In recent weeks I have seen an increase in chatter about the possibility of Microsoft entering the portable games console market with an Xbox Portable. Xbox Ready published another one of their click bait videos on the subject and Tom at the Verge let his feelings on the matter be known. The success of Steam Deck and Switch has led many gamers to speculate that now might be the time for Microsoft to join the space.

Today I’m going to discuss that possibility and look at the reasons for an against an Xbox Portable.

Xbox Ready released one of their typically clickbait videos recently with a title and thumbnail suggesting that a portable Xbox was on the way. This is of course not true as what they are actually discussing is a Dev Kit demo by Razer and Qualcomm which teased the possibility of a gaming device focussed on game streaming and remote play from your console rather than a Steam Deck like portable games console. Not quite the Xbox portable they promised

Tom Warren at the Verge has got Game Pass working on his steam deck and believes that demonstrates that an Xbox portable is a viable product. The market for these devices is slowly emerging. The Nintendo Switch has been a massive success with huge sales numbers however its not clear to me that the mobile aspect of this device is what’s driving these sales numbers. Consider that this is Nintendo only games console right now and they have gone out of their way to make these device easy to share with detachable controllers and colourful designs which appeal to a broader, younger audience. Or their parents. The Switch has sold 103 million units as of Feb 2022 which makes it their most popular console to date! Nintendo also see this console as being in the middle of its lifecycle. It will be interesting to see if their next device continues this trend or they revert back to a standard Box under the TV design.

Perhaps the better comparison is the Steam Deck which competes for mind share in the same sector of gamers as Playstation and Xbox. There are no hard and fast sales numbers for the Steam Deck so far but over 110,000 were preordered and some tracking web sites had estimates of 850,000 and up.

So there is a market for these devices. Should Microsoft get in on the action?

Reasons For

1. There is a clear market for this type of device. Switch sales numbers and the hype around Steam Deck shows that gamers are keen for this type of device. Xbox gamers have been asking for a portable version for years. Certainly when the PSP was launched a rival product from Microsoft was high on everyone’s wish list. Sadly it never saw the light of day.
2. Microsoft needs to compete with their competitors. They cannot simply seed control of a technology sector to a rival as they risk falling behind. We have seen them try to compete in music players, laptops, phones, wearables, tablets and yes games consoles to varying levels of success. Do the sales numbers for Switch and Steam Deck make a compelling argument for developing a hand held?
3. Mobile power. As chips become more powerful and less power hungry the possibilities for new mobile devices becomes really exciting. Apples M1 series of chips has shown the industry the way forward and if Microsofts hardware partners can create powerful, power efficient chips we may see a new class of games console emerge.

Reasons Against

1. Hardware is hard to make money on – MS has struggled to make money on hardware and its not clear right now how much demand there would be for a Microsoft branded device. Look at PS VR as an example of a hardware segment where Microsoft doesn’t compete with its closest rival . Microsoft currently has no presence in the VR space and doesn’t look like entering the consumer space any time soon. The most noise they have made so far on VR and the Metaverse (they seem to use these phrases interchangeably or at least see them as tied technologies) is prominently mentioned Industrial Metaverse. They are developing headsets for the US Army and VW (or another car maker) and clearly see the money in the enterprise market. They havent chosen to enter the VR space yet as the market isnt big enough and I believe the same is true of a mobile device. For now at least Microsoft seem happy to let Playstation have the console VR market all to themselves.
2. Its Niche. The market isn’t a billion dollar segment. Possibly they will see it as a vanity project akin to the Surface Studio. Its not really designed to sell by the bucket load but is a cool product that gets people talking about the brand and forming positive associations to it. Its that they don’t want it to sell a lot but they are prepared for it to be a low sales unit device. Also look at the use case Tom Warren lists. Some offline gaming when travelling. Now I appreciate it can be used all over the house or when you are out and about but this is still pretty Niche. Tom replied to my tweet and I think he is suggesting that because the Surface Studio is a niche device Microsoft could also dip their toe in these waters too. I just don’t see this happening. An all in one PC is a far different beast to a mobile games console with far less design constraints and arguably a far broader appeal.
3. Mobile game sophistication. Mobile games are becoming ever more sophisticated. Apex legends, PUBG, and Call of Duty all have mobile versions which give a pretty good approximation of the gameplay of their full blown counterparts. (Show Apex and COD mobile). Pair a controller to your phone and you have a portable games console without the need for spending £400 or £500 on a new device.
4. Game Streaming. Xbox Game Pass has game streaming which turns any Android device in to a full blown Xbox. Yes I appreciate you need a good connection but in an era of 5G connectivity for those gamers with good mobile reception buying another console makes no sense. Also consider other streaming options such as Eve online which you can now stream through a browser to any device. For developers this cuts out the middle man. This doesn’t make sense for many game publishers as they don’t have the infrastructure but if you could keep 100% of the profits rather than pay Sony or Microsoft 30% then why not. Also the direction of travel is game pass and streaming. How does a new mobile device play in to this? Perhaps a low powered streaming device (show the puck or low powered dedicated device with a controller, screen and small amount of storage) but that doesn’t meet the needs of the travelling gamer as it requires an always on connection. Also consider that the most concrete news we have had on new Xbox hardware this year has been the recent news about a streaming stick for Televisions. This makes much more sense when you look at the direction of travel for Xbox and also Microsoft which is cloud first.

4. Meet your customers where they are. – We have seen this mantra repeated since Microsoft abandoned their Microsoft first ideals after the failure of UWP and Windows Phone. I would say that close to 100% of Xbox owners also own a smart phone. To ask those users to buy another device to game on the go when they already have a super powerful phone in their pockets, (which cost between £500 and £1000) is unrealistic. As mobile phones become ever more capable the market for other mobile devices surely diminishes. We have seen this play out before in the PC and laptop markets. When smart phones became popular people realised they no longer needed a beige box or a bulky laptop to get things done. As phone became more capable, through increased power and better application support, the need to buy a replacement desktop or laptop became less and less and PC sales figure dipped across the board. The same same will happen with mobile games consoles. As the device in your pocket gets better and more capable the need for another device becomes less and less. Yes some will love the idea of a dedicated device but the bigger market to target is mobile, both for dedicated gaming and streaming.

Conclusion

Having said all this If the market continues to develop then we may see an entry from Microsoft in to this space. The ability to play Xbox and PC games natively on a handheld device is appealing. It free’s up a screen in your house and gives you the flexibility to pick up a game for shorter period of time and in any location you choose. Could it be that the next Xbox device is a steam deck like console, perhaps as a replacement for the Xbox series S? It will have to compete on price with the steam deck, which at £450 isn’t a direct replacement for the low cost series S. If the cost is much more than that players will consider the pro’s and cons of paying for a more limited device vs buying a full gaming PC or console.

I believe that this is a game of diminishing returns. Right now Valve have been able to tap in to a segment of users starved of any real innovation. The idea of playing PC games on the go is one that appeals to a lot of gamers, myself included but I’m not sure that equates to mass market adoption at a rate which makes entering this space worth while for a company the size of Microsoft. Especially when they cannot make Xbox Series S and X consoles fast enough to sell them right now. Also as mobile compute, battery and connectivity power increases the need for a dedicated hand held becomes less. If the phone you own is nearly as powerful as a games console why would you need a separate device.

So will they do it? The next 6 months is going to be interesting so watch this space!