MSFT Microsoft Corporation

By Sarah E. Needleman 

LOS ANGELES -- Microsoft Corp. is investing in five videogame studios, moving to address a longtime criticism that its Xbox One console doesn't have enough exclusive games.

At a press conference Sunday ahead of the industry's annual E3 expo here, Microsoft said it was launching its own studio and was buying four others. The software giant showcased 52 games, including 18 it expects to launch this year or next exclusively on the Xbox One.

Microsoft's machine has trailed rival Sony Corp.'s PlayStation 4 in sales largely because of a lack of exclusive hits, analysts say. The Xbox One had a global install base of 39.1 million units at the end of March, compared with 76.6 million for the PlayStation 4, according to estimates from IHS Markit.

"The Xbox just didn't have enough exclusive content," said Colin Sebastian, an analyst at Robert W. Baird & Co. "They tilted too far toward services and now they're trying to rebalance."

Microsoft previously had made only one acquisition since launching the Xbox One in 2013, when it purchased Mojang AB, maker of "Minecraft," for $2.5 billion the following year. It has canceled high-profile games under development such as "Fable Legends."

In recent years, the company has invested in building out its multiplayer gaming service Xbox Live and releasing upgrades to its hardware, including a new high-end model called the Xbox One X.

The new studio investments give Microsoft ownership of Playground Games, which makes the popular auto-racing franchise Forza, and Undead Labs, known for its zombie-survival series State of Decay. It also is buying Ninja Theory and Compulsion Games, while creating a new studio called The Initiative, spearheaded by industry veteran Darrell Gallagher, who previously was head of development at Activision Blizzard Inc. and Square Enix Holdings Co.

Microsoft didn't disclose financial terms for the studio investments. Wedbush Securities analyst Michael Pachter estimates the company spent about $250 million.

In response to the criticism that the Xbox has lacked sufficient exclusive content to compete with Sony, a Microsoft spokesman reiterated the company's lineup of coming original content.

Microsoft has long maintained it cares more about growing the number of people who use its multiplayer gaming service Xbox Live -- which had 59 million monthly users as of April -- than sales of the Xbox One.

At the press event Sunday, Phil Spencer, Microsoft's executive vice president of gaming, said the company is working on a streaming service that would allow for console-quality gaming on any device.

Analysts believe streaming games, where the content is run on powerful, remote computers and sent wirelessly to the player, could be the next big leap for videogames, and move the industry deeper into Netflix-style subscriptions.

Sony holds its press conference Monday evening.

Write to Sarah E. Needleman at sarah.needleman@wsj.com

(END) Dow Jones Newswires

June 11, 2018 13:22 ET (17:22 GMT)

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