Xbox Series N(adella)

The focus on cloud services in the new generation Xbox Series X speaks to the focus of the whole of Microsoft in the Nadella era.

Seamus Byrne

15 Sep 2020 — 7 min read

Photo by Billy Freeman / Unsplash

Xbox pricing was announced last week, with the drop on not one but two ‘next gen’ models set to arrive on November 10.

More than the straight up shelf price, which landed pretty much where expected ($749 for the fancy Series X and $499 for the set-top box stealth assassin Series S) the real excitement, perhaps even confusion, was around the new Xbox All Access subscription deals.

For X dollars per month, you can now own an Xbox with the Game Pass Ultimate service included in the price. And the maths works out to make everything better than if you bought full price on day one. At the end of the 24 months, you own the hardware outright.

Here in Australia, Telstra already had an exclusive Xbox All Access offering for customers to get this same plan concept on Xbox One models. When it launched in 2018, we were already pretty deep into this generation, so it seemed a hard sell to me to lock yourself into a two year contract when new kit was not all that far off in the distance. (Turns out it would have been a pretty perfect two year timeline in the end).

Now, available on launch day for new Xboxes, it feels too good to be true. And some are scratching their heads wondering why Microsoft is doing such a great deal on this kind of subscription bundle.

The trick is to understand what Microsoft has become since it last launched an Xbox in 2013. Salesman Steve Ballmer was still in charge, and selling hardware and boxes was his favourite way of doing business. It wasn’t the best of times for Microsoft in the midst of the transition to cloud and services and apps that work everywhere.

Satya Nadella was always a servers and online services guy. When he took over as CEO of Microsoft in 2014, the transformation began quickly to stop thinking of Windows 10 as the company’s core product and to instead start thinking about how to help people get things done wherever they needed to do them.

While Office 365 had launched before his era, it’s notable that just months after Nadella took charge the included OneDrive storage on Office 365 jumped from a paltry 20GB to 1TB. Suddenly every user felt confident they had enough space to really rely on OneDrive for their storage needs. And suddenly Microsoft was now an essential service for so many people who only really had Office 365 because they needed the software updates.

Today, Microsoft is a robust cloud services company with platforms and AI and architecture on demand for its enterprise customers and its average home users can access Office apps on Android, iOS, Mac, Windows or straight through any web browser.

Back to Xbox. Having a great new piece of hardware is going to drive this next generation of console gaming for some time to come. But Xbox doesn’t really make its living by selling the new consoles and then waiting another seven years to sell you another one. It makes its money by helping other people sell you games, and from having its users pay for subscription services like online access and like the Game Pass service that offers over 100 games as a bundled deal like a proverbial ‘Netflix for gaming’.

The shift from Xbox Live Gold as a payment for having any access at all to online play toward Xbox Game Pass Ultimate which adds a massive selection of games to play has meant the price bumped up a little more and I actually don’t know what the adoption has been like yet on this one.

Microsoft did offer a ‘crazy’ $1 upgrade offer to convert your existing Xbox Live Gold time into Game Pass Ultimate as a way to attract people to shift to the new system. And while it seemed like an amazing deal it was all about conversion and playing the long game.

And that’s what this new Xbox All Access deal delivers too.

If someone gets in the ballpark of a $100 discount on owning a new Xbox Series X with Game Pass Ultimate, that’s also someone who has been trained to discover the value in having that new game subscription service and the great new hardware to enjoy it with. And when those two years are over, the odds are incredibly high that they don’t switch off their entire subscription commitment but instead just drop their monthly rate from console deal to just paying for the ongoing Game Pass Ultimate.

Add to this the launch of Xbox xCloud services, where your Game Pass Ultimate subscription means you can play all those same games via your laptop or your phone, not just your Xbox. 5G will make that viable while riding the bus too.

That will make ‘next gen’ gaming care less and less about the Xbox in your home, and more and more about that subscription to Game Pass Ultimate.Another shift away from the hardware and more toward the cloud services subscription focus that has made Microsoft so much more valuable than ever before under Nadella’s leadership.

Maybe they should call xCloud the new Xbox Series N.