Inventing the next huge video game franchise (also known as intellectual properties, or IP) is the elephant in just about every major publisher's boardroom.
Of course, these companies are all big names in the first place because they rely on the strength of their most beloved franchises: Microsoft's (MSFT) - Get Microsoft Corporation Report Halo, Sony's (SNE) - Get Sony Corp. Report Final Fantasy, Nintendo's Mario and Pokémon. And while those franchises continue to generate millions (and sometimes even billions) for their respective companies, the highly competitive nature of the video game industry demands new offerings, too.
This is not an easy conundrum for these big publishers to solve, as a large portion of their employees always have to be at work envisioning and/or creating the new big game in a franchise. That means hiring even more people to generate ideas that may or may not stick, which is a costly venture, not to mention the polar opposite of efficiency.
One approach many companies take to deal with the issue is simply purchasing the properties of smaller game companies instead. This was the case with the notoriously popular "sandbox" adventure game "Minecraft," which challenges the player to figure out how to survive in a strange and often unfriendly world.
Originally created by Swedish game designer Markus "Notch" Persson in 2009, "Minecraft" went on to become the best-selling video game of all time with 238 million copies sold as of 2021. Microsoft Studios bought the rights in 2014 for 2.5 billion USD and has been reaping the benefits of its massive player base ever since (139 million monthly active players as of 2021).
Speaking of breakthrough successes, a brand new game debuted on February 25 from Japanese developer FromSoftware that is shattering sales records. It has sold more than 12 million copies in less than three weeks, blasting past the sales of huge video game franchises such as "Skyrim," "Grand Theft Auto," and "God of War."
What is Elden Ring About?
"Elden Ring," a medieval-inspired adventure with lore penned by "Game of Thrones" author George R.R. Martin, welcomes the player to an enormous world looming in the shadow of an ancient golden tree, populated with creatures great and small. But perhaps the focus really lies with "great," as developer FromSoftware is known for two things: Making extremely difficult games and pitting the player up against absolutely enormous enemies.
FromSoftware is currently owned by Japanese media conglomerate Kadokawa Corp., which Sony owns a 1.93% stock in as of February 2021. While the developer has been making games since the mid-90s, it started to draw significant attention with "Dark Souls" in 2011, the first in a new series known for its unyielding levels of difficulty. And while these games drew a player base seeking new levels of challenge, it took as long as four years for one installment to sell 10 million copies.
Why is This a Threat for Microsoft?
Microsoft has chosen to move in a new direction lately, putting its focus on an exclusive subscription service over inventing new IPs. It launched Xbox Game Pass in 2017, which is also available on PC and could easily be called the Netflix of games, and boasted over 25 million users as of February 2021.
However, Xbox users have noticed that Microsoft seems to be concentrating much less on making its own new series, with only a few exclusives announced for 2022. It gives gamers less incentive to buy the Xbox Series X|S, as both Sony and Nintendo have much more to offer. And with a monster seller like "Elden Ring," Sony appears to have the upper hand at the moment.
Microsoft may have a powerful weapon in hand to bring to the battle, but it's a flawed one. Since it announced its plans to acquire Activision Blizzard for $68.7 billion back in January, it will soon have some tremendously popular long-running franchises under its belt, including "World of Warcraft," "Diablo," and "Overwatch."
But Activision Blizzard has also been under major scrutiny since last year for its "frat boy culture," and allegations of sexual harassment of its female employee, which only piles onto Microsoft's issues of a similar nature.
In the long game, Microsoft's acquisition of Activision Blizzard, along with buying Bethesda as part of the ZeniMax acquisition in 2020, will certainly draw longtime fans of both developers' franchises. But for now, it doesn't have anything new that can compete with the likes of "Elden Ring"--and that leaves a major chink in its armor.