Microsoft’s Strongest Asset is XBOX Not Office

on December 5, 2012
Reading Time: 3 minutes

I’m sure if you surveyed many in the industry and asked them what Microsoft’s greatest asset to leverage going forward would be you would get a range of answers. I’m sure people would offer up Windows or Office as the most frequent responses to that question. From the looks of much of Microsoft’s marketing it seems as well that they feel their strength lies in Windows and Office. However, they are sitting on another asset that I believe may be the fundamental cornerstone of their success going forward. And that is the XBOX.

If you think about what drove the bulk of Microsoft’s success during the PCs golden age, most would agree it was Windows and Office. For the bulk of the PCs lifecycle it was productivity use cases that drove Microsoft assets into the corporate world and thus by default into the homes of many consumers. That world has changed and I don’t believe the same kind of strong sentiment exists with Windows or Office as it once did with the broader consumer market.

However the product that I do believe not only has more relevant mindshare with consumers than Windows and Office, but also has a largely positive sentiment is the XBOX. To date the XBOX has sold over 70 million units. Now, although that sounds much smaller than the 350-380 million traditional PCs we sell annually on a world wide basis, XBOXs cover more ground than PCs. PCs generally, have a higher penetration due to their tie to individual consumers. In an average consumer home there is generally more than one PC. But XBOXs are more communal and therefore generally only have one per household but chances are more than one person benefits from the XBOX regularly. But this device plays a very important role from an entertainment standpoint and one that I feel has driven higher consumer sentiment than many of the other Microsoft assets.

When it comes to all of Microsoft’s assets, I would argue that the XBOX is the one that is most commonly being woven into the core of many consumers media and entertainment experiences. XBOX is the new Office and I am not sure that Microsoft understands this at the level they need to.

Had Microsoft launched a XBOX tablet first and not a Surface tablet, my conviction is that they would have had much more success. Surface sales are not going well and our close supply chain sources indicate that its likely to not even sell 1M by the end of the year. Had their first go out the door been much more focused on leveraging XBOX assets and positioned more for gaming and entertainment, then I believe Microsoft would have had much more success.

Jim Dalrymple wrote an article today, that is worth reading, where he points out that Microsoft with Surface created a product that didn’t solve a problem. I agree at one leveld, but I’m sure many can make the case that Microsoft did solve a problem. My point is Microsoft solved the wrong problem with Surface. The problem Microsoft is looking to solve, one where productivity is the emphasis in both design and philosophy of a tablet, is not the one I believe most consumers are leading with when researching which product to buy. Thus with Surface, Microsoft has developed a product for the few rather than a product for the masses.

I fundamentally believe that pure tablet use cases carry more weight with the mass consumer market than notebook use cases. Things like an easy to hold and use form factor, a quality visual experience, heavy emphasis on best of breed media consumption and entertainment, simplicity and ease of use. These are the things the mass market values at the highest level. In my opinion if Microsoft was focusing on these use cases with Surface, they would have made a different product and I believe tied it more to their strongest asset for the mass consumer market–the XBOX.