According to one Wall Street analyst, Microsoft’s endeavor into the future of streaming which might turn into the “Netflix of Gaming” by setting it on the path to becoming a $1 trillion company.
Morgan Stanley analyst Keith, Weiss wrote in a note that we see Microsoft structure out the ‘Netflix of Gaming, we think that gaming has previously been ignored, undervalued, and misunderstood by the analysts and investors.”
Jefferies analysts Timothy O’Shea also identifies that Microsoft is on the edge of developing some new and explosive gaming businesses.
He also wrote that Microsoft, Google, and Amazon are all working on cloud-based streaming video game platforms designed to vie with PlayStation and Xbox, and these platforms could launch before the end of this decade. These services would increase the addressable market by at least 4times and would be available for all the screens including the TVs, laptops, tablets, and smartphones.”
And Weiss also agree with how Microsoft is set to capitalize on the shift in the industry.
Morgan Stanley analyst also wrote on a post that with the gaming ecosystem increasing from the comfort to the mobile device and PC, it is a big move from hardware and from one-time video game sales to the subscription services, and a future includes broadcasting, streaming, and mixed-reality, we see Microsoft as well positioned for the future of Gaming.
The Newzoo market-intelligence data illustrates that mobile gaming leads the entire gaming market. Mobile saw a 19.3% year over year on the first-quarter revenue which increases in 2017, with the consoles rising at a comparably weak 3.6% only.
Weiss said, Microsoft has already been selling those software-based gaming services, and its Xbox Live subscription service has seen its monthly active users over the past four years which increases almost the double.
Weiss said by adding in it, Microsoft has an exclusive advantage in gaming streaming with the Microsoft Azure. Azure is a key discriminator for Microsoft in the technology which required to achieve streaming and also allows for developers to scale and modifying gaming infrastructure on a consistent cloud.
However, Not only Azure can boost gaming revenues, but there are yet some another layer of benefits for Microsoft. Xbox GamePass is one of them, that’s service users download onto their computer and play by using a console which could completely be soon digital.
Weiss also said, in the next 3-5 years, we are expecting from the Microsoft to extend the reach of Game Pass from the PCs and console, to finally covering the mobile devices which greatly increases the potential base for monetization purposes.
Weiss wrote, moving the Xbox GamePass completely to digital might greatly expanding the entire gaming market. The move would increase the gaming market as users would not be even required to purchase a $400 console as a base requirement for gaming.
Gaming might be that, which takes Microsoft over the finish line in its mission to become a $1 trillion company. Weiss said his margin estimation looks increasingly conservative by given our position which is the mixture of Software and Services Gaming revenue should increase with the 80% of the outer years of our forecast period.
His projection of 45% gross margin on the gaming unit by 2021 is a key portion to support a path to $50 billion in earnings before tax and interest and a $1 trillion market limit for the Microsoft.