Microsoft Says Xbox Has Been Losing The Console Wars Since 2001

As Microsoft dukes it out with the Federal Trade Commission (FTC) over its $69 billion acquisition of Activision Blizzard, the Xbox maker has admitted something everyone probably already knew by now: It’s lost the console wars.

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“Console wars” here refers to the perpetual tussles between manufacturers like Nintendo, Sony, and Microsoft to dominate the market and outsell their rivals in a given hardware generation. In a document submitted in a June 22 court hearing by Microsoft (and viewed by Kotaku), the company discussed how it’s been losing the console wars to Nintendo and Sony ever since it hit the scene in 2001 with the beefy original Xbox. It suggests that both the GameCube and PlayStation 2 outsold the first Xbox by a “significant margin.” And as Microsoft stated in the document, it’s been like that ever since—even now.

“Xbox has lost the console wars, and its rivals are positioned to continue to dominate, including by leveraging exclusive content,” Microsoft wrote. “Xbox’s console has consistently ranked third (of three) behind PlayStation and Nintendo in sales. In 2021, Xbox had a share of 16 percent while Nintendo and PlayStation had shares of [redacted] and [redacted], respectively. Likewise for console revenues and share of consoles currently in use by gamers (‘installed base’), Xbox trails with 21 percent while PlayStation and Nintendo have shares of [redacted] and [redacted], respectively.”

According to the hardware and software sales tracker VGChartz, Microsoft’s latest consoles, the Xbox Series X and Xbox Series S, have only sold 21 million units as of April 2023. Meanwhile, the PlayStation 5 and Nintendo Switch are neck-and-neck at approximately 36 million units each, though the handheld-console hybrid has a slight lead.

As a result, Microsoft said it’s essentially given up on competing in the current console wars, instead opting to focus on delivering software (that either hasn’t come out, or has flopped) to its playerbase. We’ve seen this pivot through most of what Xbox has been doing nowadays, such as its intense focus on fleshing out its Game Pass subscription service. Microsoft seems to be less interested in being number one in the market and more dedicated to becoming the industry’s first Netflix.

“Having lost the console wars, Xbox is betting on a different strategy than Sony [and Nintendo],” Microsoft wrote in the document. “Xbox generates profits through game sales, not console sales. That is because Xbox sells its consoles at a loss, effectively subsidizing gamers’ purchase of the hardware in hopes of making up the [lost] revenue through sales of games and accessories.”

Kotaku reached out to Microsoft for comment.

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These admissions come just as Microsoft has also stated that it expects the next console generation to start in 2028. This would indicate that Call of Duty would still hit competing platforms if such a game were to be released if/when the company scoops up Activision Blizzard. That said, Sony isn’t too keen on the acquisition, with Sony PlayStation boss Jim Ryan admitting in the same hearing it wouldn’t share info on a hypothetical PlayStation 6 with Call of Duty’s devs should the acquisition be approved. Obviously, this could have all sorts of repercussions for Call of Duty fans on PlayStation.