Top Five Insights from the Xbox Leak

By Miikka Ahonen, Co-founder of Lightheart Entertainment

Microsoft and Phil Spencer woke up to a new kind of ordeal this week as numerous internal documents related to the ongoing Federal Trade Commission case leaked. According to the FTC, Microsoft itself was responsible for the mistake. The FTC later removed the documents, but unfortunately for Xbox, you can't truly erase anything from the internet.

Some of the documents are pretty old, and even the most recent ones are from at least a year ago. Xbox boss Phil Spencer said publicly that a lot has changed since those emails and documents were composed, and that Xbox will “share the real plans” when they are ready. But the cat is out of the bag; Microsoft would do well to expedite some of that PR to take the narrative back.

Here are our five key takeaways from this saga:

1. Phil Spencer wants to buy Nintendo and Valve(but knows he can't)

In a 2020 email, Spencer wrote: "Getting Nintendo would be a career moment and I honestly believe a good move for both companies".  Spencer further revealed that Microsoft was in serious M&A discussions with ZeniMax (which it later acquired) and Warner Brothers Interactive (which didn't pan out). Most notably, he suggested that if an opportunity presented itself to acquire Nintendo or Valve, he would have the backing of the Microsoft board.

Nintendo and Valve are perfect acquisition targets for Microsoft – and also utterly un-acquirable. Nintendo has the juiciest game IP in the world, and a rare proven track record in creating novel worlds, characters, and gameplay year after year. Valve and Steam would provide Microsoft with the ultimate PC platform play. Unfortunately for Microsoft, neither is for sale.

2. Bethesda doubles down on remasters and sequels

Another leaked document was ZeniMax's roadmap from 2020, which lists remastered versions of The Elder Scrolls: Oblivion and Fallout 3.

One rule of triple-A development is that once your game has a name and it ends up on an exec slide, the odds of it shipping drastically increase. And if the game is a sequel or a remaster, it's guaranteed to ship.

Good news for long-time Bethesda fans, then, but it's not exactly Elder Scrolls VI (You’ll have to wait three or four more years for that, at least). Even so, fan reception of the Oblivion remaster will likely be mixed: the Elder Scrolls community has put a lot of work and expectations into Skyblivion, a fan-made conversion mod for Skyrim.

Triple-A is about franchises and sequels, and this shows Microsoft systematically tapping into the Zenimax IP portfolio. Other notable unannounced Bethesda games among the leaks are new Dishonored, Ghostwire, and Doom titles. 

3. Game Pass third party content costs run into hundreds of millions

A document from 2020 details Microsoft's estimates for the cost of a simultaneous (or "day&day") Game Pass launch. They range from $5m for double-A titles such as Cities: Skylines 2 to $300m for crown jewels like Star Wars Jedi: Survivor.

The actual economics of Game Pass remain opaque, but the leak does shed some light on what Microsoft is paying publishers. Spencer has often stated that Game Pass is profitable, but obviously keeps the numbers and accounting principles behind the claim private. Nevertheless, the cost of third party content seems steep, especially considering that the Game Pass model has limited revenue upside.

4. The hardware refresh leak might hurt Xbox's year-end device sales

Despite Phil Spencer claiming otherwise, leaked documents detail plans for an Xbox hardware refresh next year. It includes a new controller with a two-tone color scheme, improved haptics, updated buttons and thumbsticks, and a swappable battery.

Communication on hardware refreshes is always tricky. Letting the world know of the next shiny thing will affect sales of the current version; Xbox did not want this news out just before the Holiday season.

5. Xbox’s next-gen strategy broadens its focus

Xbox's next-gen mission – with hardware coming 2028 – is to build "a hybrid game platform capable of leveraging the combined power of the client and cloud to deliver deeper immersion and entirely new classes of game experiences." It's possible the cloud-specific goals are overstated, but it’s notable that Xbox is building a unified operating system that spans all game consumption – console, PC, mobile, handheld, and the web.

It's a logical technical stepping stone for creating a "play anywhere" ecosystem. It also opens the door to bigger questions: How will handheld fit into Xbox’s game plan? Can Xbox make inroads into mobile? Can it create novel cloud-based gaming experiences? If one thing appears certain, it's that Xbox is putting its pure console days behind it, and the next generation represents a push to be something different and bigger. 

Will this push end up like the Xbox One, where in pursuit of lofty mainstream entertainment goals it lost sight of serving gamers, or will it successfully resonate and amount to something bigger? Time, and real company announcements, will tell. In the meantime, Xbox can enjoy the fact that UK regulators just provided preliminary approval for the Activision Blizzard deal; despite this week's leak, the organization is still largely progressing as planned.

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Content Worth Consuming

The Making of Vampire Survivors (Noclip). “We talk to Luca Galante about a game dev side-project that became a BAFTA Game of the Year.” Link

The Revolution of Generative AI Based Games (Tal Shachar). “Today, GenAI represents perhaps the biggest step function innovation since the advent of mobile. GenAI is poised to radically alter the process and cost of creating game assets, avatars, environments and even code. However, while much of the hype around the technology has focused on its ability to change how, how quickly, how cheaply and how easily games are created, its most transformative impact will likely be in how it enables new gaming formats i.e. new types of games entirely.“ Link

Why legendary developers are jumping onto Unreal Editor for Fortnite(GameMakers). “Epic's Unreal Editor for Fortnite (UEFN) potentially presents a huge new platform rivaling Roblox. Why are some of the most experienced developers in the world like Alex Seropian (founder of Bungie and Industrial Toys) and Pete Hawley (100 Thieves) so excited by UEFN? What does a former Roblox developer, Arthur Trusov, think about the platform especially in comparison to Roblox? Find out now!” Link

In-depth: a discovery'playbook' for Steam & console games (Simon Carless). “Imagine that you’ve just started looking at the PC and console game space for the first time. What are some wide-ranging best practices that GameDiscoverCo would recommend to ensure your game does as well as possible in a busy market? One of our clients recently asked us to write down a ‘playbook’ to get a company-wide level set on our general impressions of good approaches to the biz. So we did just that – and by kind permission, here it is, divided into three sections for easier reading.” Link

The end of cheap money for games (David Kaye). “In the games industry, cheap money fueled a torrent of M&A activity (especially during the COVID years), and a proliferation of VC firms with billions to deploy into early stage game companies… The age of cheap money is over. Public markets were the first to react, but the consequences are now working their way through the rest of the gaming ecosystem.” Link

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