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Suddenly, Microsoft Actually Cares About PC Gaming

By Sam Mattera – Mar 15, 2014 at 2:00PM

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Microsoft's renewed push into PC gaming could affect AMD and GameStop.

If it wasn't for Microsoft (MSFT -1.49%), it's possible PC gaming wouldn't exist: Just about every PC gamer relies on Windows -- the majority of PC games aren't available on alternative operating systems like OSX or Linux. And yet, despite lying at the center of the PC gaming universe, Microsoft has never offered much support.

But in recent months, Microsoft's approach to PC gaming seems to have changed quite dramatically. With a number of new initiatives, Microsoft could revive interest in the Windows platform while simultaneously pressuring both AMD (AMD -1.37%) and GameStop (GME -4.09%).

Microsoft readies new DirectX
Last week, Microsoft announced that DirectX 12 -- the next iteration of its popular PC gaming API -- would be unveiled on March 20. In the past, new DirectX releases have coincided with new versions of Windows, and have brought vast enhancements to PC gaming.

When creating a new PC game, developers rely on APIs. Unlike video game consoles, which have only one set of hardware components, PCs can be dramatically different -- APIs help bridge the gap, allowing a single game to run on a wide variety of different hardware components. DirectX is one of the more popular APIs, but there are others, most notably OpenGL. There's also Mantle, an API AMD has been pushing aggressively in recent months.

With Mantle, developers can make their games perform better on lesser hardware, but it requires AMD hardware to work. Obviously, AMD has an incentive to see Mantle succeed, as it would encourage more sales of AMD's products, especially its graphics cards.

Microsoft's new DirectX, then, is an obvious challenge to widespread Mantle adoption. Interestingly, the language Microsoft used in its DirectX 12 announcement was oddly reminiscent of marketing materials AMD has long used to promote Mantle: the phrase "closer to the metal" stands out, suggesting that Microsoft is well aware of AMD's API push.

In a statement to Forbes, AMD said it welcomed the next DirectX, and while that might sound absurd given its investment in Mantle, it isn't fair to say that Microsoft's renewed interest in PC gaming is wholly negative for AMD. In fact, it's likely that more demand for gaming PCs would result in more demand for AMD's products overall.

Xbox games come to the Windows store
Along with a new version of DirectX, Microsoft is also working on bringing more games to the PC. Project Spark, one of 2014's most highly anticipated video games, is being developed in-house by Microsoft Studios. Rather than release it exclusively on the Xbox console, as it has often done in the past, Microsoft is bringing Project Spark to Windows, rolling it out alongside its Xbox counterpart.

What's most notable about Project Spark is that Microsoft will distribute it through the Windows 8 app store. Currently, most PC games are purchased through third-party digital storefronts (basically app stores), the most popular of which is Steam. Others exist, including Electronic Arts' Origin and GameStop's Impulse.

As the video game industry shifts toward digital distribution, GameStop is banking on its digital initiatives, including Impulse, to carry the load. Microsoft's move to emphasize its own app store won't wipe out third-party storefronts like GameStop's, but it could put pressure on the space.

Saving Windows
Ultimately, Microsoft's renewed interest in PC gaming appears to be reactionary, a way to spark interest in what's increasingly a dying platform. Among consumers, PC demand has dropped dramatically -- by Microsoft's own admission, 20%. But PC gamers are a unique group, one that can't so easily abandon Microsoft's Windows.

That is, at least for now. With its upcoming SteamOS, Valve is looking to change that, encouraging PC gamers to give up Microsoft's operating system for its upcoming free alternative.

But the market is still Microsoft's to lose, and with its new initiatives, it could maintain its control of the PC gaming space for the long term.

Sam Mattera is short shares of GameStop. The Motley Fool owns shares of GameStop and Microsoft. 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.

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