Gears of War: E-Day and the Xbox IP Problem

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What's not same old is Gears of War E-Day.
Okay, we have the launch of a long-storied franchise, Gears of War. If you guys are familiar with the Gears of War franchise, remember this started with Epic Games. Cliff Bleszinski got his start. Remember they were talking about the chainsaw, they had Unreal Engine as basically a tech demo for this. And then I think it was what was it? Gears of War 3, they transitioned, they sold the franchise, the IP to Microsoft. Remember I think the focus was on Fortnite. And so The Coalition, which is Microsoft studio that they specifically set up to build Gears of War, has done what? This is their second entry into the franchise. They have not been producing at the same rate that Epic Games was. This really put a lot of like top-down or 3D shooters on the map. Remember active reload was one of their key innovation where we would reload with the shoulder buttons and then if you timed it properly, you would get a

boost and it would go quicker. Remember they had the original simplified cover system where you click A and you go into a different part of the cover and then you press A again with your thumb stick or analog stick and you would move to different parts of the cover system. Uh amazing franchise, lots of violence. E-Day is the prequel to the main line franchise and Microsoft really [ __ ] this one up in terms of just how to mismanage a franchise. Like when we talk about the mismanagement of Microsoft, this is one of the things that goes to the top of the list. And so this franchise has done well in the latest entry from a metacritic perspective. I think Eric, you can talk about that a little bit more. From a sales perspective, I don't know how you recover from this. I don't know where you go from here. The Steam numbers are not great. Remember they pulled this off of PlayStation last minute. The Steam PSU or active users based on video game insights estimates was around 100,000 where they had Xbox at around 900,000. And so that gives you a total

acquisition or units around 2 million. And so if you sell 2 million units, let's say at an ASP around $45, that's 90 million dollars. That's not nearly enough to make this franchise a success. And so you have to remember when you lose the console war, when you lose install base and you have platform exclusives, you pay a tax twice, right? Because you you lose all the foregone sales from your first-party software, too. If you have a small install platform. And so exclusives become more and more expensive because the opportunity cost is higher and higher. Like they probably would have I don't know what you think Eric, they would have pushed in terms of unit sales on PlayStation. But like yeah, there's [ __ ] more PlayStations that are active than there are Xboxes. They've just lost the ability to speak to this audience. I actually think there's a lot of things that Jenna here. I'd love for her to examine the corpse of this franchise and how the coalition just has failed to basically nurture this. I don't know how much more Gears of War we're going to see. I just don't think Microsoft wants to take a swing at whatever the coalition costs to manage this. I don't know Eric

what you think the cost is and what the break even is, but I can't imagine, you know, even 2 million units and maybe it goes what, eight by its lifetime? Is that is that a success?
This is not good, right? I mean it was almost an 88 Metacritic game. So it's not like the quality is bad from the perspective of the audience. Perhaps the gameplay is archaic, but I think it's more of a sign that how broken Xbox is, right? It is so bad in terms of the active install base playing this game. You know, if they only can get 2 million units like max, maybe even with Game Pass. I mean it's unbelievably bad, right? The rumor is it cost almost $400 million to make. Now that seems [ __ ] high. That seems high.
$400 million?
I think it's probably more like 200 to 300. And even there, they're not they're just nowhere near close to break even on this game, right? Cuz it's going to be a discount bin in like two months, you know?
The inability of Microsoft specifically

is to nurture these franchises into the live service era. Like Halo is an arena shooter that they were never able to evolve or to be able to maintain and make a serious competitor to Call of Duty. And Gears had the horde mode, right? They had a PvE mode that Cliff was starting to [ __ ] around with in Epic Games that was you facing endless hordes of PvE enemies. Remember Star Wars actually had an early version of this. And then they they just have not known what to do with it. They've always had arena-based PvP, which by the way is not enabled right now in the game. You You cannot do PvP in the game right now. They're holding it off. You can only play with four other players against AI enemies. It is [ __ ] ridiculous that you have a launch title as a premium entry and doesn't have a basic PvP arena. Like what a step back from the franchise. And so they haven't been able to take Horde mode and make it what it should, which is the live service extension. You were just talking about co-op, Mishka. Helldivers has given co-op shooters the blueprint to go out and execute on how to get this done

and it's time to [ __ ] enlist. Right? Gears of War should have enlisted to the Helldivers model and I think again, this is a huge problem Microsoft needs to solve. They need to hook Master Chief and Marcus up to life support right now.
Yeah, just to be clear, obviously this is not on Sharma, right? At all, right? This is like No, no. prior leadership that have that have like managed these franchises into the ground. But it's just more of an indication of where Xbox is. I mean, not only are they losing the hardware war dramatically, they basically have lost when their IP that they have, their biggest IP, is no longer valuable, right? This is the biggest challenge that they have in front of them.
Yeah, I just wanted to ask about the metacritic score because I was reading Ben Gordon, so he sees a co-founder of EA and he had a he launched a book recently. So I was reading the book as he's coming on the podcast, but here's the quote from the book regarding Metacritic. What was more surprising was that for games that scored 80 or higher, which is this game in here, every five points on average would increase unit

sales by about 50%. A game with 90 Metacritic score usually sold twice as many copies as a game in the same category with an 80 Metacritic score. Chris, is this still the formula or is this an old formula?
That that thing is probably
old formula. I can't even really give it any merit anymore because games just don't sell that way anymore. Yeah. I mean, you're always shooting for the highest quality possible, but like Madden and NBA 2K and FIFA have been trading it like the worst [ __ ] Metacritics they've seen in a while. They're very low. It's It's irrelevant for those games. Like majority of the games or Call of Duty even. This is why the the fundamentals are so broken on Xbox is when they announce these things like XP, which by the way, I'm going to talk about this. Like I actually 100% agree with what they're doing. And actually, the leadership they put in there makes total sense. They're not building production studios. They're just basically a licensing house for their IP and they're centralizing it. So, anyway, XP was announced as a division in

Microsoft basically to go after film, television, consumer products, strategic partnerships, and live experiences. Basically, the four pillars. XP Xbox pictures, Xbox products, Xbox places, Xbox partnerships. Now, it's clear that the consultants got a hold of the word process, right? Like this is like the most sickening [ __ ] press release I've seen in a in a while, right? Having said that, like I said, this is makes total sense. Like you should have centralized control over this [ __ ] rather than having individual silos managing this [ __ ] right? Because that doesn't work, right? And so, this is again part of her whole idea of consolidating operations within Microsoft. And I wholeheartedly agree this. And Kaylee Walters is super quality. You know, she's the one that managed the Minecraft movie. Like this makes total sense on paper, right? But the reality of it here is they're just reshuffling the decks on the Titanic right now. Like the problem is that their IP is so broken. What do they

actually have to leverage here, right? The Minecraft movie sequel, Fallout series, sure. They have Call of Duty, Warcraft, Gears of War, Candy Crush, Diablo, Forza, Elder Scrolls and Halo. Like none of these franchises really extend beyond the core market, right? There's there's no mass market IPs that they can leverage here as a movie or a television or a theme park.
Candy Crush Mario Lopez TV show.
Yeah, whatever. Right. And again, Microsoft has tried this and failed, right? They had the Xbox One TV push. You know, they have the defunct Xbox Entertainment Studios that they closed again in 2014 to
cut costs, right? It's like
Xbox gamers and gamers in general want you to focus on games, not entertainment. Like this has been a folly of of the industry forever, right? And again, this is not a new strategy. This is a strategy that's been around. This is like a rebrand, right? And you know, the new leadership actually gives

it some gravitas because I do think she's a very very good leader on this, but like they're working on the same projects they were working on 6 months ago. There was nothing new announced at all, right? And bringing it back to Gears, it's like how can you leverage broken franchises, right? Like how transmedia can't help with Gears or Halo right now because those franchises are irrelevant to the overall market. So, again, they should be fixing franchises. They should be fixing the Xbox platform, which you have not seen jack [ __ ] about. Instead, they're working on step four instead of step one, right? Through three. And this is what's driving me insane about this, right? They're just basically creating Activision 2.0 and that we should see some kind of spin out of this in the next 6 to 12 months because that's the only thing that makes sense at this point because they are so lost on the hardware and that's why one more data point of that is the fact that this year's war games have been a [ __ ] train wreck.
Do you feel that the subscription model that they have, the Xbox Pass, do you feel that that has a significant effect

on the sales of their games?
Well, yeah, I mean it's it's certainly cannibalizing games and there was a way I read that there was a way of like subscribing for a small amount of money and getting access to Gears and then canceling. Like that's been going on for a long time so that you may see some of that which is a huge loss leader as well. It is less cannibalization than it used to be. When it was at $10 to $12, that was super cannibalizing, right? But at this level it's probably not cannibalizing as much.
What do you think it would be like the most important thing for them to do to start fixing the core? Cuz you're saying that they're focusing too much on the fourth step and not the first step. If Matthew Ball, who is a very nice person, chief strategy officer of Xbox, he would say, "Hey Chris, what do you think I should be focusing on right now?" What would you say?
I'm team Sharma right now. I think she's done everything right. I'm just saying that this is like a sign of how bad Xbox is right now in terms of in the marketplace. What Sharma's doing makes total sense if they're spinning this

thing out, right? I think they should shut down Xbox the Xbox platforms, Game Pass, and all that stuff and just become a publisher, right? And maybe keep the things that they want. I think that's the only step the only way they have. I don't see any way for them to regain share on the console or platform side. So yes, that's what I want to see. I want to see like a real coherent platform strategy which is either doubling down or pulling the rip cord, you know, and moving on to be a publisher again.
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