Big news from Microsoft today, as it has put its most visionary product person, Panos Panay, in charge of Windows in addition to hardware. Technically Panay isn’t in charge of all of Windows, but the client experience you see on your computers. Very technically, understanding how the matrix of the various desktop and cloud pieces of Windows interact with Microsoft’s org chart is beyond the scope of this (or maybe any) newsletter.

There are going to be a lot of implications for Windows, so keep an eye out for analysis from Tom Warren today.

I’m leaving that to him so I can write a little more about Microsoft’s cloud efforts here — specifically Phil Spencer’s comments that as the head of Xbox, his main competition isn’t Sony but instead Google and Amazon.

It is part of a trend of Microsoft executives minimizing their consumer products in favor of talking up their cloud services. Which is to say: I think some portion of Spencer’s comments are about hammering home Microsoft’s new marketing message than dismissing the next generation of consoles.

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Some, but not all. Microsoft really is looking ahead to the next battle after (or at minimum, alongside) the Xbox vs Sony console war. He’s looking at cloud gaming. It’s been joined by Google and Nvidia already and Amazon has indeed been rumored to deliver something this year. Sony’s in there too, but it’s a little hard for me to say if the company’s heart is really in it.

We’ll leave Amazon’s effort aside for now since it’s still deeply in rumor territory, but we can already see that Google, Microsoft, and Nvidia each have very different ideas of how cloud gaming should work. Google is treating it essentially as a console in the sky, Nvidia is trying to get you access to your PC gaming library (Steam in the sky!), and Microsoft is hoping to leverage its Xbox and Windows ecosystems by bringing the games it’s already developed and licensed.

Each model comes with pitfalls. All three have different challenges getting games publishers to put games on their platforms. Google needs a big library fast since it can’t lean on an existing games ecosystem. Nvidia has a little breathing room but perhaps not as strong a negotiating position for its deals. Microsoft has struggled with getting Xbox exclusives in the recent past and it hasn’t convinced enough developers to adopt its ecosystem instead of (or in addition to) Steam.

Spencer is probably right to be more worried about competing in cloud gaming than competing with Sony and Nintendo on console sales. But it does make me wonder if the next generation of Xboxes is going to repeat the Xbox One’s rocky launch, where games played third fiddle to Microsoft’s doomed TV ambitions.

So these companies have different business models, challenges, and ecosystems to build on. But they all share a common problem: cloud gaming just isn’t that good yet. It is a little weird for Spencer to say his competition is Google and Amazon when Amazon hasn’t launched and Google’s Stadia launch has been so rough.

I use Stadia under very close to ideal internet conditions and it’s really rough. Cloud gaming might be the future, but unless our internet infrastructure gets way better, it’s all a pipe dream. Or maybe a “series of tubes” dream.

It’s also possible that the push for cloud gaming foretells yet another attempt for big tech to convince us to switch our computers to “thin clients,” super-light and not-very-powerful local computers with the real power in the cloud. Chromebooks are basically that already. It seems like a good trade off until Windows search mysteriously goes down for hours because of a Microsoft services outage.

One last thought: go read Sean Hollister’s story about Nvidia’s GeForce Now launch, specifically on the section of what games are and are not available. If Nvidia is promising to just put the games you’ve already bought into the cloud, why can’t it do that with every publisher’s game? It clearly feels it needs to get a separate license.

Just this past week we watched Fox and Roku get into a fight that very nearly took Fox’s app away right before the Super Bowl. We see channels and cable providers get into carriage battles all the time, taking channels offline. It’s reasonable to expect the same thing could happen between, say, EA and Nvidia, or Google or Microsoft.

The cloud isn’t just made up of server racks and fiber connections, it’s made up of a byzantine series of deals and agreements. As we rush to turn our consoles and laptops into thin clients beholden to more powerful computers in a data farm somewhere, we would do well to remember that access to our software is increasingly not a matter of ownership.

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