When the Xbox Series X was revealed at The Game Awards two years ago, its name caught many by surprise. The ‘series’ part in the name was a hint towards a growing family of Xbox consoles, which grew with the Xbox Series S right before the launch of the new console generation. This has led many to speculate that a handheld Xbox console isn’t unlikely to come at some point in the future, and Valve’s recently unveiled Steam Deck may just push Microsoft to fast-track such a console, if it has been in their plans.
The Steam Deck is inherently different from the typical Sony, Microsoft or even Nintendo consoles that we know and love. While it hasn’t been released yet, Valve’s openness about the way the PC-console hybrid works is frankly surprising. The Steam Deck, unlike other consoles, isn’t built on top of an open ecosystem. Sure, it will come with a custom version of SteamOS out of the box, allowing users to install games from their Steam libraries exclusively. However, Valve’s open invitation to gamers for modding and installing third-party software, even Windows, is directly at odds with the business model that most console manufacturers operate on. With that said, that could also incentivise Microsoft to add a portable handheld to their Xbox family, backed by an all-digital ecosystem that the Series S is thriving on.
Let’s do a simple breakdown of Microsoft’s revenue model for its games and services division. It’s well known that console manufacturers make more profits through digital sales on their platform than moving hardware itself. While a standard game costs the same at both retail with a physical copy and on the console’s digital storefront, Microsoft, Sony and Nintendo make more from sales through digital sales.
Multiple developers and publishers have said that Game Pass not only incentivises players to try out a larger number of games more frequently, but it also boosts sales of the games across other storefronts, including Microsoft’s own Xbox store. This also includes in-game purchases, DLCs, season passes and expansions of many games that are offered in the Game Pass catalogue. Members of Xbox Game pass also get discounts on games bought from the Xbox storefront, which many might take advantage of before their subscription ends.
Iain Garner, co-founder of indie game publisher Neon Doctrine reiterated the same while criticising PlayStation’s support structure said the same for smaller game developers.
“Games Pass definitely boosted our sales across all platforms and brought loads of new players to Sinner,” he said in a recent interview. “It was a really great experience and I would love to do it again.”
Phil Spencer, head of Xbox, has also explained a little bit about how the Xbox Game Pass service is operated, focusing on expanding its user base instead of looking at gross sales.
“The number one metric that we can look at to see if our business is actually growing are people playing more on the platform,” he said in a recent IGN interview.
“There’s nothing about review score, nothing about retail sales of console or retail sales of games. The number one sign that our platform is healthy and growing is actually engagement on the platform from players. That is what Game Pass is growing, and continues to grow and continues to be profitable at Xbox.”
A handheld all-digital Xbox console could be the perfect entry point for budget gamers who are on the move. Xbox Game Pass’ growing library could make it an easy entry point for gamers into the Xbox ecosystem, with game progress carrying forward to the Xbox series X|S consoles or even PC whenever required thanks to Smart Delivery. And then there’s Xbox Cloud Gaming which is Microsoft’s ace up its sleeve, if implemented correctly.
While countries outside of Microsoft’s chosen few await the launch of its cloud gaming service, Microsoft has already shown that it is using its Azure infrastructure to increase the shelf life of its older Xbox One consoles. As next-gen games get more power hungry, Microsoft could, in theory, use the cloud to deliver them on its handheld console, or use aggressive scalability options like the Steam Deck or even the Nintendo Switch to port those games over.
But why even bother with another console SKU when you have the power of the cloud? Well, for starters, Xbox Cloud Gaming acts as an added bonus on top of one’s Game Pass subscription, and it doesn’t really work as a stand-alone service. We’ve seen that cloud-only endeavours in the gaming space such as Google Stadia aren’t enough to sustain a user base, especially if it asks for separate purchases to increase one’s gaming library. Nvidia’s GeForce Now cloud gaming service acts similarly to Xbox Cloud Gaming, where users can access their existing libraries instead of having to purchase games separately. Xbox Cloud Gaming, as it stands right now, is a great bonus but not necessarily strong enough to stand on its own to attract brand new users.
Of course, there’s the question of price. With the Xbox Series S already coming in at a cheap $299, it could be hard for Microsoft to position another console for cheaper than that. However, as the Steam Deck and Nintendo Switch have already shown, portability is widely valued by a lot of gamers.
The Nintendo Switch is using what was outdated hardware at its launch, but its value doesn’t depreciate thanks to the excellent first party output of games and of course, portability. Another key area for the proposed handheld Xbox console to thrive in would be the more price-sensitive markets where it’s harder to justify getting a more expensive console. This is also where cloud gaming can fail to garner a large enough user base, one which may not be equipped with the internet infrastructure that is required to handle lag-free game streaming.
With the Xbox ecosystem’s growing list of devices and services serving as entry points, a handheld console seems inevitable, despite what Phil Spencer has said regarding their hardware roadmap. The question remains, are Xbox’s first party studios up to the challenge of attracting more gamers to new hardware, not that Xbox has embraced a slightly more platform agnostic approach?