Satya Nadella spoke to Microsoft’s shareholders about the company’s gaming business in their latest annual shareholders meeting. Interestingly enough, his statement may not have been interpreted correctly, not by the shareholders, but by gamers.
First things first, we found the whole thing on Microsoft’s dedicated page for their 2024 Annual Shareholders Meeting page here. Microsoft hosts both an entire video recording of the meeting, as well as a complete transcript. We’ll share Nadella’s full statement below, but you can also watch the video at 01:16:36 (unfortunately the format does not allow for timestamps).
As reported by trusted outlets like Windows Central and XboxEra, a lot of focus went to Nadella saying “we are redefining what it means to be an Xbox fan.” But while that went into the headline, few outlets explained it in context of his full statement.
So we’ll review the question that was asked of him, and add commentary on his response. Note that he isn’t in the same position as Phil Spencer or Matt Booty, knowing that gamers will be listening to their exact words. This is how Phil’s and Matt’s bosses feel about the business, and what they’re telling the people who give financial backing to Microsoft.
In the run up to this question, Nadella, alongside other Microsoft bigwigs like Brad Smith and Amy Hood, were answering a lot of questions about AI, and also other topics. As Nadella was asked about the gaming business, he was the only person who gave an answer among them.
So here’s the question Nadella had to answer:
“In addition to AI, shareholders are also interested in our gaming business and our acquisition of Activision Blizzard King. Satya, how are you feeling about the early return on that investment and just progress on our overall gaming strategy over the last year?”
Nadella says that he feels really good about where Microsoft is at the moment, and acknowledges that COD’s launch is a particular highlight for gaming every year.
He refers to gaming as a ‘secular growth category’, and this was not a buzzword he came up with on the fly. Investopedia says that “In finance, secular is a descriptive word used to refer to market activities that occur over the long term.” In plain English terms, Microsoft does not see the video games business to be easily swayed by market and consumer trends, in the same way that their Windows or Surface business moves in cycles. Instead, video games have either long periods of loss or long periods of growth.
And that explains how Microsoft has been patient with their Xbox business for the past decade. But when Nadella says they decided to double down on gaming, after the Xbox One generation, that was a bold choice. Huge risk for huge reward, and with Call of Duty, it paid off.
Nadella then talked about bringing the ‘joy of gaming everywhere,’ and the viral phrase, with the words ‘being able to enjoy Xbox on all your devices.’
But then Nadella then talks about their strategy with Activision content. For those who may not remember, Activision, including Blizzard and King, made Microsoft a major publisher on PlayStation, PC, and mobile, even before they started testing the waters on their multiplatform strategy.
Gamers may have immediately been thinking about their Xbox consoles, but investors can be more levelheaded about the business side of it. And on the business side of it, those investors know that Microsoft can’t launch their mobile store for Xbox games yet. But Nadella can talk about their Activision strategy now, because Candy Crush Saga and Call of Duty: Warzone are on iPhone and Android right now.
There can certainly be a problem among gamers where they immediately go hunting for evidence of things that confirm what they already believe, without taking a step back to think through things logically. While Xbox owners are right to be concerned if their consoles will still have value if more Microsoft games come to other platforms, this is not the 5th or 6th smoking gun that they are looking for.
The fact is Microsoft is already a major 3rd party publisher, competing with EA and Rockstar Games at the same time that they are partnered with them. Microsoft has the same kind of relationship with competitors/partners like the Linux Foundation, Google, Apple, and of course, Sony.
Xbox fans trying to spin narratives around Microsoft’s leadership has the potential not to end well for them. Even if it’s Microsoft’s job to sustain their trust with consumers, if rabid fans ruin that relationship by looking for scapegoats, Microsoft may very well focus their gaming strategy on other gamers.
Nadella’s full comments can be read below.
“Yeah, I mean, I’m feeling very, very good about where we are in gaming. In fact, right now, this is like the peak season for gaming, obviously with Black Ops and the new Call of Duty, and it’s just been fantastic to see the launch and the marketing around it, the buzz around it and the love for gaming.
If I think about it, right, we chose the secular growth category in entertainment, which we think is gaming, and said, let’s double down on it, let’s – and it’s been a passion for Microsoft ever since.
In fact, I think Flight Simulator launched before Windows or Office even, and so it’s like one of the longest franchises in this company. And so we said, let’s take that joy of gaming everywhere. And that’s why even these ads with Xbox now, where we are redefining what it means to be an Xbox fan, it’s about being able to enjoy Xbox on all your devices.
So our strategy with Activision content now is in full force. We feel fantastic about the progress we’ve made. And more importantly, I think, long term, as a company, we can bring the best of AI innovation, cloud innovation, console innovation, PC innovation to build the best games that can be enjoyed by gamers everywhere.”
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