Microsoft’s gaming revenue fell four percent in the latest fiscal quarter and Xbox hardware revenue declined 30 percent, the company reported.
While Microsoft doesn’t report console sales and doesn’t provide an updated number for Game Pass subscribers (as of January 2022 it had 25 million), it’s clear the company is struggling to sell Xbox consoles. In fact Xbox console sales have been struggling for a while. Xbox Series X and S sales were down during last year’s crucial holiday quarter, and it looks like they were down in the quarter ending March 31 this year as well.
The only bright spot for Microsoft was a modest three percent increase in Xbox content and services revenue. The company said this was “driven by better-than-expected monetization across third-party and first-party content and growth in Xbox Game Pass”.
So, why is Xbox struggling? In its financial report, Microsoft blamed most of the decline in Xbox hardware revenue during the same period last year on “increased console supply”, which suggests it is still left with two and a half years of supply with the Xbox Series X and S. It’s a difficult time. post launch.
But declining Xbox console sales can also be attributed to Microsoft’s first-party video game woes. Xbox Game Studios has had an extremely quiet 2022 after several delays, and with the failure of Halo Infinite, pressure has mounted on Bethesda’s Starfield, due later this year, to drum up interest in the Xbox console and Game Pass.
Microsoft boss Satya Nadella put a positive spin on the quarter in additional remarks, with the company revealing third-quarter records for monthly active users and monthly active devices across Xbox.
“Great content is the driving force behind our growth,” Nadella said. “We have now passed 500 million lifetime unique users across our first party titles.
“And I’ve never been more excited about our pipeline of games, which include the fourth quarter launches of Minecraft Legends and Raidfall.”
And while Microsoft generated nearly $1bn in revenue from subscriptions during the quarter, Xbox chief Phil Spencer admitted last year that Game Pass growth had stalled on consoles, with the focus on PC Game Pass.
Looking forward, Microsoft expects gaming revenue growth in the high single digits in its next fiscal quarter with Xbox content and services revenue growth in the mid-teens due to Game Pass and first-party and third-party content.
The financials come ahead of Microsoft’s proposed $68.7bn purchase of Activision Blizzard, which is subject to regulatory approval. The UK’s Competition and Markets Authority (CMA), which makes its decision today, is one of three major regulators around the world still investigating the Microsoft deal, along with the US Federal Trade Commission and the EU’s European Commission. doing.
The deal is crucial to Xbox’s fortunes, and a key element in Microsoft’s plans to launch its own App Store for games on mobile devices. New rules are expected in March 2024 under the EU’s Digital Markets Act, which will require Apple and Google to open up their mobile platforms to app stores owned and operated by other companies.
Microsoft aims to capitalize on this with its own Xbox platform, and buying Activision Blizzard would fill an “obvious hole in our capability,” Phil Spencer said last month with the likes of Call of Duty Mobile, Diablo Immortal and Candy Crush Saga. Was. to be “critically important” to attracting players to its new platform.
Of course, gaming is only a small part of Microsoft’s overall business. For those interested in eye-watering numbers, Microsoft’s revenue was $52.9 billion, a seven percent increase for the quarter. Profit was $18.3bn, an increase of nine per cent.