Microsoft Corporation (MSFT) Xbox Head Works to Save Sony Cash

by Jack @ UNIXPlus September 25, 2015

Microsoft Corporation (NASDAQ:MSFT)entrusted Phil Spencer with the job of turning the Xbox One division around and by almost all accounts he’s been doing a good job thus far. Despite speaking well of Sony Corp  (NYSE:SNE) at every turn, the Xbox head has proclaimed some problems with the way the firm does business. If his latest words are believed he may be on the verge of saving the Japanese firm a lot of money as a result.

Xbox One VS Ps4 Microsoft Corporation

Spencer said, in a September 18 conversation with IGN, “As I’ve grow in this role, and I’ve tried to learn the third-party exclusivity thing – and you see us doing less of it now. He added “it’s not something I’m a huge fan of.” If Phil Spencer really intends to stay away from third party exclusives, something he’s talked about before, Sony could be the real winner.

Saving money for Sony

Phil Spencer may disagree with the following description, but it’s the way a business deal has to work in a generalized sense. There’s elements of personal relationships, convoluted clauses and other factors that this model doesn’t cover, but it’s a good base for understanding the kind of deals that Sony (NYSE:SNE) and Microsoft make to secure exclusives.

  1. Publisher meets Sony about exclusive deal.
  2. Publisher says that it projects $100M sales of its latest game. $70M on PS4 and $30M on Xbox One.
  3. Sony says “Look we can give you money right now to forego that $30M from Xbox”
  4. Publisher, who would prefer not to take the risk of the game flopping and failing to sell $30M on the Xbox One says “How Much?”
  5. Sony says $20M. Publisher knows Microsoft has deep pockets, so it refuses even before Microsoft makes an offer.
  6. Sony offers $25M. Publisher accepts deal.

The numbers are purely there for the sake of argument, and it’s likely that the deals are much more complex and centered on performance goals, exclusive timing and a number of other factors.

If Microsoft (NASDAQ:MSFT) says it’s not likely to pursue any sort of third party arrangement, however, and publishers believe them, the firm could end up driving down the price at which Sony can buy third party exclusives.

This saves Sony Corp money, and, given theimportance of third party exclusives, likely drives sales through the roof. Too bad for Sony shareholders then that Phil Spencer may not really be saying that he’s done with third party exclusives.

Xbox One hides third party drama

We’ve heard a lot of great proclamations from Phil Spencer over the last few months. In that time it has become clear that, though he might mean everything he says, he has a way of getting across a partial view of some things to those listening.

The Xbox One is not abandoning third party exclusives. It is, in fact, investing in them. Phil Spencer said this himself in an interview with IGN, but he explained why it’s a whole different ball game.

Microsoft isn’t getting Rise of the Tomb Raider as a third party exclusive from studio Crystal Dynamics because the game is being partly funded, and published, by Redmond. It’s unclear at what point in development money has to change hands before Mr. Spencer calls it a third party exclusive.

Sony Corp  (NYSE:SNE) announced a long time ago that Call of Duty 3 would be anexclusive. The firm is likely to have paid over a heavy sum in order to close that deal. It, just like Microsoft, paid it over long before the game was finished.

Microsoft (NASDAQ:MSFT) may have decided to earmark the funding specifically for a single game while the Sony Activision-Blizzard deal cash may have gone to any part of the business. Is this earmark defined specifically in a contract what makes a game a third party exclusive?

But Microsoft is going to publish Rise of the Tomb Raider. That has to count for something, right? The firm’s name will appear on the front of the box, and it may even get a splash screen on the PS4, just like with Minecraft.

Perhaps Microsoft had an active role in development of the new Square Enix game, or it agreed to perform some of the actual role of a traditional publisher. This isn’t clear, and Microsoft isn’t likely to release any of the details of the deal. We already know how much the firm likes to hide the details of its gaming business.

Speaking of the deal just after it was revealed Mr. Spencer said, “there’s an opportunity that maps really well with what we need in terms of the genre, and a partner that’s looking for a partnership. Other people can do the deal, but it was a deal that fit well with us.”

Marketing the Xbox One

We don’t have a good idea of what a “third party exclusive” is. We do know, however, that Microsoft(NASDAQ:MSFT), with the lead of Mr. Spencer, is getting third party devs to give it content that the PS4 won’t have.

We can assume that money or resources is changing hands in some form in order to secure those content rights. That’s just the way the business world works. This goes forFallout 4 just as much as it goes for Tomb Raider.

Phil Spencer has been an excellent head for the Xbox One. He comes across as clean of the firm’s past wrongs, truly interested in gaming, and honest about his ideas. That’s why so many people have been brought around to the console under his leadership.

When it comes to talking about the way things like third party exclusives work, however, Mr. Spencer is great at making the Xbox One look good, but his representation isn’t exactly still life.

Microsoft (NASDAQ:MSFT) won’t be abandoning third party content deals any time soon despite the firm’s apparent distaste for them. That’s too bad for Sony, who could have saved some much needed cash if Microsoft were to pull out of those races, but it’s likelybetter for the console world as a whole, however long it might last.


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Jack @ UNIXPlus
Jack @ UNIXPlus