Why Microsoft Added Remote Purchases to Xbox SmartGlass

Can Microsoft boost software sales by adding remote purchases to Xbox SmartGlass?

Aug 23, 2014 at 3:36PM

It's clear that Microsoft's (NASDAQ:MSFT) Xbox One is struggling. Even after ditching the Kinect, slashing its price by $100, and selling loss-leading bundles, Microsoft has only sold 5 million consoles compared to Sony's (NYSE:SNE) 10 million PlayStation 4's.

But one overlooked bright spot is Microsoft's software tie ratio -- publishers have sold 3.26 games for every Xbox One, compared to 2.67 games for every PS4, according to VGChartz. The tie ratio is important because console makers generate revenue by taking a cut of software sales, not by selling consoles at razor-thin margins.

That's why Microsoft's recent introduction of remote game purchases from the Xbox SmartGlass app and Xbox.com is important -- it could encourage existing Xbox One owners to buy more games, thus offsetting sluggish hardware sales.


Xbox SmartGlass. Source: Google Play.

The business of remote purchases
With remote purchases, a customer can browse games on SmartGlass or Xbox.com, and the games will immediately start downloading to the console once purchased. Sony already has the jump on Microsoft by offering remote purchases through its PlayStation app.

Microsoft hopes that setting up remote purchases, then applying Steam-like flash sales, will promote impulse buying by mobile users. Remote purchases are also more convenient, because a gamer doesn't have to sit through long downloads before playing.

That strategy makes sense considering how much time Americans spend on smartphones and tablets. According to research firm eMarketer, the average American now spends 2 hours and 51 minutes on mobile devices daily, compared to 24 minutes in 2010. eMarketer also noted that by 2017, 77.1% of digital buyers will use a mobile device to make at least one online purchase during the year -- up from 51% in 2013.

Meanwhile, digital game sales are rising. Research firm NPD found that U.S. purchases of digital games rose 11.4% year over year in 2013 to $11.7 billion.


SmartGlass can be used as a "second screen" for shows, movies, and games. Source: Microsoft.

How do Microsoft's mobile efforts compare to Sony's?
While Microsoft's SmartGlass and Sony's PS app offer similar second-screen and messaging features, Sony has a clearer long-term plan for spreading its gaming ecosystem across multiple devices.

Sony's PS Now cloud-gaming service will eventually stream PS1, PS2, and PS3 games onto the PS3, PS4, PS Vita, PlayStation TV, and select Bravia televisions. Since streamed games are like interactive HD videos, they are dependent more on high-bandwidth connections than processing horsepower. Sony also offers Remote Play, which allows a PS3 or PS4 to stream its video and audio wirelessly to a PSP, PS Vita, or PlayStation TV.

In addition, Sony offers Cross-Play, which allows a game to be played on one platform, such as the PS Vita, and resumed on another, like the PS4. Certain games, like Helldivers, are identical across different consoles. Others, like Ubisoft's The Division, allow the PS Vita player to pilot a support drone to assist PS4 players on the ground.


Helldivers. Source: Sony.

Sony could also eventually launch PS Now and Remote Play on mobile devices. Sony recently discontinued PlayStation Mobile, its prior Cross-Play effort for the PS Vita and Android devices, due to a lack of software support.

To replace PS Mobile, Sony could add streaming services like PS Now and Remote Play to Android or iOS devices (paired with controllers) to pull even more users into the PlayStation ecosystem.

Why is Microsoft always a step behind?
It's painfully clear that Microsoft remains a step behind Sony when it comes to cutting-edge features. Adding remote purchases to SmartGlass was a good move, but it was really just imitating Sony.

Sony has boldly forged ahead with PS Now, despite the steep bandwidth requirements (5 Mbps) and complicated pricing tiers during the beta period. Even with these early issues, Sony's strategy of selling one game across multiple cloud-connected devices will become standard if dedicated gaming consoles cease to exist after the eighth generation. If it brings mobile devices into the fold, Sony will create a seamless gaming network liberated from a single console.

Microsoft hasn't done much with cloud gaming -- which is surprising since CEO Satya Nadella has repeatedly emphasized the importance of the cloud to the company's future. Cross-platform gaming between the PC and Xbox One -- which some developers have requested from Microsoft -- also remains elusive, although it could save the company's dying Games for Windows Live platform with Xbox Live integration.

Microsoft only recently announced its first cross-platform game between the Xbox 360 and One, Happy Wars, at E3. Sony, by comparison, already has over 30 cross-platform titles.

The Foolish takeaway
Microsoft can't just timidly follow in Sony's footsteps if it wants to convince customers that the Xbox One is the future of gaming.

Without the Kinect, the Xbox One remains a shadow of the PS4, with a handful of exclusive games but fewer cutting-edge features. For now, adding remote purchases to SmartGlass might slightly improve the Xbox One's software tie ratio, but it won't do much to move the hardware.  

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


Leo Sun has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information