Microsoft is mashing up the capabilities of the Xbox One with Windows when the company pushes out the next major upgrade for the operating system. And this is potentially the start of something bigger for the corporation’s gaming division.
In the United States, 58 percent of people who play games on both PC and console spend a significant amount of money on each platform. And 10 percent of people playing on both, more than 7.5 million Americans, are big spenders on both platforms. According to research Newzoo, this creates an opportunity for Microsoft to capture more revenues from gamers as it evolves the Xbox app on Windows 10.
“If MIcrosoft can lure Xbox gamers that are already spending money on the PC to migrate this spending to the Xbox app, it can take more money from the same gamers’ wallets,” reads a Newzoo report.
Newzoo’s Peter Warman explained to GamesBeat that the Xbox app could help build a community of gamers around the world that are more willing to work within Microsoft’s ecosystem. If the Xbox app’s Store — which takes you the unified app store for Windows — expands to include more PC game, Warman thinks that the company could significantly grow its gaming sales.
At a Jan. 21 Windows event in Washington state, Microsoft showed off the Xbox app functionality in Windows 10. The company focused on the software’s social capabilities as well as its cross-screen functionality that enabled players to stream games from a local Xbox One to a Windows PC or tablet screen. But Warman doesn’t think Microsoft will stop with that.
“I believe that the announcement of the Xbox app integration in Windows 10 is just the beginning of Microsoft’s objective to tap into PC gaming revenues,” said Warman. “The majority of the $24.5 billion in PC game revenues worldwide is generated by gamers playing on Windows machines. Ultimately, this is not about cross-screen technology but about being actively involved in the time and money people spend on Windows PCs.”
The Newzoo research expert also anticipates that Microsoft has bigger plans for cross-platform releases along the lines of the upcoming Fables game, which runs on both Xbox One and PC. It will also include cross-platform multiplayer that will enable people on PC to play with their console-having friends. Warman thinks this is a sign that Windows 10 and the Xbox app will play a bigger part in PC-game digital distribution.
“Microsoft’s tech will enable PC gamers to compete with console gamers for certain franchises,” he said. “I expect that Windows 10 will also be positioned as a distribution channel for game content that does not require an Xbox One. If they go for this and execute it well, they will source revenues that previously were out of reach.”
Newzoo thinks that Microsoft’s Xbox push on PC could even benefit the company in the massive international gaming markets.
Combined PC and console spending surpassed $51.3 billion in 2014, according to Newzoo. Microsoft is one of the few companies that is positioned to potentially tap into both of those revenue streams.
“If Microsoft heads this way, it will not be easy,” said Warman. “Managing distribution and monetization on such an open and completely digital platform as PC is completely different than the closed console space.”
Warman points out that platform holders and publishers keep digital console games relatively high compared to the PC. He notes that PC and mobile stores are more susceptible to market forces.
“The fact that downloading a digital full game costs you more than shipping a box to your house is weird and the main reason why boxed game sales are only slowly declining,” he said. “But if Microsoft takes serious steps towards PC, I expect it indirectly will accelerate the decline of boxed game sales.”
Newzoo highlights a best-case scenario where Microsoft increases its “addressable revenues by as much as 91 percent or more.” That’s if it makes the Xbox app on PC work well and entices existing gamers to shift spending to that app. But a lot will have to go right to make that happen, and Microsoft has a track record of letting PC gaming go wrong.