Microsoft is trying to spin some disappointing results for its Xbox division, with overall revenues down 4% and only a small rise for Game Pass.
If things were going perfectly for Xbox then they wouldn’t need to be buying Activision Blizzard for $69 billion, but exactly how well they’re doing is always difficult to tell because they won’t reveal console sales figures or the total number of Game Pass subscribers.
Their latest financial results are the second best ever for the first three months of the year, after last year, although that says more about what came before than it does about their situation right now.
Gaming revenue as a whole fell by 4%, while hardware sales dropped by nearly a third. Xbox content and services revenue did increase, by 3%, but apparently not well enough for Microsoft to reveal new subscriber numbers for Game Pass.
The last official figures for Game Pass were 25 million, way back in January 2022, and since then there have been regular reports of it missing its sales goals and reducing traditional game sales.
The only detail offered by Microsoft is that the rise was as a result of ‘better-than-expected monetisation in third party and first party content, and growth in Xbox Game Pass.’ So not all of that 3% rise was due to Game Pass, with the rest implied to come from DLC.
The end result is the worst quarter of Xbox sales since the launch of the Xbox Series X/S in late 2020, following a similar drop the previous quarter, right in the middle of the Christmas gift giving season.
The reasons aren’t hard to guess either, with the Xbox having had no major first party releases for over a year now, just as the PlayStation 5 overcomes its stock problems.
‘Great content remains the flywheel behind our growth,’ said Microsoft boss Satya Nadella, not acknowledging that Xbox has barely had any content, great or otherwise, in a very long time.
‘I’ve never been more excited about our pipeline of games, including the fourth quarter launches of Minecraft Legends and Redfall,’ he said. Which ignores that the fact that Minecraft Legends has already been released, to mediocre reviews and poor physical sales.
He tried to put a brave face on things though, pointing out that new records had been set for monthly active users and monthly active devices, which are important metrics.
In the future, much depends on the success of this autumn’s Starfield but Microsoft is also looking to mobile for grown, with Apple and Google being forced to allow third party app stores on their devices from March 2024, thanks to a new EU law.
Microsoft intends to take full advantage of this, via its cloud technology – which, unlike Xbox, is highly profitable – and games provided by the Activision Blizzard acquisition, including King titles such as Candy Crush Saga.
Still, it’s clear that as a traditional console business the Xbox is not currently working out, explaining better than ever why Microsoft is seeking such extremes remedies.
Buying Activision Blizzard will be the biggest purchase in its history and yet it’s still relatively trivial compared to the profits it makes, which increased by 9% to $18.3 billion in just the last three months.
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