Reaching new audiences

Microsoft is using cloud gaming distribution technology to place its Game Pass content subscription service in front of new audiences and into country markets where Xbox is under penetrated. It also wants to add value to existing Xbox and PC gamers by offering new use cases for on-demand consumption on connected devices.

At present, the active userbase of all consoles is in the range of 150 million globally and while Microsoft has also pursued a PC and mobile games strategy, its Xbox Live monthly active users across console, PC and mobile currently stand at 90 million. With over 2 billion gamers globally, there is clearly a lot of headroom to potentially expand outside the current Xbox reach, although the competition for gamer attention is huge. Microsoft believes that there are 100s of millions of gamers out there that want access to its Xbox games, and it is going ahead and testing the market to confirm this assumption.    

Microsoft’s strategies to extend reach

Microsoft is using its cloud gaming technology and three key partnership approaches to expose its games to a wider audience:

1. Through social networks and integrated streaming video platforms
2. Through telco relationships in markets where partnering to deliver its cloud gaming service makes more commercial and logistical sense
3. Through consumer electronic relationships where there is a symbiotic relationship that benefits both parties

A marketing deal but with added bells and whistles

The Samsung smartphone deal is a marketing relationship but is elevated to an extent by the tighter product integration between the deal makers. The extent of product integration reflects the keenness on both sides to make a significant statement against a difficult global economic backdrop and against other competitors that are circling both the cloud gaming and smartphone device markets.

Samsung remained the biggest smartphone manufacturer globally in 2019, so there are obvious benefits to Microsoft to expose this audience to Xbox Game Pass. This deal centres on, but is not limited to, the upcoming Galaxy Note20 series, which, as a high value product series that includes a 5G version, is more aligned to Microsoft’s launch markets for the streamed version of Xbox Game Pass Ultimate – North America, Western Europe and South Korea. Note20 buyers can invest in a gaming bundle, which will include a Bluetooth controller and will get 3 months free access to Xbox Game Pass Ultimate. The Note doesn’t sell in the volumes of Samsung’s most popular and cheaper phone series, but the Xbox Game Pass app will be available to most Samsung Android phones anyway.

Not a gaming phone, but ready to compete with specialist smartphones

Samsung is acutely aware of the importance of gaming to key demographics in the market, some of which will have been wooed by the collection of gaming-specific smartphones that have hit the market during the last few years, and the role of gaming in driving 5G adoption. The company has come up with a hybrid solution to engage the gamer by including technology in the Note20 that is optimised for gaming and game streaming, but which does not rely on a complete overhaul in design to match products like Asus ROG 3 or Razer Phone 2. The fact that high-end games can be streamed to the device via Xbox Game Pass is an obvious benefit.  

Galaxy Store arrangement is most noteworthy part of this deal for Microsoft

Significantly, the level of product integration extends to the Galaxy Store. Microsoft has agreed a deal which will give Samsung users access to an Android version of Xbox Game Pass that allows access to the Xbox Store and the ability to buy in-game items through that storefront. This makes subscribing to Xbox Game Pass Ultimate and spending money on games via the Galaxy Store a seamless user experience and is a more convincing proposition for mobile-first customers of the subscription service. A similar implementation has not been achievable on Google Play yet. This app store deal and the support of bigger screen devices, such as the Galaxy S7 tablet series, make it more likely that non-console and PC gamers will consider buying into Xbox Game Pass Ultimate.  

While this is only one app, this approach helps support Samsung’s Galaxy Store position in the market against a backdrop of increasing app store disquiet and potential storefront fragmentation. In particular, the Chinese smartphone manufacturers including Huawei are seeking to undermine the Google Play monopoly in the Android space, and this is also a threat to Samsung’s own app store ambitions.