10 Reasons Satya Nadella Can’t Sell the Microsoft Xbox Division

by Don Reisinger

It’s hard to put an exact figure on the value of the Xbox brand, but considering it generates billions of dollars a year for Microsoft, it’s safe to say that any company that would want to acquire the division would need to shell out a significant sum of money. For Microsoft, such a sale might be profitable, but it would be awfully hard for the company to actually find suitable buyers, given how much the division would fetch on the open market.

The living room is becoming a hot battleground for major companies. Google has moved there with Chromecast, Apple has its Apple TV and several other companies, like Roku, are offering hardware to bring entertainment to televisions. Microsoft is already there with the Xbox 360 and Xbox One, and its platform is arguably the best in the business. Why give that up?

According to research firm NPD, which tracks most closely the game industry, sales across the space will jump considerably in the coming years as consumers invest in new consoles, like the Xbox One, and software sales again pick up. Now is not the time to be ditching the industry—especially when, in Microsoft’s case, it’s offering one of the most popular consoles right now.

One of the issues for Microsoft is how it’s going to sell its console to another company. Granted, sales are strong, but it’s believed that Microsoft is losing money on every unit it sells. So, while the console’s revenue might be strong, it’s hard to believe that too many companies would want to acquire a device that has a sagging bottom line. Eventually, that will change. But for now, Xbox One development costs are too high to justify acquiring the company.

Although Satya Nadella didn’t specifically cite the Xbox One as an important component in his company’s plans going forward, he did say that hardware will be a key focus of his. Since the Xbox is arguably Microsoft’s most successful hardware product to date, why would Nadella sell off the division? It doesn’t add up.

Microsoft recently acquired the rights to the “Gears of War” game franchise. The company also owns “Halo” and has been trying hard to build out its first-party offerings. It doesn’t make much sense to pay so much for a popular franchise like “Gears of War” if the next move would be to sell the entire division. Microsoft, at least from the outside, seems poised to continue building out its game library.

Microsoft seems increasingly concerned that the consumer market is leaving it behind. Customers are buying up Apple and Samsung devices and leaving Microsoft’s products on store shelves. So, Microsoft has responded by saying that it wants to attract more consumers to its products. What better way to do that than to offer a product, in the Xbox, that is designed specifically for consumers and integrates fully with the company’s other services, including OneDrive? It seems like the Xbox is the perfect way to keep customers coming back to its many services.

Competition is always an issue in the games industry, but things are actually looking up for Microsoft. While Sony’s PlayStation 4 is the top-selling hardware on the market, Nintendo’s Wii U is all but dead, leaving Microsoft with only one main competitor. Better yet, Sony’s strength is in Asia, where Microsoft has spent little time promoting its brand. In the Western world, Xbox might be poised for outright success over the long term.

It’s hard to overstate just how important Xbox Live is to Microsoft. The service is in one sense an online-gaming platform, but in another, a gateway to the company’s many other services. Microsoft’s Xbox Live provides access to digital content—the great frontier in home entertainment—and integrates with the company’s services on the PC and in the cloud. Xbox Live is too important to be let go.

Here is perhaps the biggest roadblock standing in Microsoft’s way: The only companies that might be able to dole out the billions to it would take to acquire the Xbox division are Microsoft’s competitors—Google, Sony and Apple. Sure, a surprise company might come along and try to buy Xbox, but that seems unlikely. It’s hard to see Microsoft wanting to sell its Xbox division to Google, Apple or Sony.