Days after a report from Bloomberg explained that Microsoft has expected unrealistic profit margins from its gaming division—one likely reason for its raft of studio closures, game cancelations and thousands of layoffs—a chipper Satya Nadella basically said as much out loud during an interview at a Github conference on Tuesday.
"If we as an industry don't continue to innovate how we produce, what we produce, how we think about distribution, the economic model—the best way to innovate is to have good margins, because that's the way you can fund," the Microsoft CEO said on the tech-focused talk show TBPN.
It was at least the fifth time in the interview that Nadella said the word "innovation," though at no point did an idea of any specificity precede or follow it. While most of the interview bounced between incomprehensible AI talk and variations on 'Microsoft's Azure servers make a shitload of money,' when it came to gaming Nadella didn't seem to have much new to say, though what he did say he said with inspiring confidence:
"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."
I'm not really sure where Nadella's going with "some new interactive media," but that could be because I'm still recovering from the cognitive dissonance of a man who's just been paid $96.5 million in stocks and cold hard cash for the last year saying that "the best way to innovate is to have good margins."
That may track if your idea of innovation is 'coming up with ways to turn your money into more money,' but doesn't strike me as true in a creative enterprise such as making a videogame.
Microsoft's new gaming strategy, as exemplified by the news that Halo will now be on PlayStation, is "we're going to be everywhere, on every platform," said Nadella, after comparing the company's game publishing business to Microsoft Office. He also spoke about the PC/console dynamic while saying "the biggest gaming business is the Windows business," adding fuel to the speculation that the next Xbox system is basically just going to be a gaming PC.
See if you can follow this whole bit:
"We also want to do innovative work in the system side on the console and the PC. It's kind of funny, people think about the console and PC as two different things. We built the console because we wanted to build a better PC which could then perform for gaming. 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. It delivers performance that is unparalleled, which pushes the system forward. So I'm really looking forward to the next console, the next PC gaming."
I, too, am looking forward to the next PC gaming! But nothing Nadella is saying here makes me think Microsoft will be steering its future.
Despite trillions of dollars at its disposal and decades of Windows stewardship, Microsoft is now playing catch-up with Valve and the open source community which have turned Linux into the faster, easier to use gaming operating system even on Xbox-branded hardware. Now there's some innovation!
