It came as a mild surprise when Microsoft announced Saturday that it was purchasing not just one but two mid-sized studios with a focus on role-playing games. But as strange as it seems on the surface, the deal makes perfect sense for all three parties.
At the end of a relatively uneventful Xbox showcase in Mexico City on Saturday afternoon, head of Microsoft Studios Matt Booty announced that his company planned to buy Obsidian (Fallout New Vegas) and Inxile (Wasteland). The former we already knew about—Kotaku broke the news last month—but the latter seemed odd. Obsidian and Inxile share a lot of common traits. They both specialize in old-school PC RPGs, they both come from the lineage of Interplay (Fallout) and Black Isle (Baldur’s Gate), and they both operate in the no-man’s-zone between indie and AAA, making the type of mid-budget games that most publishers have abandoned. Why would Microsoft want them both?
For Obsidian and Inxile, the deal was simple: Both studios have faced financial struggles over the years, and crowdfunding wasn’t enough to support the type of ambitious games they like to make. Obsidian’s Pillars of Eternity 2, which came out earlier this year, was a commercial flop (and a good game overshadowed by the transcendent Divinity Original Sin 2). Inxile’s recently released Bard’s Tale IV earned mediocre reviews. Bouncing from crowdfunded project to crowdfunded project seemed unsustainable, and now, both Obsidian and Inxile have financial security for years to come (or at least until the next time Xbox changes bosses).
It’s not as easy to see why Microsoft would want two companies with similar pedigrees. Obviously, the Xbox’s lineup of first-party games has been anemic over the past couple of years, especially compared to its longtime competitor, Sony, which seems to put out one Game of the Year competitor after another. But Obsidian and Inxile are small studios—neither is as massive as Sony Santa Monica (God of War) or Guerrilla Games (Horizon: Zero Dawn), and neither has ever tried to compete in the arms race over graphical fidelity. How do they fit into Microsoft’s long-term strategy?
Truth is, as Team Xbox has been signaling for quite some time now, and as we’ve gathered from our own conversations with both people in and outside of the company, Microsoft is no longer interested in competing directly with Sony. That’s a battle it lost as soon as Xbox executives started outlining its original, odd plans for Xbox One in 2013. The PS4 has outperformed the Xbox One so resoundingly, Microsoft stopped providing hardware sales figures.
Instead of licking its wounds and trying to fight Sony yet again next generation, the Xbox division under Phil Spencer has taken a drastically different approach. What Microsoft wants most today is studios that will help boost its impressive Game Pass subscription service, its upcoming streaming platform, and its continued stabs at PC gaming. Developing big Xbox exclusives is no longer a priority for Microsoft, and in fact, the company decided in 2016 that it would release future games on both Xbox and PC. Soon enough, Game Pass will also be available on PC, and it wouldn’t be shocking to see Microsoft embrace Steam—or overhaul the Windows store—as it tries to reach the hundreds of millions of people who play video games on computers.
So why wouldn’t Microsoft want to own two respected PC developers? Spencer and co are likely salivating at the thought of packaging big RPG bundles with a Game Pass subscription. Both Obsidian and Inxile have long been full of talented developers but hampered by resources, and both make games that appeal to very specific, hardcore audiences, which makes them perfect components to Microsoft’s long-term strategy.
That’s not to say this will work out perfectly. Any developer who’s worked with previous iterations of Microsoft has stories about how frustrating the company’s management structure could be. Even Obsidian has a horror story, one that made this particular acquisition shocking to a lot of people.
In 2011, Obsidian signed up to make a game called Stormlands that was planned to be a launch title for the Xbox One. It was an ambitious role-playing game that Microsoft canceled for a number of reasons—everyone involved agrees that both companies share culpability—but it was also one that suffered from Microsoft’s bloated nature at the time. Obsidian CEO Feargus Urquhart told me during an interview a couple of years ago that Microsoft had a team of directors and producers assigned to Stormlands, including one executive producer who worked with the studio during the early pitching and greenlighting process.
As originally pitched, Stormlands was going to have co-op multiplayer, Urquhart said. Then that executive producer made a different suggestion. Recalled Urquhart: “About three months into the whole pitch process [he] said, ‘I think what we want to do is really hit it out of the park with this. What do you guys think about dropping multiplayer and just really focusing on it being a great roleplaying game?’”
Then, as was common for Microsoft at the time, there was a shuffle. “About two weeks after that, he was reassigned, and a different producer was put on it,” said Urquhart. “He had a different vision for that, and that vision was to double-down on multiplayer.”
Stormlands was, in many ways, the epitome of the old Microsoft way of doing things. Microsoft insisted on a long list of supplemental features including Kinect, cloud computing, and SmartGlass support, and the project became so bloated, neither company could salvage it. Today, under new leadership and structure, the Xbox department is very different, and it’s easy to envision a world where Spencer and co allow Obsidian and Inxile to thrive. If that happens, the good news for people who just like to play games is that two talented mid-size studios that might not fit into the gaming industry on their own have a chance at long-term success thanks to Microsoft’s evolving ambition.