Microsoft (MSFT) is ramping up its video game sales strategy as it prepares to release the next Call of Duty game on its Game Pass subscription service. Bob O'Donnell, president and principal analyst at TECHnalogical Research, joins Market Domination to discuss this move and what it means for the future of technology companies.
“This is an evolution of what Microsoft is doing across the gaming business,” O'Donnell said of the move. He added that the Game Pass subscription service has already been successful as subscription models grow in popularity.
“It's all about getting more subscribers,” O'Donnell noted, comparing Game Pass to Netflix in its consistent efforts to gain and retain subscribers with new services.
Microsoft's Build conference, a developer-focused event, will be held next week. O'Donnell said he expects to hear more about Microsoft's efforts in artificial intelligence at the event, and emphasized the importance of remaining a contender in the market. “This is the year that AI really starts to have an impact. And ultimately, we expect the revenue impact to start to become even more pronounced and even larger over the next 12 to 18 months. .”
For more expert insights and the latest market trends, click here to watch the full episode of Market Domination.
This post was written by Melanie Leal
video transcript
Microsoft is making strategic moves ahead of next week's Build 2024 event, and its video game sales strategy will also be in motion in a month. The software company is reportedly aiming to release the next Call of Duty to a subscription service. Technically new.
Bob Adonall, President of Research and Principal Analyst at Technos joins us. Bob, nice to meet you.
So, let's start there, Bob, by the way, this was the magazine that reported this, yes, Microsoft will add the latest installment of its powerful franchise “Call of Duty” to its Game Pass subscription service at lunchtime. I'm going to sell it a la carte for you, Bob.
What did you think of that, Bob?
What, is it a big deal?
No trading at all.
How did you see it?
Yeah, I mean, I think this is an evolution of what Microsoft is doing in the gaming business in general, right?
And as we've seen in every other aspect of the tech industry, they want to leverage this subscription model.
So it's not really a AAA surprise. I mean, honestly, this is like one of his last pieces to fall into this idea of a subscription-based model.
So I think more and more that it makes perfect logical sense, that's what we're seeing.
When it comes to software, it is now almost possible to find something that can be purchased separately.
So it's no surprise, Bob, that this is a way for them to get more excited around Gate Pass, as well as something suggested by Activision's Bobby Kodak.
Blizzard has become right resistant over time.
He's gone.
Will this have any impact on the Activision series or the Call of Duty series in terms of a reputational hit?
It doesn't really matter because they were so resistant or because, as you said, everyone is doing it now.
Yeah, I think it's completely harmless for Activision.
I mean, whether they want it or not, it's going to happen eventually, because also in the outside world, everyone is moving to this kind of model.
So, you know, I feel like this is something that, um, is going to happen eventually, and they're just making the decision to do it now, and like you said. , they feel there is an opportunity there because the situation has changed.
Well, again, at the end of the day it's all about increasing your subscribers.
It's that simple.
That means Netflix has to have new shows, just as other companies have to have new content to keep people motivated to keep their subscriptions.
This is exactly the same thing.
Again, consumers are used to it by now. I'm no different from anyone else.
There's no other game that feels so comfortable because it's not a subscription.
I mean, I don't think people think that way anymore.
And, Bob, as you know, as I mentioned, next week is Microsoft's big build conference.
I know you're watching.
This week we talked about open AI, and next week it's Microsoft's turn to talk about AI. And the central character is Bob.
Sure, there's going to be a lot of talk about Co-Pilot, it's Microsoft's AI assistant, and you know, it's, it's early days, Bob, but certainly, you know, Wall Street has There are investors and analysts. They're excited about the tool and the potential growth and adoption.
What, what do you think?
Yeah, I mean, Microsoft jumped on this early on, right?
They, we saw open AI do chat GP T about 18 months ago.
And suddenly within three months, Microsoft was talking about integrating Open AI into their tools using CoPilot.
So they jumped out far ahead of everyone else, and frankly, what we've seen since then is the Googles of the world, the Amazons of the world, and the A lot of scrambling and catching up with the meta.
And now it's clearly much more competitive.
So we're looking forward to building on what they've been doing with the first officer, and you know, they brought the first officer into the office.
We confirmed that we expect it to develop further.
So they're going to build on what they started and consolidate it, and I think it's going to be one of those big stories that will be interesting to watch over time for Microsoft and all companies. These players, hey, know what we've been talking about, proof of concept and all that stuff. Let's take a look at the actual work.
So, what I'm hoping to see is that we'll see them talking about, are there new tools that companies can use to ease the process of integrating these into their environments? That's it. Because in reality there are many. A lot of companies are really excited about this and are trying a few things here and there.
But moving it from “playing” to actual production is much more difficult.
So, you know some of it, they're already doing some of it.
I think we'll see more of that happen, and we'll see our competitors do the same.
Well, it will be interesting to see.
But this is the year that I think, as I've said here before, this is the year that AI really starts to have an impact here at Yahoo Finance.
And eventually, you start to see that the bottom line financial impact is even bigger.
I started to see it.
We expect a lot more to happen in the next 12-18 months.
Hey Bob, especially the build, Reuters reports this morning that Microsoft plans to offer this new suite of MD chips to compete with nvidia chips.
What are the implications for everyone involved?
Well, look, to be honest, I'm kind of surprised it took this long.
I mean, everyone is doing this right.
I mean, everyone is paying attention to MD because NVIDIA makes a great product and people love it, but no one likes having one company completely and completely in control.
That's why there's so much focus on additional players, additional competitors, additional replacement players.
MD has been telling this story for as long as they've been making great products. And people who are deep into this are saying, look, you can actually be absolutely competitive. Partnering with NVIDIA So it's perfectly logical for Microsoft to do the same again.
Competitors are starting to do the same.
I think this is just part of a general move towards supplier diversification.
It turns out that Intel is going to develop some great chips.
Obviously, they're trying to get in there.
All of these companies are developing their own custom chips.
We've already seen all the big companies announcing it.
This is a visual feel, and all of these things are important, but you can't rely solely on NVIDIA.
Yes, we're going to buy a lot of NVIDIA, but the growth opportunity is huge.
We need others to help us build this, and this MD move seems like another version of that.
