HALO JUMPS TO PLAYSTATION! Has Xbox Officially Lost the Console War?

All right, let's move on to something that is publicly traded and kind of interesting. So,un Halo. So, Halo is coming to PlayStation. It is truly the end of Xbox exclusivity. Halo Campaign Evolved. It's a complete remake of the 2001 Combat Evolved. Launches in 2026 on PlayStation 5, Xbox Series X and PC. first Halo game ever on PlayStation after 25 years of exclusivity. This is the game that brought me back into gaming on console just to be I remember sitting there with the four the four screen on a big giant TV playing with my friends. So, it's fun to see it back. It's weird to think it's on PlayStation. Halo Studio community director confirmed Halo is on PlayStation going forward, meaning all future Halo games will be multiplatform, not just the remake. Uh, the game features four player online co-op with with crossplay, three new

prequel missions, and nine additional weapons. I did see some videos. It does look better, which is nice. So, we recently covered Hell Divers coming out of the Halo ODST content. Uh, this is the first time we're seeing the actual game on PlayStation. I think we need to get out our white surrender flags. This is the franchise that defined Xbox. It's their Mario or Mario. Who? Got it. Did I just do Allora and say Mario? This effectively means that Xbox has surrendered the exclusive content part of the console wars. This is also a whole new lens to their campaign. This is an Xbox. If you've seen that campaign, it's like I think we need to put a PlayStation in all of those. This is an Xbox campaign because now it's on Play even Nintendo. On the positive side, maybe this is going to reinvigorate the Halo franchise, give it some life now that they know they've got bigger numbers that they can do. But you know, however, any of this needs to be considered with what Sachin Nadella is out there saying about a 30% margin

target. So, Phil, do you want to hit this clip? Let's listen to him.
Biggest gaming business is the Windows business.
To us, gaming uh on Windows and of course, Steam uh has built a massive marketplace on top of it and done a very successful job of it. So to us the way we're thinking about gaming is let's first of all now we're the largest publisher uh after the Activision. So so therefore we want to be a fantastic publisher. Similar approach to what we did uh with office. Uh we we're going to be everywhere in every platform. So we want to make sure whether it's consoles whether it's the PC whether it's mobile whether it's cloud gaming we want or the TV. So we just want to make sure the games are being enjoyed by gamers everywhere.
Yeah. Second, we also want to do innovative work uh in the system side on the console and on the PC and bring you know it's kind of funny that you know people think about the console PC as two different things. We built the console because we wanted to build a better PC

uh which could then perform for gaming. And so I kind of want to revisit some of that conventional wisdom but at the end of the day console has an experience that is unparalleled. uh it delivers performance that's unparallel that pushes I think the system forward. So I'm very looking forward to the next console, the next PC gaming, but most importantly the game business model
has to be where we have to invent maybe some new interactive media as well because after all gaming's competition is not other gaming. Gaming's competition is short form video.
Yeah.
Uh and so if we as an industry don't continue to innovate both how we
I'm just outraged I mean, he really got almost everything wrong about our business in like one quick clip. You know what I'm saying? Like, I think everyone's aware that he's expecting the gaming division to be super profitable with 30%. So, that that's the third thing that they've

completely [ __ ] up. But clearly Microsoft has lost, right? Like absolute chaos at the company right now. No one knows what the [ __ ] is going on. Everyone's running around with their head cut off. management's being questioned. Like everybody I talk to that has any type of in information about what's happening in inside the company is just completely losing their minds, right? So anyway, the reason that Satcha kind of is off it is that first of all like merging PC and Xbox is exactly the wrong thing to do. The reason that Xbox exists because it was such an easier way to interface with this type of content, right? PC was a pain in the ass and it continues to be the pain in the ass. And when you actually ask about the Xbox Rogue Ally thing, the reason that thing is a piece of [ __ ] is because it still has [ __ ] Windows on it. You know, like Windows is not is is a deterrent. It is a pain in the butt to to manage it. What Xbox does and it did as well as PlayStation and Nintendo for that matter is that they create a system that's

dedicated to gaming only and makes it a much easier interface and an easier system to actually do what you want to do which is play games and that's the whole point. The second thing is that I've made this comment before too is that we are competing for time against Tik Tok and stuff like that which is totally true but the thing is that we're not competing against Tik Tok like the we are trying to build the best type of content to compete against Tik Tok and when you start removing the ability for you to have a console that like [ __ ] up your whole competitive advantage right of of a distribution platform of a really good platform for gaming and stuff like that. You don't want to compete directly against something like [ __ ] Tik Tok because then you just become
garbage, right? Like and you just deliver your content everywhere.
You want to compete in the console market, right? You don't want to again don't want to compete against Tik Tok directly, right? So basically, you want to become a global publisher is what he said, which is complete [ __ ] Like what do you want to become? Sega, Atari, like 3Dio. Like that's what you're saying. You're basically getting rid of

your hardware advantage and becoming a publisher. That doesn't even make any sense, right? And so you give out all your plat platform distribution advantage. So it's a complete backwards ass strategy. And then finally this profit thing is like 30% profits is ridiculous. Like I was actually looking this up. EA and Activision certainly were 30% like roughly around there, right? But 30% is an insane profit margin. And he got it he got the whole thing backwards, right?
Like profit margins don't fund innovation, right? You need to reinvest profit into your teams to grow innovation and revenue, right? So, it's the dollars themselves that are reinvested in the company that will actually fund innovation. It's not the fact that you're hitting a 30% margin target. That's ridiculous. And so, finally, like this is the thing I've been talking about for years now is like the reason they're in such a tough spot right now is because they weren't working in a on a profitable model, right? They were being funded by Microsoft to do these [ __ ] stupid

strategies like day one releases. And this is why they're in this predicament and why it's been so dramatic when they're trying to get back to profitability and they have to cut teams and cut people like this is exactly what we I've been talking about for years, right? And so they are completely on the wrong track now 100% in my view anyway. like this ubiquitous type [ __ ] going across all these different platforms create, you know, competing directly against [ __ ] YouTube and Tik Tok and Netflix. [ __ ] off. Like, this is bad bad Guju and they're going to lose. And it's just again, it's time to spin this thing out and and let them run on their own. I really respect Satcha and everything he's done for Microsoft, but he doesn't understand gaming. He doesn't know what the [ __ ] he's talking about. So,
I'm going to give you one more, Chris. There's an ADUP supported version of Xbox Game Pass service coming. It was confirmed last week that you know internal folks are testing it. Surely this is going to be where they get the 30% margin. But you know while I'm kidding a little bit I'm not totally kidding. You know as Eric Seford says

everything's an ad network. So first Netflix and the streamers are you know making I think Netflix is at over a billion dollars on their adup supported version of the Netflix service. So it's an inevitable that the you know hyper casual ad driven service is going to help boost the bottom line in a market that basically flatlined after the pandemic. You know how do you monetize all of those extra people that are sitting out there that don't want to pay the now remember they raised their prices and it's was something like between $300 and $400 a year if you're a gamer to get uh game pass the mode where you can actually play Call of Duty. So yes, which pretty much shows that the time spent versus on social media and gaming, which is social media time spent like 19% and gaming is about 13%. So people

are spending a little bit more time on social media than gaming. And we knew this. We knew that short form video is growing, but the ad spend on social media is about 42%. And the ad spend on gaming, this is by brands spending their money on ads inside of gaming to sell their products. So you have 42% on social media and only about 3.7% on gaming. I actually have seen this number be more like 5 to 8% but still 42 versus you know between 4 and 8% is incredibly incredibly low because we don't have a lot of good ways for brands to spend money inside of our products and services. Chris, I know and Phil, I know you guys hate this, but this is a way to make some margin if it's done.
I don't hate this. I like money. I like money. Money is my highest.
But this is I I I I actually I think I object to this whole kind of like discussion in this way because the fact of the matter, social media is [ __ ] free, right? It's [ __ ] free, right?

And so it's ad gaming is not free, right? People are spending insane amounts of money. The fact that our engagement is that high
free to play. Well,
I'm like, well, I'm talking about console.
Yes. Yes. On
and on top of that, freeto play monetization is monetization. You know, social media, there is no freetoplay monetization.
That's not true at all. Tik Tok Tik Tok does four billion a year on their coin economy.
Yeah, you can spend money on the creators. Yes.
Let me take a step back here. The fact of the matter is that we are in a paid type environment, right? So, our should be revenue share, not time share that we're talking about, right? And so when you start doing these metrics like this, these are meaningless metrics when it comes to what people are actually spending their money on, right? And the audience that you're capturing. And on top of that, it's conflating things, right? Cuz because the thing is that the console market is a premium market. $50, $500 device and, you know, three to four games a year, right? Like that is a premium market. And so this is suggesting that you can

layer on metrics for a primarily average ad driven business on a gaming market. You just can't, right? Because the gaming market is completely different.
What's a little confusing about this chart that I agree it's confusing one is consumers spending their time or the white bars. So consumers are spending a little bit more time. brands are spending their money more in social media because you're to your point. It is designed as a free service. It's just like Facebook. It's just like Meta. It's just like Netflix. Now, all of those are designed to support ads where the majority of the gaming business, especially on console, was not designed or built to serve ads, which is why the spend opportunity is much less by a brand. And so it's not players spending money, it's it's brands spending money. But to, you know, so I agree to your point, we have a lot more premium spend, especially on console. You know, I've actually done a lot of looking into ads on console. It's very, very difficult to

do because players hate it because they've spent money. They're like, I gave you my money. Why are you showing me an ad inside of something I I spent money on? So I do think what you're saying is absolutely correct. as more free-to-play hits console, I do think in as cloud gaming, you know, or game pass streaming happens, you know, if they make unobtrusive ads or say instead of giving us $400 so you can play Call of Duty on day one, have this game pass ad supported model, I do think that that is a bit more of a value to a player, kind of like rewarded video. Anyway, sorry that was me going off.
What's your push back here, Philip? Where to start? So, first of all, this graph from you is [ __ ] [ __ ] E-arketer is your source. What do we mean by time spent? Is this of gamers? Is this the general population? I spent a I spent a lot of time trying to look into time share, and it's very hard to get good data on this. There's something called the American Time View Survey, and it's very hard to get good results out of this. So, I don't think we have a

really good understanding of how time spent is changing between social media and gaming. I don't think we have a good a good view on that. And I think that's been a core question because it's not just Satia who's saying this to be some sort of clever CEO saying, "Hey, we're competing with short form video." If you remember, Reed Hastings came out and said, "We're competing with Fortnite." So, there's been all these entertainment CEOs that come out and say this. So, it's it's not a new a new trend that people are concerned because at the end of the day, there's 24 hours in a day and so, okay, we're competing for relative shares of this. But to your point, Eric, it's not just that. It's also RPO per hour, right? Right. And that's a metric that's kind of been lost a long time ago to the gaming ethos. It used to be a thing we were tracking is, you know, how much does gaming monetize per hour per user? And I think that's much higher than these other forms of media. But I think this this this whole conversation about time use and short-term video, I do think it's real. I do think it's a real competition to us. But I think some of the things people forget is that when we look at sensor tower for instance, we look at DAOU between Tik Tok, Royal Match, and I

put in two other apps that I think gaming is not spending enough time taking as a serious competitor, which is the Meta AI app, which has AI generated videos as the way they serve short form video to people as well as the Sore app by OpenAI, which is the same concept, right? It's basically just Instagram reels or Tik Tok with AI videos. And so Tik Tok growth has actually been slowing and has kind of flatlined since about 2023 which I think is a good sign for us. And we see not so much growth in the Meta AI app and the sore app. I do know that Ben Thompson from Tetry used to talk about the fact that Facebook was kind of slipping in AI videos into their normal reels and Instagram as well as the core Facebook app and they were seeing massive success. But when they've diced it out into their own apps, they're not seeing this crazy growth. So, the only thing we've seen some uptick in is actually Sora, which is hitting around 1 million DAU from OpenAI. But when you compare that to something like Royal Match, already at 3 million DAU, and by the way, we're just looking at the United States. I'm not really seeing the numbers yet that

suggests this is a real threat. And with Tik Tok not growing, I don't know. I don't know. It sounds like a clever thing to say, but I'd love to see some more growth here. I do think this is a looming threat. And I do think gaming has not taken AI seriously. Like we haven't talked about Elon Musk's attempt at gaming AI, which is coming and I do think we should be scared shitless about what he's going to do. He is a bullshitter, but as Benedict Evans says, he's a bullshitter who delivers. And so if we don't hop on some of this AI generated content, we're going to lose the supply side war. Certainly, Western publishers are going to lose the supply side war. We're not going to be able to keep up with the content pace and the algorithm that I think these AI apps can deliver. So, I'm kind of skeptical on the whole time use thing, but I am scared about AI generated short- form video. And I do think that's a threat we need to be taking seriously.
Okay, I'm going to try to articulate this a little bit better. Is that the time spent metric is not nearly as interesting to me as the money spent metric, right? And so, the audience that we have in gaming is a premium audience that's willing to spend not only on

premium games on console and PC, but also spend money in mobile gaming, right? which is a very small fraction of a percent of the audience that matters in this quote unquote mass market mobile business, right? The reality of it is the people that spend is a very small fraction of a percent. So therefore, that's the audience that we care about, right? So all these looks that are [ __ ] on social media and not spending on mobile, like fine, take that audience. We don't want them. As long as we're servicing the audience that we already have and trying to grow that audience with better content and different content, that's where we can play and live.
It's all correlated. It's all correlated though.
All correlated. Time spent, revenue.
Yeah. It's And ads. If you've got, you know, 99% of people not spending money, wouldn't it be great for all of us to make money showing ads to those other people?
We already tried this. We already tried to do e-commerce and games. It doesn't work. All the ads in games are other

games. It takes you out of the gaming experience. We don't have high clickthrough. This is a a tried idea.
I just object to this whole idea that Satcha is putting out there is like they're trying to compete against Tik Tok. You're not competing against Tik Tok, right? You got to compete against the console guys. Like this is this is not the business that you're in. You're in a premium business, you know? You're not in the chachki [ __ ] business, you know? Stop it.
Yeah. I I think they're conflating the challenge of share of time versus what is the content that is consuming that share of time and how do you develop an experience that takes that back and yes how do you in gaming develop a 5-second cat video that you scroll through in 2 seconds versus a deep you know now $80 experience in in console gaming. So, I don't I think you're right that we're conflating two different play patterns or experiences that are asking for your time.
You're taking console as the comparison here because you're painting him as the Xbox guy, but you got to remember like

they still own Candy Crush. They still have Call of Duty Mobile. Like those are closer substitutes to Tik Tok, especially for that audience which tends to be older female. That is a real trade-off. That is a real threat.
No. I mean, yes.
You don't think that's a real threat to mobile gaming? You don't think those are
when you're when you're like whales are spending, you know,5 to10,000 a year. Like that's who you care about, right? How many [ __ ] people are that, right? That's not the mass market watching Tik Tok videos and YouTube cat videos, you know? Like it's a misunderstanding of what the market is is what drives me crazy about these type of strategic decisions, right? As mass market as people play these games, it's not the mass market that's spending on these games. And that's for both console, mobile, and PC for that matter. So, we're still trying to cater to this audience and grow that part of it. But,
you know what was really funny, too, is I saw an article. I forgot if it was pocket gamer mobile gamer.biz that Monopoly Go is creating a chat app. It's in soft launch somewhere. And so, Scope is actually trying to make an app that

does exactly what all the other chat apps do. I don't know if they're trying to replace Discord. I don't know if they're trying to complace with short form video, but I was like, "Oh my god, now we are trying to directly add those kinds of features to us to it's to another app, too." So, anyway, we'll look into that more when we, you know, hopefully get into the soft launch.
All right, let's move on.
Let's Yeah, let's wrap this up and let's go to this topic.