Tim Stuart told attendees at the Wells Fargo TMT Summit that the company’s ultimate goal is to bring all of its content and services “to every screen that can play a game”.
This “mission” is designed to reap higher profits from Microsoft‘s gaming division than has traditionally been the case with its relatively low margin console business, the exec said.
“For us, when we think about the business, gaming as it relates to Microsoft and with Activision, operating leverage and margin expansion is definitely a piece of that puzzle,” Stuart said.
“At the highest levels, you go from what was a lower margin third-party entity that we sold on our store to a high margin first-party business, so when you think about the Xbox component of Call of Duty, you go from that low margin business to a high margin business. Then what you do is you also expand and say, we’re now driving high margin sales on PlayStation, on Nintendo.”
Prior to its purchase of Activision Blizzard, Microsoft agreed 10-year deals to bring Call of Duty to Nintendo platforms and to keep it on PlayStation consoles, should the acquisition be approved by competition regulators.
“And that’s really, lastly, where we’re going in this business, is that expansion of operating leverage, where we think about placing our bets,” Stuart added. “First-party, subscriptions, advertising – those are all high margin businesses that we want to expand into.
“And what you’ll hear from us more and more is a bit of a change of strategy, and again, not announcing anything broadly here, but our mission is to bring our first-party experiences, our subscription services to every screen that can play a game.
“That means smart TVs, that means mobile devices, that means what we would have thought of as competitors in the past like PlayStation and Nintendo. We’re going to Nvidia GeForce Now, their gaming subscription service.
“But when we think about taking our businesses to these end points, again it’s that high margin business to new gamers, that really Activision allows us to do in a much, I don’t want to say easier way, but a much more, I’ll say fast way to get there, versus trying to build on your own.”
Xbox boss Phil Spencer has previously expressed a desire to “take Game Pass everywhere”, although he said in 2020 that “other competitive platforms aren’t really that interested in having a full Xbox experience on their hardware”.
That same year, Spencer also said that Microsoft viewed Amazon and Google as its primary competitors in the games business, as opposed to traditional rivals Sony and Nintendo.
Speaking to Protocol, he claimed that the Japanese platform holders weren’t set up to compete in the race to take gaming truly mainstream via the cloud.
“That’s not to disrespect Nintendo and Sony, but the traditional gaming companies are somewhat out of position. I guess they could try to re-create Azure, but we’ve invested tens of billions of dollars in cloud over the years.”
Spencer added: “I don’t want to be in a fight over format wars with those guys while Amazon and Google are focusing on how to get gaming to seven billion people around the world. Ultimately, that’s the goal.”