Microsoft Corporation (MSFT): Why the Xbox One Will Still be a Massive Success

Page 1 of 2

Microsoft Corporation (NASDAQ:MSFT) took some risks with its latest console, the Xbox One. Perhaps enough risks to sink the machine entirely. The backlash in the gaming community has been resounding: core players do not appear to be happy with the decisions Microsoft has made.

And yet, I still believe the Xbox One will be successful. Although it will take some time to play out, Microsoft’s strategy with its newest Xbox is very forward-thinking, and could allow the Windows-maker to dominate its customers’ living rooms.

Microsoft Corporation (MSFT)

Why the Xbox One could fail

Right now, the Xbox One’s future looks fairly bleak.

Microsoft Corporation (NASDAQ:MSFT) has fundamentally changed the notion of game ownership. With previous consoles, the “game” was the disc, and the disc was the game. But now, the “game” is merely a digital file.

For all intents and purposes, the actual physical disc is irrelevant. Gamers are more or less simply buying the rights to access the game on Microsoft’s servers.

This brings some unfortunate side effects. Games cannot be easily lent or sold. Moreover, gamers must connect their consoles to the Internet regularly to verify that their collections are legitimate.

Microsoft Corporation (NASDAQ:MSFT)’s rival, Sony Corporation (ADR) (NYSE:SNE), has capitalized on these shortcomings. Sony released a video indirectly mocking the Xbox One’s restrictions, and further, has decided to undercut Microsoft’s console by $100 with its PlayStation 4.

Various polls have shown that — at least online — gamers appear to be wanting the PlayStation 4 much more than the next Xbox.

Microsoft’s long game

But writing off the Xbox One as it stands today would be naive. With the Xbox One, Microsoft Corporation (NASDAQ:MSFT) has decided to play the long game. Though sales might be sluggish around launch, the Xbox One is intended to have a very long life.

In fact, for many gamers, the Xbox One might be the last console they’ll ever need to buy, because the Xbox One itself is merely the tip of the iceberg. Alongside the new console, Microsoft has invested heavily in its Azure cloud gaming servers.

Although the Xbox One is less powerful than the PlayStation 4, it should actually be capable of more impressive graphical output. Game developers can shift some of the processing power to Microsoft Corporation (NASDAQ:MSFT)’s cloud servers, and combined with the Xbox One’s local processing prowess, deliver superior games.

And as technology progresses, the Xbox One should only improve — cloud servers should become ever more capable. Meanwhile, broadband Internet speeds are steadily increasing (Google Inc (NASDAQ:GOOG) Fiber) meaning that, eventually, games could be handled completely in the cloud.

This would thus render the idea of a console obsolete. Rather than buy a new, $500 box every five years or so, consumers could simply stick with the Xbox One — potentially forever.

Sony’s cloud gaming buy

But Microsoft isn’t the only console maker interested in cloud gaming. Last year, Sony Corporation (ADR) (NYSE:SNE) spent almost $400 million on Gaikai, a cloud gaming service.

Some of Gaikai’s technology appears to be in the PlayStation 4. Although the PlayStation 4 isn’t backwards compatible, users can stream old PlayStation 3 games to their new console over the Internet — much like Microsoft Corporation (NASDAQ:MSFT)’s Azure gaming solution.

That isn’t to say they’re the same. There’s a big difference in strategy here. Gaikai is all streaming — Microsoft’s strategy is a hybrid of the two. Given that widespread fiber Internet penetration appears to be several (perhaps many) years away, that could give Microsoft the upper hand over Sony Corporation (ADR) (NYSE:SNE).

Page 1 of 2

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Click here to Read Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 74 percentage points in 2.5 years. Our beta is only 1.2 (download a FREE newsletter and see the details inside)

Lists

Best Selling Magazines in the World

Shortest People in History

The Most Celebrated Holidays in the World

Most Expensive Handbag Brands in the World

Top Selling Comic Book Issues of this Century

The Most Powerful Women in Politics

Best Paid DJs

Most Rebellious Female Artists

Best Paid TV Actresses of 2014

Best Paid Actors of 2014

Most Expensive Horses in the World

Tallest People Ever

Most Encouraging Feminist Celebrities

Best Paid Supermodels of 2014

Top 10 Suburbs for Retirement in 2015

10 Wealthiest Cities in America

Top 10 TED Talks for Entrepreneurs

Best TED Talks on Education

25 Most Dangerous Places to Live in America

Top 10 Ski Resorts in the United States – 2014 List

Top 10 Most Remote Places in the World

Most Visited Museums in the United States

Wealthiest Photographers in the World

Most Famous Gay Athletes

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!