Stephen Elop, the former Nokia CEO who may have led to the acquisition by Microsoft, is replacing the freshly-minted Julie Larson-Green as the head of Microsoft’s devices and studios business. What this means is that he will be in charge of Xbox and its games, among other pieces of the company. Julie Larson-Green was appointed for this position in July 2013, so her swift reappointment might come as a surprise, but there’s more to this than just that, as Elop has quite a colorful history.
Before he was the CEO of Nokia, Stephen Elop was the head of the business division of Microsoft. There has been recent speculation that his appointment into Nokia was a plant to devalue the company so that Microsoft could purchase their Windows Phone division, but that is just a rumor. What’s fairly concrete is that after that ordeal, Elop was considered as a candidate for the CEO of Microsoft after Steve Ballmer announced he was stepping down in late 2013. While Elop was being considered for this position, there were many rumors stating he, along with several other candidates, was considering selling off Xbox and killing Bing was he to get appointed. As we all know, Satya Nadella got the CEO gig, but Elop was just announced as the head of devices and studios.
What does this mean for the future of Xbox?
This might come as a surprise to many, but the Xbox division, despite great sales, isn’t a huge money-maker for Microsoft. Due to the original losses incurred on the first Xbox, the Red Ring of Death failures of the 360 (about 50% of devices encountered this issue!) and the R&D and marketing investment of the Xbox One, the Xbox division has gone between massive losses and minor profits, especially when compared to the company’s other avenues. In fact, Microsoft have been reportedly hiding the losses of the Xbox division by grouping it with other devices and Android royalties.
Regardless, even when Xbox turns a profit, it’s significantly smaller compared to Microsoft’s more lucrative businesses. While this seems acceptable to us, their shareholders have reportedly pressured CEO Satya Nadella to get rid of Xbox, Bing, and Surface to avoid large losses and increase stock value. While this is a regrettable outcome of shareholders contrasting larger divisions to smaller ones, the signs towards some major restructuring are stacking up. It’s unusual for a division to get appointed with a new head in six months.
While the Xbox One has been selling very well, it’s still being outclassed by its main competitor, the PlayStation 4, by almost an almost 2-to-1 ratio in terms of sales. Microsoft is clearly not content with this situation, as they’ve already dropped the price of the console by £30 in the UK and included upcoming multiplayer shooter Titanfall to go along with the new price. This bundle nearly matches the price of the PlayStation 4 and shortens the price disparity between the two. There are also further rumors of an even more aggressively-priced unit (said to either drop the Blu-Ray optical drive or Kinect), with Xbox press releases trying to address the noted power difference between the systems. It’s clear that Microsoft aren’t satisfied with the already impressive sales of the Xbox One, and they are willing to do what’s necessary, as a price cut three months into the release of such a device is almost unheard of.
What does all of this mean for the future of Xbox? While it’s easy to go full-on doomsayer and say the Xbox One is done for, that is unlikely to happen any time soon. In fact, it’s unlikely that there will be a major upheaval for at least a year, as changes in management usually take some time to trickle down. That being said, Microsoft will definitely pursue more aggressive practices to make sure that the Xbox One is not only selling in numbers more comparable to the PlayStation 4, but also is making a larger profit that sits more favorably among their other divisions. The company is in no financial danger, so while they most likely won’t completely kill off the Xbox, they’ve been known to drop support for their unsuccessful products to the point that they’re almost on life support. It’s too early to tell whether that will happen, however.
Right now, it’s obvious that Microsoft are betting heavily on Titanfall to get the sales of their system to the levels they want. While this is a bit of an odd proposition, as the game is also coming to the Xbox 360 and PC platforms via EA’s Origin, it will definitely cause a significant spike in the sales of the Xbox One. Whether this will be a large shot in the arm or a butterfly kiss remains to be seen.
With the hard-to-deny discontent from upper management, lackluster sales even after Titanfall will definitely lead to significant changes in Microsoft’s strategy regarding the Xbox One. Elop, however, doesn’t have a gaming background, and whatever changes he makes will likely end up being more business-minded, like price cuts, sponsorships, marketing, and other similar deals. If Titanfall does end up being a massive success for the new system, then crisis will most likely be averted for the foreseeable future. The question of meandering profits compared to Microsoft’s other divisions still remains, and is a much longer term quandary. What will happen is anyone’s guess, but Elop’s history doesn’t seem too promising for those interested in hardcore gaming from Microsoft.
In the end, it’s too early to tell. We’ll see in a month if Titanfall puts a lot of Xbox Ones in homes. The only thing that’s for certain is that Microsoft are putting a lot of effort to get the system to make a bigger profit. In the end, that’s likely to make the Xbox an even better platform to get – the price might drop or more games might come to the platform – so let’s sit back and enjoy the ride.
What do you think? Will you be getting an Xbox One for Titanfall? If not, what would get you to do so?
Let us know about your expectations from the system and your armchair CEO theories in the comments.