Microsoft “killed the Xbox One Slim right out of the gate” says analyst firm

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Microsoft announced not one, but two new Xbox One consoles at E3 this year. First, you’ve got the 40% slimmer Xbox One S which features 4K video playback, HDR and a “streamlined” controller. Next year the more powerful Xbox One, currently codenamed Scorpio, will be released, bringing 4K gaming and Virtual Reality support to Microsoft’s game box.

It’s a confusing message for the average consumer. Should they pick up the Xbox One now, or wait for the higher end version next year? On top of that, just about every major Xbox One game is headed to Windows 10.

It’s this mixed messaging that has Analyst firm DFC Intelligence convinced that Microsoft made a blunder – and is even looking, despite overwhelming evidence to the contrary – of exiting the game hardware business.

“The most immediate problem is Microsoft effectively killed the Xbox One Slim right out of the gate,” they said in an investor update. “If there were many Xbox 360, Wii U and even PlayStation 4 consumers interested in an Xbox One this holiday season they have now been told to wait until Scorpio arrives in 2017. Microsoft can only hope that the buzz around Project Scorpio goes away soon but with the cat out of the bag that is unlikely.

“There are all kinds of other problems with Microsoft’s mixed messaging. The pricing on the original Xbox One is great, and the Slim is wonderful, but all the important new games will be on PC, so why invest in a console? Just upgrade your PC. And if you do want a console why buy now when Scorpio will be here later. All of this is a net dampener on new hardware sales now and really opens the door wide open for Sony and even Nintendo for the NX.”

They surmise that Microsoft may spin off the Xbox brand or sell it off as the brand tries to align with its operating system.

“The biggest issue is whether Microsoft will even have a game division by the time Project Scorpio launched,” they said. “It is no small irony that the E3 events went on at the EXACT same time as Microsoft CEO Satya Nadella was announcing the $26 billion acquisition of LinkedIn.

“The overall question now seems to be not if Microsoft will exit the game business, but when and how. Of course, that leads to many other questions such as how is exiting the game business handled? Is Xbox spun off? Does Microsoft find a buyer? Or does the company just shut Xbox down? DFC feels the latter option will most likely not occur but it is clear something must be done.

“Unfortunately the value of the Xbox brand is in serious flux with much of its advantage tied to the Microsoft Windows 10 operating system.”

I’m not an analyst, and while I do think that the mixed messaging is unhelpful, I can’t help but feel that the Xbox Brand came out of E3 stronger than it went in. Slowly amalgamating Windows 10 and Xbox to become a singular platform, and taking emphasis away from hardware and focusing on Software may be the smartest play the company has done in years.

Last Updated: June 21, 2016

Geoffrey Tim

Editor. I'm old, grumpy and more than just a little cynical. One day, I found myself in possession of a NES, and a copy of Super Mario Bros 3. It was that game that made me realise that games were more than just toys to idly while away time - they were capable of being masterpieces. I'm here now, looking for more of those masterpieces.

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