You may have heard about the recent layoffs at Microsoft. It wasn’t quite across the board but 18,000 people managed to lose their jobs, or 14% of their total work force is now out of work, as noted by IGN. But why? What happened? Well, a small portion of those jobs – a head count of 200, to be exact [via Recode] – were from out of the Xbox Entertainment Studios department, a subsidiary of the Xbox group division that was in charge of taking Xbox into tinsel town and cooking up a storm of original programming content; that didn’t work out.
So the original plan from Microsoft with the Xbox Entertainment Studios division was to breach into the digital content providers space with their own original programming, leveraging the Xbox Live platform as a mediator for content distribution similar to Netflix or Hulu. Microsoft would be a multimedia king in a space regularly dominated by television network pioneers and motion picture moguls. The Xbox was about to go full Hollywood and no one was going to stop them… except, of course, reality.
The reality of it all is that you need advertising, you need financing, you need market support and you need content recognition within the typical hype circles to make anything happen. The division never really got there after being opened in 2012.
Instead, the paltry selection of content that came out of the studio within its two years in service turned fewer heads than Joan Rivers having the wind lift her skirt up while passing by a group of frat boys in line to see the latest Seth Rogen romp, and no one outside of gamers and hardcore fanboys cared (or care) about things like Every Street United or the upcoming Halo series.
The reality is that Microsoft thought that they could appeal to casuals due to their leverage with hardcore gamers. They thought that by abandoning the group that made them famous in the core market, and focusing on the group that Nintendo irregularly taps like a husband with a penchant for sharing the neighbor’s bed whenever his wife goes to visit her parents out of state, would be an easy feat since – as mentioned – Nintendo was doing it. The problem is that both Nintendo and Microsoft ran into a wall when they didn’t focus entirely, and firstly, on the core audience with their subsequent product launches (i.e., the Wii U and Xbox One, respectively).
What non-gamer in their right mind would blow $500 on a game device – that wasn’t even that great at being a game device – in order to watch TV on their TV? Or even more than that, game-related TV on their TV – if we’re talking about the content coming out of the Xbox Entertainment Studios? I mean, what was going through the heads of Don Mattrick and Steve Ballmer thinking that people who don’t care about video games would want to watch game-culture TV on a video game device? Even more than that, what made them think that gamers would want to forfeit game-culture to want a media device centered around watching TV on the TV?
The whole thing reeked of failure before it even got off the ground, a lot of it due to the fact that the target demographic was just all wrong. If Amazon decided to open up some original programming only found on the Fire TV, I don’t think that would be a bad thing – they’re catering to a casual audience anyway, so why not? Netflix and Hulu have found some success with original programming, because once again, they’re catering to an audience who came to them looking for the kind of content they’re producing.
Microsoft, alternatively, decided to use their hardcore base in an attempt to force a technology on them that the market never asked for, didn’t want and wasn’t desiring out of the device. While innovation is always necessary in any market and to push any device to the next level of consumer engagement, the thing you don’t do is completely kill your respect and engagement with your core demographic and target audience. Or in this case, Microsoft’s target audience for this endeavor was the casual entertainment goer and they actually didn’t have them to begin with; so they were attempting to leverage a business move based on a market segment they didn’t even have!
It’s not hard to see why the Xbox Entertainment Studios went belly up. In fact, it would have been an absolute miracle if it didn’t completely tank.
TL;DR: Microsoft misjudged their market position by attempting to cater content to an audience they didn’t have, causing the Xbox Entertainment Studios division to falter.