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How Microsoft Could Build the 'Netflix of Gaming'
Capital Markets, FinTech
Microsoft Corporation (NASDAQ: MSFT) has long been in the gaming business — the company began developing the original Xbox console in 1998.
Microsoft’s share of the console market has slipped in recent years though and the landscape is set to change dramatically, but investors with an eye on gaming should rest assured that it’s well-prepared to ride the trend, Morgan Stanley’s Keith Weiss said in a recent note.
Microsoft Today: Razors and Razor Blades
Since entering the gaming market, Microsoft has operated primarily on what Weiss calls the “razor/razor blade model” of high margin games being bought for lower margin consoles.
The company created upsell opportunities through accessories and Xbox Live subscriptions, which add features such as multiplayer online gaming, free games and discounts.
Weiss projects Microsoft’s gaming business to surpass $10 billion in fiscal 2018, up from approximately $9 billion in fiscal 2017. Within that figure, roughly 70 percent will come from software and subscription services.
It should be noted that Microsoft has disclosed little information on the how its gaming revenue breaks down, but software and …
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