Xbox may have been subject to a lot of ridicule this year due to their controversial shift in strategy by porting four former first-party games to competitors PlayStation and Nintendo, but there’s no doubt the Microsoft-owned brand is prospering regardless of the hate.
Microsoft’s FY24 Q3 (Jan-March) earnings call was held yesterday, and it revealed staggering numbers for their gaming division that prove they’re doing just fine, even without the unexpectedly successful PlayStation-owned Helldivers 2 earlier this year.
Microsoft Shareholders Must Be Happy With Gaming Division
The results of the Microsoft Gaming division’s earnings in the past quarter are quite impressive, with intriguing conclusions to be drawn from them:
- Revenue up 51% (with 55% from Activision)
- Xbox content & services revenue up 62% (with 61% from Activision)
- Xbox hardware revenue declined 31%
Ever since Xbox closed its $68.7B merger with Activision Blizzard last year, the massive publisher has been clearly carrying an enormous part of the gaming division’s quarterly revenue. Interestingly, with Activision Blizzard’s contribution deducted, it appears the Xbox division was down 4% year-on-year in overall revenue.
The same holds up for the content and services revenue, which gains a huge 61% boost thanks to the Call of Duty owner. Removing that from the equation shows Xbox’s core services like Xbox Live, Game Pass, etc. only grew 1% in the past year. Regardless, it’s still counted altogether, but the Activision Blizzard merger has been worth its weight in gold for Microsoft.
Hardware Decline & Multiplatform Success May Lead To More Xbox Games On PS5
The more concerning part of the results that ties in perfectly with Xbox’s pivot in their exclusivity strategy earlier this year is the Xbox hardware revenue, which was down 31% year-on-year, the steepest drop-off for the Series X/S consoles since launch. Moreover, Microsoft CFO expects this revenue to decline further, suggesting console demand has dipped sharply.
Xbox hardware revenue has been in the red for a while, so it’s no wonder the brand has reconsidered its approach to exclusivity. Outrage from fans aside, though, the strategy shift has clearly worked for them, as Microsoft CEO Satya Nadella commented on its success:
We’re expanding our games to new platforms, bringing four of our fan-favorite titles to Nintendo Switch and Sony PlayStation for the first time. In fact, earlier this month, we had 7 games among the top 25 on the PlayStation store, more than any other publisher.
Sea of Thieves and Grounded have been topping the PlayStation pre-order charts for a few weeks now. Couple that with other Xbox-owned games like Minecraft, Call of Duty, Fallout 4, etc. ranking high in sales on PlayStation, and it comes as no wonder that Microsoft must’ve made a boatload of money on software sales in the past quarter.
Nadella’s comment also seems to suggest that they may bring more titles to PlayStation and Nintendo after the success of the initial four. There’s long been speculation about the exclusivity status of tentpole Xbox titles like Starfield, Indiana Jones, and most recently, Senua’s Saga: Hellblade 2. The impressive results may just sway Microsoft into porting them to PS5.
With Xbox hardware revenue declining steeply, many are concerned about the platform holder throwing in the towel and becoming a third-party publisher. Thankfully, Xbox has reaffirmed its commitment to hardware, with a next-gen console in the works. Rumors point to it being a handheld, but it’s great that they’ll continue to compete with PlayStation, as competition breeds innovation.
