Microsoft will increase subscription, AI game: analyst

Microsoft (MSFT) is sharpening its video game sales strategy as it prepares to launch the next installment of Call of Duty on its Game Pass subscription service. TECHnalysis Research President and Chief Analyst Bob O’Donnell joins Market Domination to discuss the move and what it could signal for the technology company’s future.

“It’s an evolution of what Microsoft is doing in its gaming business generally,” O’Donnell says of the move. He adds that the Game Pass subscription service has already seen success as subscription models gain popularity.

“It’s all about getting more subscribers,” notes O’Donnell, comparing Game Pass to Netflix in its consistent effort to gain and retain subscribers with new offerings.

Microsoft’s Build conference, a developer-focused event, will be held next week. At this event, O’Donnell hopes to hear more about Microsoft’s artificial intelligence initiatives and emphasizes the importance of continuing to be a competitor in the market: “This is the year that AI really starts to have an impact. And then eventually , we start to see even more financial impact on the bottom line. We start to see that and I expect we will see more of that in the next 12 to 18 months.

For more expert insights and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Melanie Riehl

Video transcript

Microsoft making strategic moves as it prepares for its Build 2024 event next week and a move in its video game sales strategy, the software company reportedly intends to launch the next installment of Call of Duty on its subscription service to learn more about the What’s happening. new to technology.

We have Bob Adonal Technos, President of Research and Chief Analyst, joining us now, Bob, it’s good to see you.

So let’s start there, Bob, and by the way, this was the paper, uh, reporting that yes, Microsoft is going to add the latest installment of that mighty Call of Duty franchise to its lunchtime Game Pass subscription service , Bob, instead of, you know, selling a la carte.

What did you think of that, Bob?

Uh, big deal?

There is no agreement.

How did you see this?

Well, I mean, look, I think it’s an evolution of what Microsoft is doing in its gaming business in general, right?

And they’re seeing this subscription model, as we’ve seen in every other aspect of the technology industry, as something they want to take advantage of.

And so it’s not really a AAA surprise, I mean, honestly, it’s kind of one of the last plays to fall into this idea of ​​a subscription-based model.

The story continues

So I think it makes sense more and more, it’s perfectly logical, that’s what we see.

It’s almost possible to find something you can buy on your own now when it comes to software.

So, it’s not a surprise and it’s a way for them to get more excited about Gate Pass, Bob at the same time, this was something that Bobby Kodak at Activision.

Blizzard has endured over time.

He’s not there anymore.

Does this do anything to the Activision franchise and the Call of Duty franchise in terms of reputational impact?

Because they were so resistant or because you said, like you said, you know, everyone’s doing it now, it’s not really going to matter.

Yeah, I don’t think it hurts Activision.

I mean, it was going to happen eventually whether these guys wanted it or not, because the outside world again, everybody moved to that kind of model.

So, you know, I feel like this is something that, um, would have happened eventually and they’re just making the decision to do it now and they feel like they have the opportunity, like you said, since things have changed there.

Um, and again, it’s all about getting more subscribers at the end of the day.

It’s that simple.

And so, in the same way that, you know, Netflix needs to have new shows and everyone needs to have new content in order for people to stay motivated, you know, to keep those subscriptions.

This is exactly the same thing.

And again, consumers are used to this now, you’re not making it any different than anyone else.

No game is better because it doesn’t have a subscription.

I mean, I don’t think people think like that anymore.

And, Bob, you know, as we mentioned, stick with Microsoft next week is the company’s big building conference.

I know you will be watching.

Um, you know, this week was open to AI and Google, next week it’s Microsoft’s turn to talk about AI and, and, and front and center, Bob.

We’re certainly going to talk a lot about the copilot, which is Microsoft’s AI assistant and, you know, it’s still early, Bob, but certainly, you know, there are investors and analysts on Wall Street who are, who are, we’re excited about this tool and about the potential for growth and adoption.

What do you think?

Well, look, I mean, Microsoft has been ahead of this since the beginning, right?

They, we saw open AI do GP T chat about 18 months ago.

And within three months, all of a sudden, Microsoft was talking about integrating the Open AI stuff into their tools with copilot.

So they jumped way ahead of everyone else and, frankly, what we’ve seen since then is a lot of struggle and recovery from the Googles of the world, the Amazons of the world, the metas of the world.

And now it’s obviously getting significantly more competitive.

So, you know, the expectation is that they continue to build on what they did with the copilot, you know, they brought that to the role.

We’ve seen that I hope to see this develop further.

So, I mean, you know, they’re going to continue to build on what they started and integrate it and, and I think, you know, one of the big stories that will be interesting to watch over time for Microsoft and all these players is, hey , you know what we’re talking about, proof of concepts and all that kind of stuff, let’s see a real production.

And so what I hope is that you’ll see them talking about whether there are potentially new tools that they can, uh, that companies can use to make the process of integrating these things into their environment, uh, easier, because the reality is that There are a lot of companies out there that are super excited about this and have tried a few things here and there.

But going from that, hey, we’re playing with this to actual production is much more difficult.

And so I think you’ll see some of that, they’ve already done some of that.

Hopefully we’ll see more, you’ll see your competitors do this too.

So it will be interesting to see.

But, you know, this is the year that I think, and I’ve said this before here, even on Yahoo Finance, this is the year that AI really starts to have an impact.

And then eventually we start to see an even bigger financial impact on the bottom line.

We’re starting to see that.

I hope we will see more of this in the next 12 to 18 months.

Hey Bob, specifically to build too, there was a Reuters report this morning that Microsoft plans to offer this new MD chip set to compete with Nvidia’s chips.

What do you think, what are the implications of this for everyone involved?

Well, look, I mean, to be honest with you, I’m a little surprised it took them this long.

I mean, everyone is doing it right.

I mean, everyone is looking at an MD because NVIDIA makes amazing products, people love them, but no one likes it when there’s one company that completely and utterly dominates.

And that’s why you’ve seen so much focus on additional players, additional competitors, and additional alternatives.

A doctor is out there pushing this story while they make great products and the people who are, you know, really diving deep into these things, they’re saying, look, they really can be absolutely competitive with NVIDIA. Microsoft do it again.

Your competitors are starting to do this too.

I think this is just part of this general movement towards supplier diversification.

We have that Intel will launch its sophisticated chips.

Obviously, they’re trying to get in there.

You have all these companies building their own custom chips.

We have already seen this being announced by all the main players.

So that’s the sense of the vision, all of this is important, but we can’t just rely on NVIDIA.

Yes, we are going to buy a ton of NVIDIA, but the growth opportunity is very big.

We need others to help us build this too and this MD change feels like just another version of that.