Microsoft exec email exchange reveals cloud gaming takes priority over consoles

'From a strategy perspective I believe in our tradeoffs for Cloud and Content in Gaming over console volume,' said Phil Spencer in the email

Xbox Series X

Microsoft has reportedly been losing out on Xbox Series X/S sales due to a tradeoff it made by investing in its cloud and gaming content, as revealed in an internal email exchange between Xbox CEO Phil Spencer and Xbox CFO Tim Stuart.

As shared by The Verge, the exchange took place in December 2020, and was revealed as part of the FTC vs. Microsoft hearing. In the exchange, the two talked about the reasons behind underperformance in Xbox console volumes.

In the email, Spencer talked about Microsoft missing yield for Scarlett, the codename used for the Xbox Series X/S. The company made a calculated tradeoff by prioritizing investments in cloud infrastructure and gaming content. While facing challenges such as hardware production scarcity, likely due to the COVID-19 pandemic, and a delayed Halo Infinite release, Microsoft remained focused on its long-term ambition by betting on the cloud and content strategy.

The company had also reduced the compute units on the Xbox Series X silicon from 56 to 52. Despite the change, it still fell short of its hardware production target.

The email exchange also revealed that Microsoft had intentionally held back chips for its strategic cloud investments, which might have contributed to the company falling short of its production target.

“From a strategy perspective I believe in our tradeoffs for Cloud and Content in Gaming over console volume,” said Spencer in the email. “With our strategy and opportunity console volume will still be the thing we constrain to grow our long term ambition.”

Spencer also took shots at the dearly departed. He said that competition, including Google Stadia, do not have the “console strength we have” when it comes to developer engagement, gaming community and catalogue of content.

The email exchange also referenced a separate “dedicated” version of Xbox Cloud Gaming that Microsoft had been working on. However, the recent testimony during the recent hearing, Sarah Bond, head of Xbox creator experience, indicated that a dedicated version was not currently in development.

Read more about the exchange here.

Source: The Verge