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.

[masterfox]

this year will be even higher declined imo.

[Aloymetal]

It's inevitable.

[-Mika-]

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.

[jznrpg]

@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.

[neomahi]

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

[Aloymetal]

@Mika
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.

[Lifexline]

@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.

[fr0sty]

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.

[Hofstaderman]

Picturing the Agent from the Matrix saying this.

[Lifexline]

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.

[Lightning77]

"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.

[VenomUK]

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.

THE BAD:
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.

THE GOOD:
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.

CONCUSION.
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.

[glennhkboy]

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

[FernDiggidy]

Halo Infinite was such a let down

[porkChop]

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.

[SullysCigar]

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.

[Godmars290]

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

[SullysCigar]

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.

[Crows90]

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.

[XBManiac]

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

[sparky77]

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.

[SullysCigar]

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?

[Abriael]

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.

[sparky77]

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.

[SullysCigar]

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.

[XBManiac]

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

[Vengeance1138]

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.

[ChasterMies]

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.

[Godmars290]

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

[derek]

Xbox is a dead/dying brand there is no compelling reason to own one for the majority of the public worldwide. The only hope for Microsoft is to buy up enough existing content/ip to force people to buy into their crummy ecosystem. The likey scenario is that Microsoft continues to bleed artistic talent and these newly acquired ip are driven into the ground like everything else Xbox touches.

[343_Guilty_Spark]

What about the ecosystem is crummy?

[Godmars290]

Inability to produce/release AAA titles.
Releasing said AAA titles day one on a subscription service.
Offering those titles and subscription service on PC.

No matter how much MS talks up consoles, talks up having the most powerful when they do, nothing is actually done *with* them. Nothing that utilizes their hardware is actually made for them.

And this has been the case since OG Xbox.

[derek]

@343, no offense to anyone who likes/prefers xbox. But in my opinion what makes xbox so crummy currently is that a giant bloated corporation like Microsoft is running them. Microsoft is not interested in videogames as a form of art, only as an industry to try and control and shove into their existing services model.

[neomahi]

But Microsoft has bottomless pockets with infinite money to spend so, who cares right? Just keep on going and keep on spending

[Sonic1881]

Microsoft is not happy with the Xbox division

[shadowT]

did not expected this decline of Xbox hardware sales

[Traecy]

Pretty much.

[EasilyTheBest]

Microsoft is hosting its financial conference call for investors and analysts, and during the initial remarks, chief executive officer Satya Nadella and chief financial officer Amy Hood provided more insight into the performance of the Xbox business.

Nadella boasted "nearly 1 billion dollars" this quarter in revenue from subscriptions. We also hear that Microsoft's first-party games have surpassed 500 million lifetime unique users.

Nearly 1 Billion in Xbox Subscriptions in just 1 Quarter.
Microsoft & Xbox are going to be fine.

https://techraptor.net/gami...

[343_Guilty_Spark]

Don’t give us the actual news…tell us how Xbox is crumbling.

[Sonic1881]

Lol

[Battlestar23]

'Nearly 1 Billion in Xbox Subscriptions in just 1 Quarter.' Gamepass has nearly 1 billion subscribers that great.

[crazyCoconuts]

MS knows gaming is the future of entertainment and will only grow in the future. No way they want to bail on it now, even if they're losing to PS. They'll continue to invest more and more into the industry until they can't anymore.
Windows, Office, and Edge is becoming more and more irrelevant and they will continue to double down on cloud and gaming and won't stop because of these little setbacks

[HyperMoused]

Nanananananan Redfall....nananana Redfall...,Batman...i mean Redfall

[Destiny1080]

if only phil, could have gotten redfail to 60fps

[MrSec84]

Even 120FPS wouldn't have helped, the game just doesn't look compelling or exciting in any way IMO, which seems to be shared by many people.

[ghostrider32]

Microsoft should have taken out the trash, after that 2013 fiasco.

[EvertonFC]

Gamers get fed up of waiting in the end is what I'm seeing here.

[Ninver]

It's not looking too good for the Box.

[Hereandthere]

As usual 3rd party, pc, windows carried gamepass and xbox to a small profit. Nothing that xbox 1st party puts out look anywhere near next gen or having any kind of budget, just cheap ps2 looking games like age of empires, pentiment, hifi rush and Xbox One looking redfall.

[Reaper22_]

I think some of you need to take a business class because you obviously don't understand how this works.

[jznrpg]

PS5 sales way up . Xbox sales way down. What’s business class do you need to take to see Xbox isn’t doing well?

[SonyStyled]

He said “I think” so it’s just his opinion, though I’m curious too

[EvertonFC]

The only one who needs business school is you 🤣😂

[MrCrimson]

Need games. There's no games.

[aws04]

Sega should buy MS

[MEGANE]

And they Just spend 80 billion on games they already have 😂

[gold_drake]

ooff 30% is alot.

but .. if you dont have games then why get a console. its rly their own fault.

[Gamerscore2077]

Damn, I don’t think any of us expected the hardware to drop that low.

[Hofstaderman]

Guess all those reports citing MS top brass not enthralled with XBOX division performance were true after all.

[darkrider]

Of course. Their hardware doesn't appeal gamers after only just 2.5 years on the market. It's a huge drop.

[boing1]

That's a clear message Xbox is not hardware anymore.

[FinalFantasyFanatic]

This lends further evidence for my theory that Microsoft will eventually stop making hardware and just focus on software/subscriptions.

[EvertonFC]

They should just become a 3rd party publisher and release there games on playstation and Nintendo imo.
They have definitely put all there eggs in one basket this gen and it's NOT looking good for Xbox.
Never good when gamers have been saying wait for E3 for 10 years, no real AAA of any note or regularity.
It's almost like they don't know what to do ?

[FinalFantasyFanatic]

They could try and push Gamepass to Sony/Nintendo, but I think it's in Sony/Nintendo's best interests to not allow that. Microsoft has enough studios that they can just be a 3rd party publisher and pump out some games every now and then on Sony/Nintendo consoles, I think it'll work out better for them.

[darkrider]

Becoming a 3rd party studio. It's Inevitable. Microsoft is out of the console hardware race.

[Bathyj]

30% down from a year they did not have a game?

Also CMA just blocked Microsoft. Clearly this is a company that should have no strong leadership over gaming.

[ChasterMies]

So many mistakes but the biggest is not investing more in their games about 10 years ago. I remember when Halo was a must play game. So sad to see where it is now. I also blame the Series X and Series S strategy. You either pay $300 for a nerfed box or $500 for the next you really want. Meanwhile, Sony sells you the full power of this generation for $400. And consumers know it’s the latest console because it’s called PS5.

[Zombieburger638]

Make good games = $$$

[redrum06]

Phil Spencer needs to go. I don’t get why he has been in this position for so long.

[EvertonFC]

Don was far better imo and that says alot lol

[ModsDoBetter]

Whilst GamePass is incredible value, my console just sits there, occasionally being played in short bursts every few weeks, so after much consideration, I have decided to sell my Series X and it’s listed online as I type this.

I had hoped to hold on for Starfield and/or STALKER but honestly, I’m done waiting on Microsoft and their constant delay after delay.

I may pick one up later in the life-cycle if they manage to turn things around but yeah. I’d rather get some cash to go toward a PSVR2 or a few big releases that are coming out instead.

I hope stay hope for the sake of gamers, that Microsoft’s Xbox division get their act together and start delivering. It’s honestly a freaking shame and whilst I’ll gladly call out fanboys and hypocrisy on this site, it just can’t be defended anymore. They’re a sinking ship and have fallen from grace from the glory days of the 360 era.

[XBManiac]

Microsoft needs to stop that Activision thing ASAP and put Cloud gaming where it should be if they had no pressure related to competition. I mean... It seems that we are playing with 2021 version of xCloud since Activision deal was rumored and then announced. Like if Microsoft were waiting for the deal to be solid, before releasing the real cloud gaming they have invested so much time and money on it... or, maybe, Microsoft cloud gaming is a hoax and it will never be at the same level as NVIDIA or others?

[anast]

No one wants to use their gaming products. They are widely inferior compared to the competition.

[Binarycode]

It's dying.

I still don't understand the love for MS.

360 was broken hardware.
Had 3 good games.
forza
halo
gears

xboxone was severely underpowered.
Mostly 3rd party, but always promised investments and amazing i/p's never delivered.

xboxseriesx is a powerful enough console that's again lacking quality titles. It's just more 3rd party.

Microsoft can never use money as an excuse, they print the fkin stuff.

They should have pulled their finger out and made great games. Nintendo pumps out the same games because ppl love those i/p's.

Sony pump out great hardware, great games and invest in new games all the time. That's why they succeed. Sony is about games.

[EvertonFC]

Exactly, I don't think Xbox division know what to do, they've had 4 good years during the 360 era and thats it since the original Xbox.
All that money and nothing to show for it first party AAA wise in 20 years apart from 1 good fable game, gears, project dark was good and Forza, like WTF MS