Microsoft boosts focus on exclusive games for the Xbox console in battle with Sony PlayStation

Key Points
  • Microsoft unveiled a string of exclusive games such as "Halo Infinite", "Forza Horizon 4" and "Gears 5" at the E3 conference on Sunday.
  • Microsoft announced the acquisition of of U.K.-based Playground Games.
  • Analysts said the focus on more first party content will help Microsoft's gaming unit in the future as it competes with Sony's PlayStation 4.
Microsoft makes big bet on gaming with Xbox One X

Microsoft unveiled a string of exclusive games for the Xbox console and the acquisition of four content studios, as it tries to regain lost ground against the Sony PlayStation.

On Sunday at E3, the biggest gaming event of the year, the U.S. technology giant showcased 52 games, 18 of which will launch as exclusives, meaning they will not be available on rival consoles. Exclusives are crucial for consoles to differentiate their offering from rivals and Microsoft in the past has been criticized for not having enough.

It teased a game called "Halo Infinite" without giving a timeline for release. The first "Halo" game was released in 2001 and was a key reason for the success of the original Xbox. Other key exclusives include racing video game "Forza Horizon 4" and "Gears 5."

Microsoft makes big bet on gaming with Xbox One X

Microsoft also announced further investment in original games. It said that it was forming a new studio called "The Initiative" and announced the acquisition of U.K.-based Playground Games, the developer behind the "Forza" franchise. Microsoft also signed letters of intent to acquire another three game studios.

Analysts said the focus on more first-party content will help Microsoft's gaming unit in the future.

"It will take time to reap the rewards of this more expansion strategy, but puts Microsoft on a much stronger footing," Piers Harding-Rolls, head of games research at IHS Markit, said in a note Sunday.

Microsoft's latest generation of console is the Xbox One which was originally released in 2013. The company refreshed the line up with the Xbox One X, a more powerful version of the device last year. Sony's PlayStation 4 was also released in 2013 and it too has recently brought out a souped up version of the console called the PS4 Pro.

Since the release of the consoles, Sony has taken the lead. There were 39.1 million Xbox One consoles in the market versus 76.6 million PS4s at the end of March 2018, according to IHS Markit data. Sony has been able to consistently deliver blockbuster exclusive games that has helped boost its market share.

Game streaming service

Microsoft also announced plans to launch a game streaming service on Sunday. This would mean that users could select a game online and play it immediately without the need to buy a disc or download the title. Sony currently has its own streaming service called PlayStation Now for $19.99 a month.

Harding-Rolls said the streaming service is likely "a few years away from launch." But Microsoft's strength in cloud computing should put it in a good position.

"A number of publishers are showing renewed interest in cloud gaming and subscription business models. As the market shifts, Microsoft is strongly positioned due to its Azure capability," Harding-Rolls said.

As the life cycle of a console continues to increase, Microsoft and Sony are relying more heavily on subscription based models. Microsoft has a $9.99 a month subscription service called Xbox Game Pass which gives users access to new games.

"We've been thrilled to see the positive impact Xbox Game Pass is having on the gaming ecosystem, including increasing the number of titles gamers play nearly 40 percent and increasing gameplay hours by almost 20 percent," Mike Nichols, chief marketing officer for gaming at Microsoft, said in a press release on Sunday.

Sony will hold its E3 press conference on Monday.