Microsoft Gaming Revenue Drops 4% year-on-year, while Xbox Hardware Revenue Declined 30%

Microsoft announced its financial results for the third quarter of the fiscal year 2023, including details on the performance of its Xbox business.

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masterfox156d ago (Edited 156d ago )

this year will be even higher declined imo.

-Mika-156d ago

It really sad. Phil needs to go. Microsoft really needs to go ask Peter Moore to come back. He did amazing during the early 360 years. That aggressive leadership is what they need. This passive leadership style of Phil Spencer is not working. Xbox really needs someone who is assertive and who has a plan to right the ship. Phil does not know what he doing. It not even up for debate anymore.

jznrpg156d ago

@Mika Peter Moore was part of the long term problem. Instead of learning to manage studios and create their own IP and grow their own studios they paid for exclusives hence where they are now.

neomahi156d ago

@ -Mika- While I agree, don't you think buying Activision-Blizzard is aggressive enough? It's pretty aggressive, but that's it

Aloymetal156d ago (Edited 156d ago )

Idk if you're being sarcastic or not but if you're being serious then I agree, that's exactly how I feel about Jim.
Microsoft needs to bring someone different and Sony needs to bring back uncle Jack Tretton lol. Maybe my fellow PS fans disagree but that's how I really feel.

Lifexline156d ago

@Mika do you really believe Phil is doing a bad job. IMO i believe he is so far the best xbox executive they have had. He is finally doing something about the lack of consistent games that Xbox has always had and it's because they don't have a lot of capable developers he is rectifying that. In the past they relied on paying for third party exclusivity which worked for a moment but it's a long term plan. If it wasn't for him they wouldn't be acquiring so many studios and he helped with create GamePass which is it's biggest achievement yet.

He is letting developers do their own thing which works for some others not so much. But he is positioning Xbox to be the market leader in the future. Most xbox executives have been short sighted and he is the first one that is planning for the future. All these developers they will make Xbox a formidable player in the gaming industry. Just look at how much fruit Bethesda is bearing already imagine activision in the future amongs all the other studios.

fr0sty156d ago

LifexLine, if that's the case, then why didn't Xbox have any first party exclusives last year? Why is halo in shambles? He's had years to right this ship, and has failed to.

Hofstaderman156d ago

Picturing the Agent from the Matrix saying this.

+ Show (4) more repliesLast reply 156d ago
Lifexline156d ago (Edited 156d ago )

The thing is I wish Microsoft would report numbers for Xbox alone but they don't.

But it's good to see GamePass being a bright spot and it alone raising revenue by 3 percent. I'm sure MS is happy about that they seem more focused on GamePass then the hardware. I'm glad to see it flourishing hopefully it keeps growing but MS needs more content not just AAA games but small games like Hi-Fi Rush you need variety. How do they expect to grow GamePass numbers with limited content they need to cater to all gamers.

Netflix at it's prime was securing so many deals and buying studios up to have a constant stream of games. So it's good to see them actually buying studios up and securing content I'm sure it will reap the benefits soon. I can't wait to play call of duty on Gamepass. But it seems to be changing this year so far better then last year. But they need to be consistent and they will grow GamePass the way they want it to. I'm sure the activblizz acquisition will help immensely no doubt about that.

I'm surprised they are still struggling with Hardware supplies it makes sense they still send out "invitations" to buy one when available.

Lightning77156d ago

"But it's good to see GamePass being a bright spot and it alone raising revenue by 3 percent. I'm sure MS is happy about that they seem more focused on GamePass then the hardware."

I hope they're not happy about this gamepass seems to be the only growth while hardware is falling. They said they're working on the next gen hardware. I wouldn't be surprised if the Xbox Series V or whatever it's called will be entry lvl hardware like the S. Won't be a total loss in hardware and will have gamepass as the leading reason to get the console.

At this rate I wouldn't be surprised if they did that.

Games like Grounded, Hi FI, Pentiment and Minecraft sustain gamepass and services as we've Seen, but do absolutely nothing in moving hardware. In fact I don't think Redfall will Move Hardware tbh. Starfield, Forza 8, and Hell Blade 2 seems to be the game's to finally move hardware but all that remains to be seen.

Like I said I hope MS isn't just happy with gamepass carrying. If they are then we should be very, very worried.

VenomUK156d ago (Edited 156d ago )

Xbox hardware declined 30%. Xbox Content & Services is up 3%. So what does it all mean? Let's look at the bad and the good.

Firstly, in the hardware space Microsoft has a problem because there has been a significant drop in demand for the Xbox consoles, and considering the Xbox Series S was often available at a discount it cannot be said the price was a barrier.

Game Pass; no matter how beloved by Xbox owners for its value it's not a draw to non-Xbox owners, which echoes how Microsoft's marketing is preaching to the converted.

Lack of first-party games. It may be that since the end of 2021 and the Halo Infinite / Forza Horizon 5 releases the only real triple-A first party release will be Starfield set for release in September 2023 - a gap of an incredible 22 months. If both Xbox and its competition run the same first-party games but the PlayStation additionally has desirable first-party games then regardless of the price, people will be willing to pay for games they want - and they have.

So a 30% drop IS a big deal when is some territories PS5 this year has had an almost 300% year on year gain in sales.

Xbox Content & Services is up 3%. This includes not just sales of Xbox consoles and on its store, but also the Xbox Store available on every Windows PC. This means Microsoft makes 12% on EVERY third-party game sale (lower than Steam which takes 30%).

This also refers to games published by Microsoft and sold on different PC stores like Steam and Epic.

This also covers the phenomenal growth of Minecraft and it's add-ons.

Additionally, as Microsoft buys up publishers they now generate revenue for it. So for new Skyrim or Fallout purchases made on Switch or PlayStation it makes money from it, and as the PlayStation user bases grows - Microsoft makes more money.

If this product cadence continues then I would not be surprised if at the most senior level Microsoft execs are discussing going software and services only.

glennhkboy156d ago

It actually means that the software & service revenue increase, almost more than offset the decline of hardware sales.

FernDiggidy155d ago

Halo Infinite was such a let down

porkChop155d ago

Why? They didn't have any high profile exclusives last year so it's not surprising there would be a decline. This year they have some major IP launching.

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SullysCigar156d ago

Never nice to see a gaming company going the wrong way, especially when they're amidst a massive, industry-changing acquisition. It must be hard for them. I hope Phil's okay after this news.

Godmars290156d ago

how long do you think he's been trying to bury it?

SullysCigar156d ago

Well exactly. Apparently they shared an expected decline in overall gaming revenue, but conspicuously absent were their expectations around hardware revenue dropping by almost a third year on year. Shocking stuff, especially now the chip shortage is long in the past and nobody can cite supply issues.

People just aren't buying xboxes, it seems.

Crows90156d ago

The problem is actually PR and advertising, funnily enough.
If xbox would just advertise the crap out of their pipeline with the message "only on Xbox and PC" that would sway many more casuals towards xbox.

Many and I mean, probably the, majority dont know starfield is a console exclusive. Most still beleive itll be on playstation.

SirBruce155d ago

Well... what is bad for one uses to be good for the others in the same league.

sparky77156d ago

Surprised these results are above their predicted expectations, it's even their 2nd best Xbox Q3 ever.

I guess since Game Pass is up they are happy, it will be interesting to see the percent increase if and when ABK is included.

SullysCigar156d ago

What were the "predicted expectations" for this Q3 YoY for gaming revenue? And same for hardware revenue?

Did they really expect to make 30% less money than this time last year on their hardware, bearing in mind where we are in their consoles' life cycles?

Abriael156d ago (Edited 156d ago )

They actually expected worse. They expected overall gaming to drop 5-9% and content and services to drop 1-4%. They didn't say hardware.

sparky77156d ago

Abriael said the keys parts.

What is even more interesting is that even with a 30% hardware drop their revenue only fell 4% so it's quite clear hardware is become less and less as an important revenue driver.

SullysCigar156d ago

That is interesting, thanks. I find a drop in hardware revenue of almost a third pretty shocking at this stage though. I would have expected a drop after last year, don't get me wrong, just not to such an extreme degree. Presumably this includes the sales of all their special controllers, too.

This probably goes some way to explain why they didn't share gaming hardware forecasts at the same time as those total gaming forecasts. They must have had some indication it was going to be awful even at that stage.

SirBruce155d ago

Well... next quarter will have data achieved after Xbox Rewards and game pass promotions ended.

Vengeance1138156d ago

Can't see hardware revenue ever not declining as nobody at all needs to buy a physical machine to play any Xbox game. Nor has MS given players any incentive to buy one.

DeusFever156d ago (Edited 156d ago )

There’s something to that but realistically, in America, most household internet can’t handle cloud gaming. And we have a mish mash of smart TVs and Roku devices and such that can’t run xCloud. So you need fast, uncapped internet and some kind of hardware to make cloud gaming work. I’m surprised that any company is still pushing cloud gaming when we still have so many barriers for customers.

Godmars290156d ago

*Bangs head into wall in preparation to comments of Xbox defenders*