Microsoft’s seemingly premature closure of Mixer left the streaming community in despair – but was a typically ruthless business decision by the platform-holder.
The concept of the loss-leader – in which you swallow a loss during a newly launched product’s early days, in order to ensure it achieves a critical level of market penetration later on – will be familiar to anyone who observes how the makers of videogames consoles go about their business. All three consoles that Microsoft has so far launched were initially priced at or below cost price, before manufacturing economies of scale kicked in and, later on their lifecycles, the company finally started profiting from the hardware, as well as the famously more profitable software.
But Microsoft’s decision to close Mixer suggests that the platform-holder has fallen out of love with loss-leaders, at least in situations where hardware isn’t involved.
Whichever way you look at it, Microsoft’s abrupt and unexpected decision to close the streaming service and jump in bed with erstwhile rival Facebook Gaming was ruthless at the very least and possibly even deeply cynical. It was certainly a decision that eschewed any form of sentimentality in favour of pure business pragmatism.
As a result, the fiercely tribal and partisan community of committed gamers will, in future, think much more deeply before throwing in its lot with Microsoft rather than a rival company – which could prove problematic with both its Xbox Series X and Sony’s PlayStation 5 due to arrive before the end of the year. Although so far, Sony has surprisingly declined the opportunity to leverage Mixer’s closure in a bid to score PR points over its deadly rival.
So why, precisely, did Microsoft close Mixer?
As the company’s head of gaming, Phil Spencer, pointed out in interviews after the announcement, Mixer had essentially failed to grow to the critical mass which is required for any streaming service to succeed. One can surmise from Spencer’s comments about finding the size of Mixer’s audience disappointing, along with its failure to corner a significant share of the game-streaming market, that it was losing money for the company.
And Microsoft had certainly put plenty of cash into it – it never disclosed how much it paid to acquire the technology behind it, originally known as Beam, in 2016, but after it got Mixer properly up and running in 2017, the company chucked money at it. Firstly in terms of software development, adding features and robustness, and then by signing up high-profile Twitch streamers for eye-watering sums.
According to esports consultant Rod Breslau, adding up the deals they originally signed to decamp from Twitch to Mixer, plus the pay-offs they received when Microsoft shut Mixer and terminated those contracts, streamer Ninja profited to the tune of around $30 million USD and Shroud made about $10 million USD. Not a bad haul, given that Ninja only signed to Mixer in August 2019, and Shroud followed suit in October 2019.
Which all provides a nice little microcosm of late-stage capitalism: the already-loaded big guns of the streaming scene become even richer after just a few months’ work, while lesser known streamers struggling to grow their audiences – almost certainly having committed to the service for a much longer period than the big beasts – must now start all over again, and urgently need to establish a new source of income before Microsoft pulls the plug on Mixer, which will take place on July 22. At least Twitch, with its vastly wider reach, will give those less established streamers a better chance to make more money in the long run. It’s easy to envisage them becoming PlayStation 5 evangelists in the process.
What particularly sticks in the craws of everyone trying to make a go of Mixer is that it feels as though Microsoft never gave it a chance to succeed: shutting the whole operation down mere months after splashing vast amounts of cash on poaching two of Twitch’s top talents seems very impatient indeed.
Let Facebook splash the cash instead
It’s easy enough, however, to discern the thought processes behind Spencer’s decision to kick Mixer into touch. Sure, Microsoft is one of the world’s richest companies, but recently, one of the few concerns which is even richer – Facebook – entered the streaming fray with Facebook Gaming. Facebook is desperate to establish a foothold in the games industry, which it has done to some extent with the acquisition of Oculus, and has recently been touting its desire to use Facebook Gaming as its primary means of establishing that bridgehead.
So if you were Phil Spencer, you’d undoubtedly find yourself thinking: “Hang on: why are we shovelling all this money into a bottomless Mixer-branded pit in order to scrabble our way to a basic foothold in the streaming market, when we could just exit stage left and let Facebook feed their near-identical cash-incinerator instead?”
Revealingly, Spencer mentioned Microsoft’s desire to concentrate resources on its xCloud streaming game-delivery service instead which, of course, will compete directly with Google’s Stadia. Even for a company as mind-bogglingly rich as Microsoft, the prospect of competing against two companies with even greater amounts of cash washing around was apparently daunting. Facebook Gaming gave Microsoft an out for Mixer which leaves it free to embark on a massive rivalry with Google – a crucial rivalry in the long-term, if we’re to believe the widespread opinion (which has been touted for at least 20 years) that the days of consoles are numbered.
There are other potential sub-plots. Microsoft partnering rather than vying with Facebook makes sense, since its console offerings could really do with a VR headset, and via Oculus, Facebook could provide precisely that. And if Microsoft is indeed going to embark on an almighty ding-dong with Google, then Spencer at least knows his enemy: Stadia’s head Honcho Phil Harrison spent three years working under Spencer at Microsoft, having previously risen to the status of one of the games industry’s big beasts at Sony Computer Entertainment.
Meanwhile, all those streamers who committed to Mixer will now be feeling pretty aggrieved with Microsoft, and will be thinking hard about their next moves. They know that Twitch is going nowhere – so at least they can return to that fold — and will now also be wondering whether Facebook will demonstrate more staying power in the world of streaming than Microsoft did. Our gut feeling is that they will – Facebook has far fewer games-related plates spinning than Microsoft does, so at least shouldn’t face any dilemmas about which ones to prioritise. But Mixer’s closure has severely dented any sense of trust in major gaming corporations that streamers may previously have possessed.
