Xbox aficionados and Playstation fanboys regularly find themselves caught in the crossfire of Sony (NYSE: SNE) and Microsoft's (NASDAQ: MSFT) ongoing battle for the exclusive rights to the latest blockbuster gaming titles.
Microsoft recently got a leg up in these "console wars" when the ink dried on ZeniMax's acquisition last Monday. The merger had been in the works since September but remained in regulatory limbo in the EU. With the deal finalized, ZeniMax will now operate as an independent company within the Microsoft ecosystem.
Microsoft will absorb the many studios under the ZeniMax umbrella, the most important being Bethesda Softworks. The deal brings the number of first-party studios owned by Microsoft to 23 versus Sony's 13. But Bethesda isn't just any gaming studio; it's the publisher of landmark gaming franchises, like "The Elder Scrolls," "Doom," and "Fallout."
Outside of the gaming sphere, it's hard to understand the significance of these Bethesda franchises. One only has to look at the publisher's sales figures to understand why Microsoft paid $7.5 billion for the studio. For instance, the latest iteration of the Elder Scrolls, "Skyrim," managed to sell 30 million copies between 2011 and 2016," according to Geekwire.
Clearly, there's a demand for Bethesda's games, and Microsoft has a chance to capitalize on its deal by making Bethesda's next blockbuster PC and Xbox exclusive. But no one, neither Bethesda nor Microsoft, is dropping any hints about which titles will be exclusive. According to Microsoft gaming chief Phil Spencer, "some titles" from Bethesda will be exclusive. "There won't be any immediate changes yet," according to Bethesda's marketing chief Peter Hines, quoted by TheVerge.
Such vagueness rightly has many Playstation owners worried. The question is- should they be?
Under the leadership of CEO Satya Nadella, Microsoft has been shifting from being an Xbox maker to being something akin to the Netflix of games. Microsoft currently offers its next-gen Xbox series X for $34.99 a month. A monthly cost which also includes a subscription to the Xbox Game Pass.
And it seems that the Xbox Game Pass is the true linchpin in Microsoft's strategy to win the console wars. The deal now gives Microsoft the chance to make Bethesda's entire library and latest releases available through the game pass at a low monthly cost. Microsoft understands just how advantageous this is and has already made games like "Skyrim," "Fallout New Vegas," and "Doom Eternal" available through Xbox Game Pass.
More than exclusives, Microsoft's subscription model poses a real threat to Sony's market share. Why would a customer save up more than $500 to get a PS5 when they can get an Xbox today for less than $40? And when Bethesda's next big blockbuster rolls out, why would you pay $70 for just that one game when you can access that game and Bethesda's whole library for $10.
The cost of games and consoles is only going up. So as time goes on, the advantage of both Xbox and the Xbox Game Pass will also go up. The Microsoft-Bethesda merger only makes this advantage more clear. So while Sony was paying millions for exclusives, Microsoft was playing the long game.
Only time will tell the victor.