How Stealing Tomb Raider Could Reap Huge Rewards For Microsoft

| About: Microsoft Corporation (MSFT)


MSFT announces that Square Enix's Rise of the Tomb Raider will now be an Xbox exclusive.

Part of a growing PR campaign to highlight the Xbox One as a gamer-centric console - a direct jab at the PS4.

SNE will counter with Uncharted 4 as a competitor, but Tomb Raider's popularity with PlayStation users will be missed.

As Gamescom 2014 concludes, it's time to re-check the scorecards and see who came out of the convention in Cologne, Germany, in a better position than when they entered. While the video game media is as much about loyalists to certain companies and consoles as it is to objective reporting, there were surprises for everybody at this year's convention. The biggest surprise came from Microsoft (NASDAQ: MSFT) and the introduction of the newest exclusive game for the Xbox One: Rise of the Tomb Raider, an old Playstation (NASDAQ: SNE) heavyweight.

The news that the newest edition of the Lara Croft franchise was going to be an Xbox exclusive rather than in its traditional role as a multiplatform game shocked many convention goers, while giving Microsoft a huge win to cap off its second strong showing at a conference this year (the first being E3 in June). The reason for the surprise is because Tomb Raider had always been linked with the PlayStation ecosystem, given the popularity with Sony loyalists for over a decade.

Xbox game-intensive PR campaign continues

It makes sense why Microsoft would want such a profitable franchise because the marketing push for 2014 has been about making the Xbox One a gamer's console like the PS4 rather than just a family entertainment machine. At Gamescom, as well as at E3 earlier this summer, Microsoft devoted more of its conference time to promoting independent game studios as well as updates to big-budget titles like Halo and Assassin's Creed rather than on hardware or aesthetic updates. Partially as a way of calming the seas after the disastrous public relations campaign for the Xbox One that annoyed the gaming community in 2013 due to a lack of backwards compatibility and inability to share games with friends for free, Microsoft needed to make amends as quickly as possible. With Sony's PS4 sales at double what the Xbox One has done since the November launch, emphasizing game choice is a good way of keeping loyal customers in the Microsoft family, as well as to make connections with independent studios to earn their exclusive business and make Xbox stand out as the console for gamers.

Xbox One raids the PS4

While all console developers make a play for exclusive titles from independent studios, Microsoft shocked the gaming world when it announced that Square Enix's Rise of the Tomb Raider would now be an Xbox exclusive for Christmas 2015. The Tomb Raider franchise has almost always been a profitable multiplatform game franchise, but has mostly been associated with PlayStation users and with Sony. In 2013, the Definitive Tomb Raider game recorded 69% of its sales on the PlayStation 4, which means that Square Enix must have been paid a large sum of money to convince them to go Xbox-only for the next game, which is a huge risk given how the majority of the studio's money was made off the PlayStation.

Microsoft can win big as a "gamers" machine

From an investment standpoint, this is a big win for Microsoft because it has made a franchise that sold nearly 4 million copies in FY2013 an exclusive title, and reinforced its message that the new console will be for gamers. Furthermore, it dangles a carrot in front of PlayStation loyalists to jump ship to be able to continue a beloved franchise. While it certainly won't lead to a mass exodus from Sony to Microsoft, any above-average increase in system switchers, a traditionally low figure, will be counted as a major victory for Microsoft and its shareholders, who could expect an uptick in sales and interest in Xbox One to be reflected in future earnings reports. Sony, meanwhile, won't be too hard done by the loss of Tomb Raider. It will be now in direct competition with Uncharted 4, another popular exclusive franchise, but it is still a direct hit at Sony's long-time bragging point as the company for hardcore gamers. Microsoft could stand to win big as a result, and more importantly, close the sales gap with Sony, which makes this new market development an intriguing one to follow into 2016.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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