Even the best-selling consoles in history haven't reached 200 million units sold. In fact, aside from PlayStation 2 at about 160 million, even the bigger success stories have sold closer to 100 million total consoles than 200 million.
In a world where Microsoft (NASDAQ:MSFT) executives estimate there to be 2 billion gamers, according to Geekwire that means that proprietary consoles address only a small portion of the market. And while the company no longer releases Xbox One sales figures, that console has probably sold in the ballpark of 45 million to 50 million units, leaving approximately 1.95 billion customers not available to Microsoft.
"We know we aren't going to sell 2 billion consoles, and there are a lot of markets around the world where a console is not necessarily part of the lifestyle," said Kareem Choudhry, Microsoft's gaming cloud vice president, during a tour of Microsoft's gaming facilities in Redmond, Washington, that Geekwire covered.
During the tour, Choudhry showed off the company's progress on Project xCloud, an effort to move its games off consoles that it began working on in 2018. This project would move the processing power needed for top-tier games to the cloud, making it possible to play them on any device.
Check out the latest earnings call transcript for Microsoft.
What is Microsoft doing?
Before Satya Nadella took over as CEO from Steve Ballmer, Microsoft had been operating a mostly closed ecosystem. Aside from offering some of its software -- Office and Skype, for example -- for Apple, it generally made customers buy Windows machines (or an Xbox) to gain access to the latest versions of its software, games, and apps.
Nadella changed that by accelerating efforts to bring the best versions of all the company's products to any platform that wanted them. Ballmer should get credit for starting that process by bringing the Office apps to Android, but it was Nadella who has preached an any-device, any-customer strategy.
Project xCloud would do that for gaming, bringing the company's software (i.e., games) to people using tablets, phones, PCs, and who knows what other devices. Using Microsoft's Azure cloud platform, the company hopes to make streaming gaming available on 4G and eventually 5G networks. It laid out its broad goals in a blog post Choudhry made back in October:
Scaling and building out Project xCloud is a multi-year journey for us. We'll begin public trials in 2019 so we can learn and scale with different volumes and locations. Our focus is on delivering an amazing added experience to existing Xbox players and on empowering developers to scale to hundreds of millions of new players across devices. Our goal with Project xCloud is to deliver a quality experience for all gamers on all devices that's consistent with the speed and high-fidelity gamers experience and expect on their PCs and consoles.
Microsoft isn't abandoning the Xbox. It has a lower-cost version in development and still offers Xbox All Access as a subscription offer that includes a gaming console. In addition, gamers playing over xCloud can use Xbox accessories, including controllers to enhance game play.
Why is this important?
The tour of the company's gaming facilities shows that Microsoft hasn't backed off this plan. That's good news for investors, as consoles are generally not money winners -- selling games is where the money is. Going to the cloud means the company can sell a lot more games.
This idea is also a win for gamers, who may soon get access to more titles without having to own multiple consoles. And a bigger addressable market could cause Microsoft to lower game prices. Why charge $60 for a game and limit the audience if it can sell more than six times as many copies at $10?
Microsoft has shown that it's willing to open its doors to a bigger audience. Project xCloud does that in gaming, and that should help the company sell a lot more games.