Netflix and Hulu apps.

When they showed that off I knew nobody at Xbox had a single clue who their audience was.

Halo 3 and Gears of War were must have games of that generation and the big hits from Sony (e.g. Last of Us) didn’t come till a bit later. These games were so successful that many looked past the RRoD and loved the 360. In this context I think buying studios makes sense.

I wonder if CoD will become XBox / Windows exclusive?

Another example right here: https://news.ycombinator.com/item?id=29980227

Intel is buying fab capacity from TSMC. Backing away from vertical integration to force their own fabs to compete on the open market.

Ballmer gets a bad rap but he was the one that got them moving towards Azure and cloud. He made MS a lot of money, they didn’t suffer under him. It was mostly just optics where he didn’t look good.

Look at the stock price under him, and then after.

Although it's plausible that had he stayed on for say another five more years, we would have seen the fruits of his early investments pay off and the stock appreciate accordingly.

The guy who had Nadella in charge of cloud the entire time? Ballmer is the one that not only placed Satya, but made the call to push and fund it.

For me your comment rings the same as saying look at the stock price of AMD under and after Lisa Su.

Nah, their model is different. They are building a Disneyland-like experience, where the public pays to "be there" and the attractions always change. Never been done before.

Exactly. They're going for quantity to ensure even if a bunch of stuff fails, they'll get a few hits. Sometimes all you need is a few hits.

That type of closed garden seems more like Apple, no?

Microsoft has been understandably eyeing that 30% on all digital goods sales Apple gets for years now. They missed the boat on the Windows store, but they'll do just about anything to keep a similar financial structure on the Xbox side.

Gasprom, Dell and Tesla may be some examples of companies that have done will with vertical integration.

Tesla is kind of vertically integrated, but mostly because they were the first to make a popular electric car, so adequate supply chains for those components didn't previously exist. It remains to be seen whether it's still an advantage when most of the industry is making electric vehicles and competitive alternate suppliers for those components are common.

Dell installs a Microsoft operating system on SSDs from the lowest bidder and puts them in a Foxconn motherboard with a CPU from AMD or Intel.

Gasprom is a majority state-owned company in Russia. This can't really be an example of anything to do with a free market.

The typical example is Apple, because they're currently very profitable. But they've been doing vertical integration for decades and their history is full of instances of almost going out of business. The previous "see how well vertical integration works" example was IBM.

Tesla also makes components like seats internally.

A lot of companies just outsource that and lose out on the profits, it is one of the reasons tesla has such high margins.

> Tesla also makes components like seats internally.

For the same reason. Vehicle seat are, for better or for worse, typically model-specific. Before there was Tesla there was nobody making Tesla seats. Would anybody be surprised if they start outsourcing that soon, given that they now have enough volume to attract third party suppliers and seat manufacturing is certainly not their competitive edge?

> A lot of companies just outsource that and lose out on the profits, it is one of the reasons tesla has such high margins.

Vertical integration increasing margins is just an accounting trick.

It costs $5 to make a widget, the widget maker sells it to the car maker for $6, the car maker sells it to the customer for $8. The non-vertical car company has a $2 unit margin, the vertical car company has a $3 unit margin. But to get it they take on all the risks and expenses of the widget maker.

If making widgets is a commodity market then the $1/unit is going entirely to fixed overhead (otherwise someone would charge less and gain market share). Taking on the fixed overhead in exchange for the $1 is breakeven and increases systemic risk by reducing supply diversification. But on paper your margins increase by $1.

>For the same reason. Vehicle seat are, for better or for worse, typically model-specific. Before there was Tesla there was nobody making Tesla seats. Would anybody be surprised if they start outsourcing that soon, given that they now have enough volume to attract third party suppliers and seat manufacturing is certainly not their competitive edge?

I doubt this will happen. Here is the reason they started making seats themselves as explained by the big cheese himself: https://youtu.be/YAtLTLiqNwg?t=357

Given what happened when they worked with supplier last time, I doubt they would want to give up the ability to innovate by going back to a supplier even if they are big.

Furthermore, I think suppliers might not be chomping at the bit to work with Tesla anymore. When the Model 3 was being developed, that insanely large preorder volumes caused some suppliers to do whatever it took to get the order from Tesla because of FOMO. Some even stripped their margin to the bone in the hopes of establishing a long term relationship with Tesla. In the end Tesla did not deliver on the numbers they promised and this lower volume caused massive financial problems for some suppliers, especially the smaller guys. I think there were even some bankruptcies of smaller outfits. Given Tesla's reputation as difficult to work with, I don't fully think they will get preferential treatment compared to someone like Toyota or Honda (which I hear suppliers love to work with).

FUN FACT: The largest Tesla skeptic subreddit /r/realTesla was started by someone who was supposedly a liaison between Tesla and the seat supplier during the Model X days. In fact he watched the whole Model X train wreck from start to finish and his banning from /r/teslamotors when he detailed all the disasters happening during Model X led to the creation of /r/Realtesla.

> I doubt this will happen. Here is the reason they started making seats themselves as explained by the big cheese himself

This is an explanation for why they designed their own seats, and basically amounts to "existing seats were uncomfortable." That makes sense when the status quo is junk, but now they've got a good seat, what does it matter who manufactures it?

Are they expecting to do a lot of further seat innovating in the future? Does seat technology have a rapid rate of change?

> Given Tesla's reputation as difficult to work with, I don't fully think they will get preferential treatment compared to someone like Toyota or Honda (which I hear suppliers love to work with).

People care more about what you're doing right now than what you did when you were just starting out. Tomorrow's reputation is based more on today than it is on yesterday.

>This is an explanation for why they designed their own seats, and basically amounts to "existing seats were uncomfortable." That makes sense when the status quo is junk, but now they've got a good seat, what does it matter who manufactures it?

>Are they expecting to do a lot of further seat innovating in the future? Does seat technology have a rapid rate of change?

Well maybe for other manufacturers that rely on these suppliers no but I think the real point that Elon and Sandy were getting at was that anything a user touches should be made in house as that is what you can craft carefully to perfect the customer experience. Will their seats change? Well so far they have gone though 4 or 5 revisions so it seems like they continue to make changes and iterate.

>People care more about what you're doing right now than what you did when you were just starting out. Tomorrow's reputation is based more on today than it is on yesterday.

Suppliers will happily give a quote, its just that the quote will likely be higher to account for the added expense of working with Tesla. People go from supplier to supplier and since this field is very much relationship based, I can see Tesla losing out to other manufacturers especially when supply is crunched like right now. For a lot of parts(for example seats) there are only 2-3 companies to choose from. If they burned bridges with all three then what?

This is an overly rosy view of Microsoft's moat (and acumen) IMHO.

For one, Microsoft completely missed out on the mobile revolution.

For another, look at Mixer. This was there attempt to clone Twitch. They threw a bunch of money at it and quickly gave up. To me this was insane. Streaming has shown to be great marketing for games and I never thought they'd give up so quickly and right before the new Xbox launch.

Imagine if Mixer streamers had early access to the new console and titles? And drops? Viewers absolutely love drops.

What if the Xbox Game Pass included a Mixer sub like Amazon Prime does with Twitch Prime?

To me this just showed they have absolutely no idea what they're doing.

I mean, look at how much money they've thrown at Bing.

I think "the mobile revolution" is a joke and never materialized. 95+% of mobile games are unoriginal clones with layers of mechanisms to reduce fun unless the user pays. People who enjoy games have largely abandoned mobile, save a handful of decent titles that were ported from other platforms.

Mobile-first gamers are: people (mostly kids) who are so naive about games they will accept garbage (or cant afford a better gaming system) and whales who enjoy spending large amounts of money to move up the leaderboards.

Mobile gaming C-level's loved talking about the mobile revolution for a decade, but I really think it was all optimistic nonsense in service of their fundraising.

I don't think they meant just in terms of gaming, but the mobile revolution in terms of how smartphones took over the world and Microsoft missed the boat.

Ah, that's fair. I was working on a service ancillary to the gaming industry during the big hype, so I mostly associate the term with the push toward mobile games. Definitely valid outside gaming.

Consumption on the go world, yes.

Mobile revolution for doing actual work on the go is mostly done in laptops, and Windows is still the champion on that regard.

(Simplistically) Business people think about money, gamers and ground level game developers think about games. The "mobile revolution" as told by C-level executives was about the former, and it's been a screaming success.

Mobile games were never going to replace more traditional games because it's a totally different market, but companies don't really care about that anyway - they might not have /understood/ that mobile games were never going to supplant traditional console and PC gaming, but they didn't need to because they made fistfuls of cash anyway.

Mobile gaming is mostly crap, sure, but it is still quite profitable. I think the parent was referring to having a successful mobile platform like Google or Apple so that Microsoft could skim their commission off all those mobile games.

Who just bought Zynga?

Take Two. And Microsoft just bought King via Activision.

I don't know about that. They gave it like four years and spent a lot of money promoting it and it was still microscopic. They could have tried other things, but if Ninja couldn't draw viewers, do you really think a bunch of obscure streamers nobody watches having drops would have made a bigger difference? At some point you have to stop throwing good money after bad.

Ninja just recently [0] talked about why he thinks Mixer failed and it was not due to its potential.

He specifically mentioned stuff like: needing a hotmail account to register, when you register you had some random name assigned to you and had to go into your profile to change it afterwards, etc. Small stuff basically, but it added up and Microsofts corporate structure prohibited quick adjustments.

[0] https://youtu.be/FxBpRQaPIPw

Throwing money at Ninja is really an example of poor execution.

What makes Twitch successful is not any one streamer. It's an ecosystem. Raiding is huge on Twitch for streamers supporting other streamers.

You don't build a forest by planting one very large tree. A forest is everything from the tallest tree to the undergrowth.

> do you really think a bunch of obscure streamers nobody watches having drops would have made a bigger difference?

I absolutely do. You see this on Twitch whenever a popular game has drops and the viewer numbers go through the roof. Sure there are a bunch of AFK viewers just wanting the drops but this is a game of numbers. Some are real people. Some will stay.

On the streamer income side, I really don't think you can overestimate how huge of an impact Twitch Prime has on Twitch.

> Throwing money at Ninja is really an example of poor execution.

Really agree with this. They should have been trying to pull as many streamers on the verge of success on twitch as they could (newly qualifying partners mostly) rather than trying to get already established talent to come over for big money.

I do think they also tried this, I knew of some mid-tier streamers who moved over as well, but they probably could have done more. Ninja was clearly a last ditch effort to save the platform rather than a calculated plan.

It is true that on Twitch, when a popular game has drops, the viewer numbers go through the roof. But I don't think you can extrapolate that an unpopular platform could pull viewers away from Twitch by having a bunch of unpopular streamers do drops. You'd probably influence which streamers on Mixer got viewers on Mixer, but would it get people to drop Twitch? I strongly doubt it.

More to the point, no other platform has succeeded here either. Whatever that Facebook streaming thing is is a non-factor, YouTube streams exist but seem to be used primarily as a way for YouTubers to do events rather than a real Twitch competitor, etc. I'm not sure a Twitch competitor can be viable until Twitch does something to drive people away. The network effect is strong.

They tried with the failed Windows phone. I think after that they wanted to stay out and focus on their strengths. Besides this purchase gives them King - of Candy Crush fame. So now they own one of the biggest mobile game devs.

You know there are essentially only two search engines on the internet right? Google and Bing? Microsoft is doing good and cornering market and is helping users forget that DDG and Ecosia and Yahoo are just Bing.

Who is Microsoft "doing good" for? It's not Microsoft shareholders. Bing is a money pit and poorly executed.

Do you know who benefits the most from Bing? Google. Why? Because Bing's (subsidized) existence helps create this illusion that there really is more than one search engine. Google loves that Bing exists because it nicely helps them avoid having to have the monopoly talk.

bing made 8b in revenue last year. your data is way out of date. its wildly profitable

Baidu and Yandex are doing pretty well in their markets.

Interesting. I take that Mixer example as quite the opposite: throwing money at game streamers only really makes sense if they're trying to get yet another point of integration for gamers, no?

I take your word for it that the execution was lacking - and, perhaps, they were never going to win. Perhaps that's why they keep buying other, successful companies.

But it still builds to the same picture: even if they suck as operators, they're building a pretty darn big machine.

Looking from the point of view that most people that actually want to do mobile work are using laptops or hybrid devices like Surface clones, they are doing pretty alright.

Sure they lost the mobile phones, but that market has already plateud, newer Android and iOS versions are only gimmicks for those on 2 year contract renewals to change devices.

Microsoft winning at streaming and mobile would be horizontal integration, not vertical wouldn't it? Neither of those things are part of the "supply chain" of their core gaming business.

I'd like to read analysis about why only Twitch succeeded in this market.

They are still missing a mobile platform and that's why I believe they will retry within the next few years

I don't think they will. There's no point. There is a stable duopoly, where Microsoft can reap the benefits of competition between the two, without wasting any resources.

May not be best for consumer - really great for business. (especially, if courts hold that Apple/Google cannot outright ban apps from their stores)

Purely anecdotal but I feel like we are at a point where a lot of people would definitely stop and take a close look at a non-Android alternative to the iPhone

> "a lot of people"

Depends what you mean by a lot of people, and what kind of alternative you have in mind. Tech folks want something open source, like the degoogle androids we already see. Non-tech folks don't care much about Android, they just want something that works and has all the apps. So it would be hard to have any real competition, considering even Microsoft had to pull the plug

Would be really hard to launch a new platform. Even if its excellent on its own unfortunately it can't survive without a big app catalog.

Yes, it would definitely be an uphill battle. But I wonder if you could build a platform where a progressive web app felt enough like a mobile app and therefore enticed more app developers than requiring them to learn native tools for another platform

Ever heard of Firefox OS?

https://medium.com/@bfrancis/the-legacy-of-firefox-os-c58ec3...

Can a new phone platform be successful if it launches without whatsapp / wechat / line / instagram / [add a dozen social networks there]?

A phone that doesn't let you speak to your friends, family, and coworkers is going to be a tough sell. Getting all those from the get go, without a large user base to motivate the developers, is going to be a tough sell.

Easy solution, make the default app platform be based off of html/css/javascript. Now the entire ecosystem of web developers can build for your platform instantly.

The nostalgia I have for 2009-2011's webOS, as a former app dev for the platform and its embrace of the Web Platform, is still very much real to the point that I keep my Palm Pre 2 dev unit behind me in my home office. Still charges and boots just like it did back in 2010. I'd love to see something with the computing power of the present try it again (and I'm aware React Native exists), but my expectations of it ever coming to fruition are rather low.

Aside: Seeing MagSafe chargers for iPhones these days makes me chuckle. Also a webOS innovation from back in...2009.

I lost my old Pre recently. Will probably buy another for the nostalgia reasons as well.

Wasn't that PalmOS which got acquired by LG?

That would be Palm webOS.

My beloved webOS failed with that 11, 12 years ago.

They can always start from their old playbook with Embrace..

I would be very happy with a third option. As an iPhone user, I really am unhappy with iOS, but any time I even briefly entertain the idea of switching to Android, I laugh at the idea. Both options are bad, and I'm stuck with the lesser of two evils.

The new PinePhone actually looks kinda decent. Unfortunately it will likely go from an interesting idea to abandoned before my iPhone is ready for a replacement.

I have the PinePhone Beta Edition with Convergence Package and I tried all of the available OS alternatives, unfortunately none of those is quite ready for use as a daily driver.

Overall the best experience was with Mobian, this is actually pretty close to being a daily driver and if only performance was a bit better it could be OK (the new PinePhone Pro will be faster so I'm waiting to try Mobian with that).

Ubuntu Touch was the smoothest in terms of performance. The main disadvantage is I could not find some of the apps that are available for the other distros like Gnome Maps. Since it is based on Ubuntu I was expecting to find a larger app ecosystem compared to Mobian but that wasn't the case (I tried searching both in the store app and using apt search in terminal). Also, many apps in the store are actually repackaged progressive apps.

The default OS (Manjaro Plasma) is the least polished of all the ones I tried, it is quite a lot slower than Mobian or Ubuntu Touch and even basic things like placing an app on the home screen are broken, and I have no idea why they chose it as the default OS.

Why is android bad in your opinion? i personally went for IOS recently due to privacy,security being important to me(3 years of security update for 1.4k android device is ridiculous), but I'm pretty jealous of android's software, usability and its users not having to buy everything apple to do simple tasks.

I don't feel like MS would do better on security or privacy compared to android.

Windows Phone at least was trying different things almost a decade ago. Some were pretty decent features.

> android's software, usability and its users not having to buy everything apple to do simple tasks.

Software as in third party apps or? What does the last point mean? What is an example?

I don’t care about privacy or security for my self. I use iOS devices because of usability and UX. After webOS then Windows Phone died I moved on to iPhone 6S and stuck with iPhones.

> There is a stable duopoly, where Microsoft can reap the benefits of competition between the two, without wasting any resources.

The huge competition where both charge 30% of gross sales, far higher than even the federal corporate tax rate, which is only charged on the net.

They get away with that because it's a two-sided market and they have all the consumers. Microsoft tried to woo devs on Windows phone and it didn't work, because consumers didn't follow.

They’re the ones providing everything from the OS through the dev environment and the hosting and payment processing, not to mention marketing and having built the billion devices that users are purchasing from.

And they don't have to spend billions on building and maintaining their own platform.

Hard to see that lasting more than another 2-3 years.

I’ve heard that thanks to patents and stuff they already makes loads of money out of mobile as it is!

they make money but they lack control, e.g. MS can't decide how software/apps are distributed, what is trusted and what not, how apps are glued together, that's a huge miss, plus the 30% cut Apple and Google apply to payments, MS is missing out on a lot of money, and MS stores pale in comparison. Not that I support this model of distributing software, I prefer the old desktop model of downloading from internet, but don't think MS is making much money just because of patents.

Is there some particular cultural reason why MS have been so bad at the whole walled Garden thing? I’m thinking back as far as MSN

I'm not sure about internal cultural reasons why but it seems like Microsoft just sucks at user experience for the most part, which is the key to the walled garden approach to me. I've never used a Microsoft product (other than mayyyybe the Xbox 360?) and thought, wow, this product is awesome and I'd never willingly switch to something else. You know, that feeling you get when you use something like an iPhone or Google products in the 2000s/early 2010s?

well actually MS knows how to create a walled garden, but just enterprise gardens. They fail at consumer gardens because the leadership doesn’t see money there and are quite shortsighted at seeing it too. Eg see how they lost ads, search, browser, mobile. They’re in games because of Windows and later Azure, so, again they look at it through enterprise glasses.

I wonder if the Nokia phone division sale included the NGage patent portfolio

Nokia kept all their patents.

For anyone curious about that:

"Nokia will retain its patent portfolio and will grant Microsoft a 10-year license to its patents at the time of the closing. Microsoft will grant Nokia reciprocal rights to use Microsoft patents in its HERE services. In addition, Nokia will grant Microsoft an option to extend this mutual patent agreement in perpetuity."

https://news.microsoft.com/2013/09/03/microsoft-to-acquire-n...

Less so than they used to. These were mostly 90s patents and a lot of them expired in the past five years.

Yeah, there's already a quality- and cost-leader for the mobile market. MS would need to push their business office lock-in, but both they and Blackberry tried that. Without the consumer market it's not viable.

I could see them launching an Android “SurfacePhone” just because (to have SOME stance in mobile). Or Windows-based since Windows already has an android subsystem (or emulator right?).

It's called the Surface Duo, it's already on its second generation.

https://www.microsoft.com/en-us/d/surface-duo-2/9408kgxp4xjl...

$1500 Android phone is giving me some Ballmer-era level laughs.

Nowadays it's fine if it is made well (actually not good even in 2nd gen, for software)

The Samsung Fold 3 was around this price at launch.

Hmm, if it had a headphone jack and NFC-F (which it seems the Japanese edition might?) I'd be interested. Microsoft has always made good hardware.

That's a foldable phone that you never use in 'full screen' mode, correct? For $1,500? Ouch.

I honestly don't understand which market segment that device is targeted to.

They haven't completely given up on mobile. The Microsoft Launcher for Android is really close to what a modern Microsoft mobile platform would feel like.

https://www.microsoft.com/en-us/launcher

https://en.wikipedia.org/wiki/Microsoft_Launcher

I use this on my phone, I really like it. All they have to do is leverage it and start a store, but not sure if the timing is right just now.

I think if MS embraced ad blocking and made edge (both mobile and desktop) support extensions including ublock origin they could really eat into that platform. At the moment you can run Firefox with ublock origin on Android ( which I do ) but quite a few extensions don't work ( like violent monkey). To me, being able to run ublock origin (and other addons) on Android is a massive competitive advantage, but Firefox can't seem to convert it to users in the mobile space, basically they have no real platform/marketing leverage.

People outside tech and geeky niches won’t leave something like Chrome because of stricter ad blocking.

Just like privacy, security, and the intense amounts of FB/Meta hatred, these issues aren’t the same for the populous at large.

I could see using this for work with office 365 integration but that’s the complete opposite direction of gaming for me.

Convinced they're just going to do the Netflix/Stadia route with mobile etc. Sell a controller, use the device you already have and stream games running from azure.

Long term plan, obviously.

Not so long term - xCloud has been in live public beta for a few years now.

This will be interesting to see. If Steam Deck becomes a successful device, I believe the Xbox division will release a mobile device to compete with Nintendo.

I mean if your controllers already support Bluetooth and you already have an Android-based dual-screen form factor device and you already have cloud gaming infrastructure.. do you really need an entire new device? Or do you need a bundle at point of sales

They should just copy Steam Deck.

I don’t think so. They’ve moved away from owning the platform (at least in mobile) in favor of services. Office is wildly popular in mobile OS app stores.

Microsoft is making the Game Pass catalog playable on mobile devices. I think that's their strategy there.

May be a Microsoft branded version of Android. Or like how Android currently work on Windows. Windows with Android compatibility.

Or a xPhone where they could leverage Xbox gaming on Mobile with Android compatibility.

It is sort of strange to think Microsoft prospect all of a sudden looks fairly bright.

It's too late to capture mobile platforms, not only because the market is stabilized but most importantly: computing moves to the cloud, where Microsoft is already a big player. IMHO there is no point for them to do that.

That is a really interesting thought. Now they got much more of everything both in terms of technology (cloud, mobile apps, hardware experience) and developers trust.

Wonder if Windows on ARM will be any help there

That's an interesting idea. I wonder if the size & concentration of that market is an effective deterrent?

They are going at it with their own Surface Duo based on Android, it is like Android but with Microsoft twist, so.

Duo is an utter facepalm. What are they thinking. It doesn't make the device cheaper or lighter, in fact it makes it heavier and more expensive. It constrains your interaction and UI model. It introduces unnecessary mechanical complications and points of failure. It made sense for Nintendo on the DS because it did reduce costs and the device could be small and light enough for it to work. The Duo is just different for the sake of being different though. Classic solution in search of a problem.

We could have had Windows 10X as well, but apparently the new blood on WinDev has lost track of what made Windows great, and are now as headless chicken running into all directions.

I agree with you 100%, I've never even heard of or seen a use case for the dual-screen flip smartphone

That said, my friends seem to love their Samsung foldable phones. "Having a tablet available at any time in your pocket is a game changer"

(I don't understand how it's a game changer, but there you go, one counterpoint)

I watch everything on an iPad. For me personally, it’s a minor game changer to be able to do all that on one device. Same with the minor notes, management, journaling I do on it. Though as you say. Not a game changer because of the pricing. If this was available at the same price as current devices, I’d consider that a moderate game changer.

It's just not for you. Bigger dual screen makes sense for some people.

They don't need to have a mobile platform if they can get a foothold on game streaming on mobile.

just saying wouldn't be a bad idea to make a xbox mobile-android device in the near future now that they have mindshare again

This is what I’m worried about. With them owning both the games and the OS that they are played on, we could be forced into a subscription. Paying to own may be a thing of the past.

You mean a thing of the present. See the other front-page story about Diablo not working if you're offline for too long.

Paying to own is already a thing of the past for music and movie content. How is this different?

I’m not saying it’s different, it’s more like the nail in the coffin. Movies, music, apps, games, treadmills, coffee, printers. Anything that can somehow have internet connectivity becomes a subscription.

...which is why nobody in their right mind would buy anything "smart" that can't be modified to be dumb.

Thankfully we can still completely avoid subscription for music legally.

I think we can already see what the future market will look like. Gamepass exists right now as a subscription service at $US10 per month and cheaper in many regions. And games to own cost anywhere between 2 months to 1 year of subscription. It does not make economic sense to stop pay-to-own, given almost all owners will keep the subscription in addition or will want to pay-to-own additional games in the future. The reason subscription services like Gamepass are taking off is it makes so much economic sense to many consumers. It even makes sense for infrequent gamers, as they no longer need to purchase dedicated hardware with the streaming services. If paying to own stops being a thing, I think it will be because the market is so small it isn't worth running the store fronts any more.

Fortunately, all the good video games have already been made.

Activision-Blizzard was the worst performing gaming companies during COVID so it stands to reason that this would be the best gaming developer considering how well Bungie did as an acquisition for Halo and the acquisition of mojang.

There is so much IP that is tied up with Activision-Blizzard that it seems like a good deal.

Sure... If $2B in profit up 46% YoY is worst performing I'll take it.

Bethesda/Zenimax massive $8B acquisition hasn’t appeared to have any issues yet though it is very new. Decent chance this acquisition doesn’t happen, but it does mean Microsoft can go after another 1-2 medium sized gaming companies with success.

Isn't that basically the same Nintendo and Sony? Save for the cloud platform.

Sony practically owns their cloud platform too, with their Gaikai purchase a decade ago[1] and PS Now being "PS3/PS4s in the cloud".

[1] https://www.gamesindustry.biz/articles/2012-07-03-sony-acqui...

This is actually an area where I think Sony has dropped the ball; PS Now is an interesting service, and they have a pretty interesting catalog of older games from the PS2/PS3 era. But they don't advertise it well enough, and I don't think they put enough focus on new releases and keeping them available the way Microsoft does with Gamepass.

There's rumours of them revamping PS Now and PS+ into a new service.

I've heard these, and they should! It would give them direct competition to GamePass Ultimate, which is a tier of service they don't currently offer (unless you buy PS+ and PS Now as separate subscriptions).

I assumed Sony were migrating to or already using Azure at this point.

https://news.microsoft.com/2019/05/16/sony-and-microsoft-to-...

At the time Microsoft where not throwing so much money at games development an IP ownership. I wonder how Sony feel about this now.

I see. But because they're maintaining datacenters for PS3/PS4 streaming I think they have the potential to go hosted, at the end of the day multiplayer servers are developer-controlled and network servers (e.g.: PSN, Xbox Live) are mostly identity services and such. (Even matchmaking isn't the network's job anymore)

Nintendo yes. But they've long been a closed, relatively niche ecosystem. Their entire market cap is less than the value of this deal.

Sony, perhaps. But I do think the cloud platform is a critical piece, because it is a huge source of value capture (e.g., all CoD compute on Azure is no small deal). It also allows significantly more dominance in distribution via cloud gaming - and coincidentally, Microsoft has been much more aggressive about owning distribution with Xbox Game Pass. This is all on top of the fact that Microsoft influences the PC and console markets, not just the console market.

Activision are much better at monetising than Nintendo.

Think candy crush and loot boxes vs fun single player mario games

Nintendo operates on different rules due their absurd array of reliable IPs. I get the sense that MS, Sony are still trying to sort out their own "Mario, Zelda, Pokemon" clone with mainstream movies/merch potential and all that entails.

> Nintendo operates on different rules due their absurd array of reliable IPs

Or do they have an "absurd array of reliable IPs" because they operate differently?

Halo is probably the closest thing they have to a Marioesque IP.

I'm not that big on FPS games. When I play Nintendo I generally play things like Mario Party or Mario Kart. A friend recently gave me an Xbox Series S, and off the top of my head I couldn't think of a single multi-player party sorta party game. I'm sure there are plenty of these games, but they definitely don't have the same type of draw as Mario.

The major non-Nintendo consoles have de-emphasized splitscreen and party games for a long time -- once we hit the PS4 and Xbox One era, it felt like most games didn't even support splitscreen at all, aside from a few indies. I think those games tend to rely on in-person interaction to boost the fun, and MS/Sony have decided to prioritize selling additional consoles instead of making one usable for multiple people.

The halo universe is pretty big. There are about 20-30+ books that I can recall, a phone game, and 2 RTS games on top of the FPS games we know and love. There is a TV show releasing this or next year. The universe of Halo is one I've grown up with and can't stop waiting for the next piece of lore to come out. There's a lot to enjoy in the Halo universe even if you don't play FPSes. The books themselves are solid though a solid % is just your run-of-the-mill fiction.

I don't think the parent was saying they were the same.

Just that Halo was the closest IP in terms of prestige.

Nintendo and mobile are the only real options for party games. Xbox and Playstation are for AAA enthusiast games.

From a pure marketing perspective the problem is Master Chief is such a blank slate unless you are pretty steeped in the lore.

ie Pikachu has already sold a lunchbox by the time you have explained what the space marine guy is about.

This all seems really simple-minded but having identifiable brands are incredible business. I definitely see MS and Sony trying to Mario-ify their characters. Aloy/Horizon Zero Dawn is a good candidate for this.

Absolutely not, Microsoft owns your operating system on your general computer. At least you could argue that I am, in some sense, willingly entering the ecosystem by buying an xbox. Blizzard and Minecraft are primarily PC games.

Pretty sure Nintendo operates their cloud platform as well, though it's hardly comparable as it only offers NES + SNES roms.

It offers some n64 titles now as well.

Sadly, these are emulated quite poorly.

It's pretty difficult to emulate an N64 with both accuracy and speed because its GPU is strange and flexible in all the wrong ways. And its game catalog isn't that large, so not worth the engineering effort.

The games people care about deeply like SM64 have remakes that aren't that hard to get.

I saw an SGI Indy on eBay today, that had some sort of N64 development device it came with. Not sure if it actually contained an emulator or maybe just a header for an onboard debugging port though. Sadly it was priced wayyy higher than the Indy I just bought so I ignored it.

I’d be more inclined to agree except that emulation of the same exact games went much better on the original Wii. Nintendo just phoned this one in.

Word of Dolphin hasn't made its way to Nintendo HQ yet?

Unfortunately they didn't support their own game engine as they could: https://en.wikipedia.org/wiki/Microsoft_XNA

Stardew Valley and Terraria were actually IMO the best games produced with that

That you have to thank the traditional WinDev vs DevDiv political wars.

As usual the .NET product (XNA), got replaced by a C++ one (DirectXTK).

https://walbourn.github.io/welcome/

They acknowledged they should have behaved better, years later with the new management adding support for MonoGame on the XBox,

https://news.xbox.com/en-us/2016/03/14/letter-chris-charla-i...

Guess this was what Steve Balmer meant when he said, DEVELOPERS DEVELOPERS DEVELOPERS DEVELOPERS.

For how bizarre that moment was, he was 100% correct. Developers are the lifeblood of a hardware platform like this.

I mean, isn't this basically how it used to work when the console manufacturers were also the game developers? Like Sega and Nintendo.

It's not really the same. For one, when those were the two juggernauts in the game cartridge era, they weren't really in the business of just scooping up a bunch of game studios, because financially it didn't make much sense.

What's different now is that Microsoft is focusing on becoming the Amazon Prime Video of video games. While you will still be able to buy the games outright, the games of the companies they're purchasing will be part of the monthly price gamers pay to play.

So for instance, because they own Zenimax, I can load up any of the Bethesda / id games and play as part of my subscription. And when Starfield and Elder Scrolls VI come out, they'll be part of that price too. Buying Activision brings Call of Duty, Overwatch, Warcraft, Starcraft, Diablo, and a host of other games under the same umbrella.

I guess they've decided that low monthly subscriptions paired with season passes for content is the way of the future for gaming.

It's definitely a compelling offering. I don't think one model has to win over the other though. There will be room for subs and there will be room for steam libraries where you own licenses as well in the future.

For me personally I have a hard time justifying game pass. I only complete 2-3 games a year at best and it's really expensive at that rate.

> For me personally I have a hard time justifying game pass. I only complete 2-3 games a year at best and it's really expensive at that rate.

Weirdly, that's the exact reason that I can justify Game Pass. Though I imagine you mean that you only play 2-3 games thoroughly, where I play a much larger number of games through the year, but rarely for long enough to finish them.

That's fair, I could see if you wanted to try a bunch of games first. I have to admit I take them up on the 3 month trial every year or to do just that. But I always do the trial with the intention of playing a bunch of games and then never play one! Hah! But that is not their fault, it is mine.

That's me. When I want to wind down, I usually play a card based roguelike of some sort. I rarely finish the game (my current one is a game based on solitaire), but I get my money's worth out of it each month.

And their windows game store is still full of bad UX and random bugs and glitches that make it look like it was built by amateurs.

Creation layer of the stack: Unity or Unreal.

I'm surprised they didn't snap up Unity before it went public. C# is the main language, cross platform deployment that goes well with .NET's new cross platform story and there are strong commercial markets for Unity like Movies, TV and Architecture that could benefit from Microsoft's enterprise sales force and relationships.

Visual Studio is still there, although losing market share

To Visual Studio Code

There is no better alternative for Windows and console game development, except C++ Builder and Delphi.

Even Google now ships VS plugins for Android game development and Stadia.

Next headline: MS to acquire Epic Games? Tencent is in the way there.

Really, I could see them launching their own engine. Think of all the studios and talent they have now. They have the engines behind Halo, CoD, WoW, Overwatch. Could build an Unreal competitor.

Microsoft already has id Software! Epic Games historical competitor. id Software has Quake, Epic Games has Unreal.

id Software is not the company it once was, but they still make engines. idTech 7 is their last one, powering Doom Eternal.

idTech is cutting edge tech. Their team is one of the best in the industry, second to none, competing with Epic, Insomniac and Naughty Dog. But it is not engine for general use, not now. It does one thing(FPS), and does it extremely well. But it lacks tools that you would need to create games of another genres. Things like advanced animation tools, dialogue systems, quest systems, ways to handle vast open worlds, etc.

idTech would be great for Halo and Call of Duty. But it isn't great for The Elder Scrolls, Starcraft, Gears, and many different games Microsoft Studios are working on. EA already tried to make every studio to use Frostbite for every single game and ended up with disasters like Dragon Age Inquisition and Mass Effect Andromeda.

>> EA already tried to make every studio to use Frostbite for every single game and ended up with disasters like Dragon Age Inquisition and Mass Effect Andromeda.

By what measure are these games considered disasters? I was under the impression they were critically well-received and sold a decent amount each. DA:I was a better game than DA:O 2, for example (at least IMO).

Regardless, I fail to see what the engine has to do with anything, considering they both presented noticeable graphical and mechanical upgrades over their prequels.

Mass Effect Andromeda was a disaster. Months after release Bioware Montreal was eliminated as a separate entity. They weren't even allowed to make already planned DLCs. It became a meme because of poor quality. And a lot of blame can be put on Frostbite.

Inquisition's development was a disaster due to poor tools. Pax 2013 demo, for example, was faked because no one knew what gameplay would look like(A YEAR BEFORE RELEASE), and it was mostly caused by missing engine systems. Game turned out to be OK though.

>> And a lot of blame can be put on Frostbite.

I am having a hard time understanding what the Frostbite engine had to do with any of this. Anything you can point to besides your opinion on the matter?

Battlefield is a multiplayer first person shooter. It doesn't need a dialogue editor, save system, third person camera, a lot of systems that help support advanced AI, and many other things that the Bioware game would need. Hence Frostbite didn't have all these things. They needed to be developed from scratch DURING the production. Which means half of the team was unable to work properly due to the lack of tools.

ME:A and DA:I had dialogues a save system, third person camera, etc. Why were they disasters if they were very successful in their own right? I don't understand what you are trying to get at.

Seems to me the engine was perfectly capable of doing everything you wrote it can't do and both games were successful deliverables.

Tencent and Sony have investments in Epic Games, not sure if either party wants to start selling to Microsoft.

Yeah it wouldn’t happen. Them two being the two biggest gaming companies too.

It is quite wild. The only thing missing is good will.

I think Game Pass has built up a helluva goodwill bucket, from talking with friends of mine.

The Games Pass is such ridiculous value that my "non-gaming" partner got a Series-S with Games Pass to play MS Flight Simulator, and as an aside, to have games available to myself and our kids (it was impossible to get the Series-X in the UK in the lead up to Christmas without paying scalpers).

I have a PS5 (sadly from a scalper), and I begrudgingly got Plus to fully experience the PvP aspect of Demon's Souls but the fact that it comes with a bunch of PS4 games for free, especially a few that I've been meaning to buy, makes it worth the subscription.

I doubt Sony would have done this without the pressure from the Games Pass.

I think Microsoft know that the PS4 won last gen on the basis of the amazing exclusives it had. I think that Microsoft is going to put a lot of exclusive pressure on Sony this gen with their buying spree (Bethesda etc), and while it is very hard to find time for gaming, I'm glad we have both systems in my house.

I liked the PS4 but even I feel like Sony didn't so much win the last generation so much as Microsoft lost it. Microsoft just never recovered from just how bad the XBox One launch was and Sony managed to win by pretty much doing nothing but releasing great exclusive titles. Sony right now seems to be fully into the hubris stage they were in when they made the PS3 and I feel like they are going to slowly lose market to XBox which has immerged from the disastrous XBox One humbled and with a greater desire to cater to their audience.

> Microsoft just never recovered from just how bad the XBox One launch

They just completely lost me to their branding strategy from that point. If I can't keep track of which console name does what, it's going to take something really compelling to make me pay attention. I'm still not actually sure what the PS5 competitor is even called.

The XBox branding department are big fans of The IT Crowd and completely unaware that it is a comedy. https://www.youtube.com/watch?v=ab8GtuPdrUQ

It’ll still be a while. Xbox still is in such a distant spot everywhere outside America. Europe and rest of Asia for sure. I’m not considering Japan in this. It’s fine that Xbox will never sell there. I think you’re right they’ll climb back. It’s just such an uphill battle.

Edit: Hah okay yeah the PS3 and hubris…does mean things could change pretty quickly and world wide (outside Japan and maybe a few other East Asian countries), Xbox could be neck and neck if not winning out again. I’d rather not have either win out. Sega was never going to survive, we don’t have another gaming console company in sight unless Steam Deck counts, so the relative parity of Nintendo, PlayStation, and Xbox is nice. Throw in Valve for now too.

Things can change so who knows. I don’t enjoy casual mobile games. I do enjoy the Quest 2. I can only imagine how great VR gaming will be by the end of this decade. Then we have Roblox, a single game [platform], valued at roughly the same price as Activision without the acquisition margin.

> it was impossible to get the Series-X in the UK in the lead up to Christmas without paying scalpers

Not completely impossible. I managed to purchase an Xbox Series X directly from Amazon UK on 20th December. Amazon also had sufficient consoles in stock they were able to not run out for more than 12 hours [1].

[1] https://www.theverge.com/2021/12/23/22852161/xbox-series-x-a...

This feels a little like Amazon Prime in that the cost of the total bundled deal is technically good, except that I don’t really want everything in the bundle, and would rather receive much less value for only somewhat less money. It probably works for a lot of customers, but I really avoid as many subscription services as I can.

Even Game Pass without Cloud gaming is bargain. I surprised that it also come with cloud gaming for free.

I would have loved game pass when I was younger for the sheer number of games. Now personally it offers me the ability to try things out and not regret dropping money on those games. I don’t play nearly as many games as I used to, but paying $15 and playing Back 4 Blood with friends was great. And I didn’t care when we all got our fill of it because I got my moneys worth. Personally it’s a great alternative to pirating.

Game pass is a loss leader. They will jack the price once they crush competition.

That’s what everyone thought.

They actually reported profit with game pass.

Not according to Phil in Nov 2021

https://www.essentiallysports.com/esports-news-not-the-only-...

At 15 dollars per month, 18 million subscribers, that's 3.25 billion dollars. They bought Betheseda for 7.5 billion. So now they're in the hole 4.25 billion and they still have to pay to run an entire extra company.

Why would you report an acquisition's cost with the operating expenses of an ancillary service? You should compare the operating expenses of Game Pass with its revenues (i.e. Game Pass subscriptions), and you should compare Bethesda's acquisition cost + operating expenses against its projected revenues (i.e. Bethesda game sales/subscriptions. Apples to apples, oranges to oranges.

We could do that, but that would hide the big picture. As Phil himself said, it's not yet profitable. It's a loss leader. True cost of ownership!

You are trolling at this point. I know we are to assume good faith, but the way you’re writing your replies. Repeating this Phil stuff. Combining two completely different things…

It's all Microsoft! The only way you sustain an unprofitable loss leader is by spending money from other parts of the company. To push game pass, theyve been buying IP. What's confusing about that? To There's no need for debasing accusations.

That might all make sense if Bethesda didn't also bring them other revenue streams. I mean, Elder Scrolls Online alone brings in a completely separate subscription stream and cash shop.

You keep ignoring every one saying that Bethesda acquisition which was Zenimax being acquired was also bought for other things and they got other things as well.

Why would you count Bethesda? I don’t understand the rationale. It isn’t even like they are the same revenue stream.

The article you linked does not say anything while adding up its word count. It’s common knowledge gaming companies say consoles never make a profit (except Nintendo). Game Pass is a fledgling growing SaaS. Of course sustainable is the right term. Nothing News worthy.

It's an answer to the reply that said they were profitable. They're not. They're 'sustainable'. That's it.

Even if you want to be anal about this. Phil saying the words sustainable doesn’t mean it’s profitable or not. It is just him saying stuff to the public. As if any corporate exec is ever going to be truly honest in public.

Taking away PR words as fact is not sustainable. It doesn’t work.

where did you get 3.25 billion? is that a years worth of subscription income? Does game pass blow up after that or something? Have subscriptions just stopped, 18 million and ..... no more growth.

If they keep buying stuff, they're not gonna make any money. It is thus a loss leader, as Phil indicated.

You understand those things they are buying have value right? That they are not just throwing money into the void. Investing in future growth is what businesses does in a competitive environment. If they don't keep buying stuff their service will fail and they will lose everything they had invested to that point. Thats how you don't make money.

Microsoft is buying stuff. Game Pass isn’t buying stuff. Microsoft makes plenty of money. Notice how any one can decide where to draw the line of what is what.

Why do you keep bringing Phil up. A loss leader isn’t the same thing as a growing SaaS. You are putting words in his mouth while repeating Phil said this, said that.

Yes, Microsoft makes plenty of money, that's how they're able to run game pass as a loss leader. Literally the original point.

So then game pass doesn’t lose billions. It makes billions since Microsoft does. Using your logic of assigning expenses and profit any where

They still don't own the graphics cards and displays (monitors &/or googles)

Microsoft has an AR goggle contract for the US Army, and functioning models of both this and the commercially distributed HoloLens, so you bet VR is in their reach.

They do have HoloLens though.

Those are very much a commodity.

Nvidia and AMD, of $650B and $160B market caps, make commodities?!

I'm not sure what market cap has to do with it? BHP Billiton is an _actual_ commodity (mining) company with a market cap similar to AMD [1]

GPUs aren't commodities in the traditional sense, it's more of a figure of speech to convey how interchangeable and standardized GPUs are nowadays.

[1] https://www.google.com/finance/quote/BHP:NYSE

Consumer game hardware is small potatoes in the revenue stream of those companies. They might be important to the game-playing consumer, but they're regarded as commodities by industry.

another strategy piece is linkedin for competitive analysis. They are able to see industry data for where all the top talent is working and when they are on the market.

DirectX, too.

The only thing they're missing is hardware design capabilities.

I disagree. The Surface line, which came out in 2012 and has been continuously refined each year after, are some really beautiful, inventive, and highly technical pieces of hardware. The hinge on the Surface Book especially generated a bit of buzz when it came out, and the rest of their lineup is quite solid.

To say this also ignores the XBox and its controller, which often trades places with the modern PlayStation controllers for what is considered best-in-class.

Microsoft has plenty of hardware design capabilities.

You are right, of course. The Xboxes are better and better hardware-design-wise each generation, and the Surfaces are highly rated.

I should have been more specific - I was thinking of the CPU and GPU design.

Is kind of strange, but I think Microsoft have some of the best keyboard and mouse on the market. ( Or at least use to have since I no longer use them ) And Surface Laptop, while far from perfect, you could see their continuous refinement year after year. Most company give up after a while. But Microsoft is actually making lots of progress for the PC industry.

Give it a few months, and they will acquire Subspace.

Already happened. Insiders know that snagging PriitK was the real motivation behind the Skype acquisition...

>> has been able to vertically integrate

MS for a long time had such opportunities which it missed almost every single time.

On the other hand, Apple had similar opportunities and succeeded almost every single time.

The MS list:

- Windows Mobile

- Zune

- MSN

The Apple list:

- iTunes

- iMessage

- iCloud

- iOs (some more)

Microsoft is extremely successful with Azure. Apple did not compete at all on public cloud offering.

>> missed _almost_ every single time.

> Microsoft is extremely successful with Azure.

I do not see any disagreement here.

They still rely extremely heavily on Nvidias ability to create more and more powerful hardware. I recently found out that like 70% of the world's supercomputers are powered by nvidia GPU compute. People often talk about the tech power of different countries (personally I've heard a ton of people talk about China in this way), but at the end of the day they are still reliant on the hardware manufacturers. Who am I to say that China or X country doesn't secretly have something that far outclasses nvidia hardware, though?

Between gaming (the biggest form of media), supercomputers, science computation, crypto nonsense, etc. It's really looking to me like nvidia is actually one of the biggest power players across the globe. Makes me really wonder about the tech they aren't flashing to the public. I was personally astounded when I saw their announcement to purchase ARM. I've seen a few instances of people saying the dead acquisition is stifling innovation. Honestly I'm kind of happy it didn't go through. Probably just a lack of vision on my part, though.

Microsoft uses AMD for their Xbox consoles, not Nvidia.

Honestly wasn't thinking about xbox at all. Good point. Now I'm wondering what the market share is between the two. I'd guess xbox is properly higher?

Also apparently tencent owns like 40% of Epic Games? It's all bullshit folks. https://www.youtube.com/watch?v=J6-r7GNlZvk&ab_channel=Cap.H...

What’s the bullshit part of Tencent owning 40% of Epic Games? Fortnite possibly wouldn’t be what it is if not for Tencent’s early investment and support of Epic Games. That then further goes into Unreal Engine not being what is today either.

I was just getting at the illusion of choice. At the end of the day it's all owned by the same handful of small groups. Found out yesterday that Blizzard apparently owns King. Tencent owns a cut of Activision Blizzard, as well as a slice of basically every gaming company. https://dataromas.com/what-companies-does-tencent-own/

Note that I'm not even criticizing or otherwise knocking these business practices, I'm simply making some observations. My use of the term bullshit was particularly to describe the illusion of choice. Not that it's anything new. http://www.visualcapitalist.com/wp-content/uploads/2016/07/c...

I think the world would be just fine without fortnite, but I will say unreal engine is pretty nice to have. Probably just a matter of time until Microsoft owns unreal engine as well.

Tangentially relevant due to Tencent involvement:

https://www.youtube.com/watch?v=_gXlauRB1EQ&ab_channel=Peopl... https://www.youtube.com/watch?v=vTMF6xEiAaY&ab_channel=Peopl...

Tencent has been bogged down by CCP’s crack down. It’s valuation is likely higher than the market is putting it at, unless CCP continues their stuff even more. Money that Microsoft has doesn’t matter to a company that also pumps out billions in profit like Tencent. They have no reason to ever give up an inch of their 40% stake. Microsoft wouldn’t be able to own it or Unreal realistically. Tencent is a bigger gaming company than Microsoft.

Cool you’re seeing how much Tencent controls. However the linked site doesn’t give good data and info. Tencent has stakes in far more things and the stakes they have are known too. While the site lists only a fraction of them. Including not listing much, much bigger stakes they have. Or not listing the actual specific stakes they have in companies like Kakao which are known. Or not saying their Epic Games stake percentage.

I should get to posting content! My notes on Tencent are pretty detailed if I may put humbleness aside for a second lol. But I don’t publish anything. Seeing sites with such weak info, is motivating.

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Yeah there isn’t much choice in any thing. I don’t care about games, but Take Two (Grand Theft Auto, etc) are the 3rd biggest independent gaming developers and publishers. They have a market cap or $28B and are buying Zynga for $13B. Zynga themselves have swallowed dozens of companies amounting to a couple billion. EA, the 2nd largest, bought Popcap who make Bejeweled and Zombie vs Plant. Pokémon Go developer is valued in the billions and Google, Nintendo, among others have sizable stakes in it.

For all the positives HN and other geeks give Steam and Valve. They still charge a 30% cut. Only finally changing it up a bit because of Fortnite’s profits letting Epic Games compete with their 12% cut. So as much as saying Fortnite going away is no problem. At least they are the ones fighting the three headed modern gaming walled gardens of iOS App Store, Play Store, and Steam. Sure, it’s more like the enemy of my enemy situation, but that’s better than them not being around.

Edit: thanks for the reply! Most people don’t reply after the first 24 hours. Just set up a bot to get reply notifications. Was happy to geek out on this topic for a bit. Even though the bigger issues of monopolies and how screwed us normal people are, are not pleasant.

If you wanna get wilder if you’re an SO user. Prosus, who owned 40%, maybe 32% these days, of Tencent, bought Stackoverflow :P. They have also invested in many tech companies.