Why is Microsoft Involved in Gaming?

One of my older friends asked me why Microsoft is involved with Xbox gaming. I didn’t really know even though I had a few ideas (see below), so I figured I’d search the Internet to see what Microsoft’s officially stated opinions are.

Well, the results were unambiguous. Microsoft supports gaming. Big time. In May, during a presentation at the Build Conference, CEO Satya Nadella said, “Most of you (financial analysts) view gaming as ‘Microsoft has an Xbox business.’ I think you understand the console economics. But it’s a much broader thing for us.”

During the presentation, the Microsoft CFO described how Xbox is a multi-billion dollar business. That’s a pretty good reason to be in a segment. And the head of the Xbox division said that being at the forefront of gaming helped the company’s understanding of the next wave of computing solutions, namely mixed reality and holograms.

Also, gaming creates an enormous social network — millions and millions of users: “This attracts more users to Microsoft’s social network which in turn builds loyalty. This is where people find and meet their digital friends and keep connected with them. The result of this is it drives commerce which leads to a cycle that is demonstrated in the slide above.” See https://www.windowscentral.com/xbox-multi-billion-dollar-profitable-business-more-first-party-investment-way.

So, really the question isn’t, “Why is Microsoft involved in gaming?” It’s really more like, “Where is Microsoft headed with gaming?”

One recent development is that Microsoft acquired Beam (now called Mixer). This is a live-streaming service similar to Twitch, which Amazon purchased for $1.0 billion dollars. Billon. With a ‘B’.

Another possible area of growth is in eSports. I’d never even heard about eSports until recently. But competitive gaming is projected to be a huge form of entertainment, with revenue roughly $700 million in 2017. See https://venturebeat.com/2017/03/14/newzoo-the-esports-economy-will-grow-41-to-696-million-in-2017/ ).

So, I suspect that people who aren’t really into gaming — and that includes me — dramatically underestimate the business impact of gaming. It’s clear the Microsoft sees huge value and is committed to gaming products and services.

As a technical person, my thoughts about the importance of gaming are a bit more indirect. Much of the roots of machine learning goes back to the early days of computer chess. And video game technology has pushed the forefront of computer graphics. In short, gaming related development has all kinds of beneficial technical side-effects.

The moral of the story is that I tend to think about gaming as a bunch of teenagers sitting in a darkened basement, shooting at each other with joysticks for hours on end. There’s a lot more to gaming, and there’s a lot of money involved.

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