Xbox CEO Openly Floats the Need for Third-Party Exclusives and “Potential M&A” to Win in Hardware, PC, Mobile, and Streaming

Xbox CEO Asha Sharma is making headlines twice a day, if not more, as she attempts to right a ship that's been going the wrong way for a long time. Yesterday, she was featured in three different articles on Wccftech:

• First, she explained that the decision to pick just two console exclusives (The Coalition's Gears of War: E-Day and inXile's Clockwork Revolution) was linked to the current unhealthy state of the Xbox business;
• Second, she noted the need for cheaper hardware, as consumers are unable to purchase consoles that cost thousands of dollars;
• Third, in a newly published memo sent to the whole Xbox team, she admitted that the division had become "overextended".

This last news item went live alongside reports of mass layoffs coming later this month, which understandably overshadowed the rest of the memo. However, Sharma's message does include other tidbits worth highlighting.

Speaking about the games lineup, Sharma stressed that more focus will go toward the biggest franchises, like Elder Scrolls, Fallout, Halo, Gears, Forza, and the like, thus inevitably suggesting that minor IPs will get cuts. Interestingly, she also floats the idea of third-party exclusives, something that Microsoft hasn't tried in a long while.

We are the fortunate stewards of industry-defining franchises that have enormous potential and player demand, but we have not adequately funded them to compete and win. At the same time, as we saw this past weekend at Showcase, a reliable pipeline of first- and third-party exclusives and new IP are critical to our success. We need to reassess the balance between these and our investment priorities for the next 5 years.

Recently, there's been only one example: GSC Game World's STALKER 2: Shadow of Chernobyl, which was an Xbox console exclusive for 1 year without moving the needle much for Microsoft. Before that, we have to go back to the likes of Rise of the Tomb Raider, which was also an exclusive for almost a year, and CAPCOM's Dead Rising series, with 3 never launching on PlayStation and 4 waiting a year before landing on Sony's console. Crytek's Ryse: Son of Rome also never launched on any other consoles.

The thing is, all of those deals were infamously bad for Microsoft. Moreover, Sharma's push for more third-party exclusives faces an even tougher reality than it did in the Xbox One era. With Series S and X trailing behind Xbox One in sales, publishers have even less reason to lock games to the platform unless Microsoft is willing to spend heavily to make the deal worthwhile.

Later in the memo, the Xbox CEO also hints at potential acquisitions, though it is unclear whether she is referring to tech or game development companies.

We’ve become too reliant on vendors to operate our systems and must become more self-reliant as an engineering culture to build for the future. We must increase the value we ship to players while decreasing the time it takes to do so. Going forward, we’ll evolve and rebuild our stack and look at capabilities across all of XBOX and potential M&A to help us win in hardware, PC, mobile, and streaming.

One thing's for sure: the Xbox strategy is still very much in flux and prone to change at a moment's notice.

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