Xbox profits revealed in new FTC leak

Gamers, investors, consumers and competitors finally get a concrete answer on just how profitable Microsoft's Xbox video games division actually is.

[Obscure_Observer]

Well well, so Xbox is making more profit than Playstation, hu?

Interesting. Very, very interesting!

[Jin_Sakai]

Guess they don’t need Activision then.

[outsider1624]

From what i read they made 230million a month(revenue). What i wanna know..how the heck are they paying for the cost of all those games to be on gamepass?

[VenomUK]

Xbox Gaming includes profits derived from the Xbox Store app on Windows.

Microsoft, by not separating the console business from the massive Windows install base is able to conflate the profit and loss of the console business.

Obscure_Observer celebrating Xbox’s ‘win’ over PlayStation ask yourself this question; how can Xbox be making more profit if its install base is a third of the size of PlayStation, and it’s store and accessories likely do a third of the business?

[343_Guilty_Spark]

Xbox is here to stay.

[Obscure_Observer]

@Jin_Sakai

"Guess they don’t need Activision then."

If were MS, I would trade Activision for SEGA and CDPR in a heartbeat.

[wiz7191]

@Outsider I’m guessing you forgot Xbox isn’t their only source of income , they still have windows and plenty of others things.

[Babadook7]

Not higher than PlayStation profit, I think.

AM = contribution margin. Contribution margin is 100% higher than Gross profit because the latter include all the costs of a sale of a product.

[wiz7191]

@VenomUk why wouldn’t the XBOX gaming division not use profits from the Xbox APP store on PC ? When it’s the same ecosystem .. The Xbox App Store is the same store the on the Xbox , it just doesn’t include PC games

[fr0sty]

That was last year... and as the article mentions, could be skewed by the way the numbers are counted. Phil goes on to admit "the Xbox business today runs at a single-digit profit margin" (note that they leave out what that single digit is, so there's no way of knowing if it is above or below Sony's 7%)

Keep in mind this is BEFORE the Activision deal closed which removed an additional $69 billion... their profit margins now could be (and likely are) in the negative. This is why Phil said that if they don't get substantially more GamePass subscribers by 2027, they may exit the gaming business entirely. Xbox Game Studios, Bethesda, Activision/Blizzard go on fire sale, and you know who will likely buy them at that point. Microsoft just put ALL their eggs in the GamePass basket, they'd better hope they don't end up like Netflix, etc... circling the drain as they all realize the streaming subscription services aren't profitable or sustainable.

[Obscure_Observer]

"Keep in mind this is BEFORE the Activision deal closed which removed an additional $69 billion... their profit margins now could be (and likely are) in the negative"

Whatever mental gymnastics you try won't rewrite reality, dude.

Xbox division is making more profits out revenues than Playstation. I don´t care if you like it or not. It is what it is.

[Concertoine]

Buying Activision didn’t “remove” $69 billion. It reallocated that money into assets in the form of Activision’s workforce, IP’s, and annual cash flow.

[xHeavYx]

@Obscure_Observer
Dude, you blaming people of mental gymnastics wins ironic comment of the day.

[DoubleTTB22]

Netflix is actually doing great. It is making about 5 billion in profits each year these days. The reason most streaming/subscription services don't make profit is because they are focused on gaining market share. Basically if you can underprice goods and lose billions early on, you can out compete everyone and overprice them later. As soon as Netflix's subsciber growth slowed down, they started focusing on making a profit to keep their share prices afloat.

Gamepass on the other hand has a bigger problem. The economy of scale here is pretty small since it is only really viable for people with xbox's or mid-tier pc hardware. We are a ways away from streaming being consistently good enough even for casual players.

[fr0sty]

If Xbox was doing so good, statements like "If gamepass subscriptions don't substantially increase by 2027, Microsoft may exit the videogame industry." wouldn't be made by the likes of Phil Spencer, but they are. Those aren't words of confidence, they are words of desperation.

" Xbox division is making more profits out revenues than Playstation. I don´t care if you like it or not. It is what it is."

"However, in the aforementioned testimony, Spencer says that "the Xbox business today runs at a single-digit profit margin."

They have since dropped to single digit profit margins... I don´t care if you like it or not. It is what it is.

Concertoine, if that were true, then that would also mean that Microsoft dropping into the single-digit profit margins this year like they admit had nothing to do with them buying Bethesda, which would mean that the nosedive in profits was attributed to loss of revenue due to dropping sales, which doesn't bode well for Microsoft at all. However, that likely isn't the case, as assets are not counted towards net profit, income is (and how much of that income was left after expenses, which buying a publisher for billions is most definitely an expense).

[Michiel1989]

How would their profit margins be affected by an aquisition, assuming acti/bliz is profitable, I kind of assume relatively speaking acti is more profitable than ms, so their margins will only go up. profit means revenue compared to operating cost, not making massive aquisitions.

You're just using words randomly and are making 0 sense.

[Michiel1989]

@frosty you're talking out of your ass. Lets say a company makes a net profit a year of 100 mil. They buy something for 1 bil and start to make a net profit of 130 mil a year, do you wanna say that it's not a profitable company anymore for the next 8 years and from one day to the next they are when they made back that 1bil? it's called investing and it has nothing to do with the net profit. You don't write it off as an expense. People are so desperate to paint a dumb narrative that they stop speaking normal english, pathetic.

[fr0sty]

Buying a company is no different than buying an asset to generate revenue for a business. Even if that asset starts generating revenue on day 1 that you buy it, you still are in the red as far as profit goes until you have recovered the money you spent on that asset. Microsoft spent $69 billion on Activision, a company with a Net Income (Annual): of 1.513B. That's 45 YEARS it will take at current Activision Net income levels to recoup the price Microsoft has paid for it. Even if we counted gross revenue, Activision still only makes $7.5 billion of gross income before expenses. Even if all of their expenses vanished because they were owned by MS, which they will not, Microsoft would still take 9.2 years to just to break even on the purchase.

If you make $100,000 per year, and I ask you to give me every penny you make so I can invest it in buying a business that will generate $1000 per month... your $100,000 per year just became $12,000 for a full year. If you have $35,000 per year in expenses to survive, you're still going to end up out on the streets. Microsoft has plenty of money in the bank to keep Xbox on life support while they wait on this investment to give them a ROI, but Nadella isn't going to just let them keep losing money, he's going to expect to see the income start pouring in from this purchase soon. This is why Phil said that if GamePass subscriptions do not dramatically increase by 2027, that the Xbox gaming division will go out of business. They will either liquidate both Activision and Bethesda as quickly as they can, along with the rest of the developers under the Xbox brand, or move on to being a third party publisher exclusively and exit hardware entirely.

[ChasterMies]

“We're not entirely sure how Microsoft calculates its accountability margin”

I guarantee it doesn’t cover the costs of acquisitions and everything else covered by Microsoft’s other divisions. Payroll comes from Microsoft, cloud storage comes from Microsoft. The real power of Xbox is that Microsoft can use its profits from Windows and Office to buy game studios and eat losses on console sales.

[Einhander1972]

Interesting, so what we see here is that PlayStation is returning far more of their revenue to the players and it's employees.

And none of this really matters because Microsoft accounting like everything else is so deceptive.

[Soulsborne]

A trillion dollar company is able to throw around money like its nothing, imagine comparing M$ to fucking Sony..... not even in the same league. And despite all that, 3rd place babyyyyyyyyyyy

[anast]

I like your style.

[KwietStorm_BLM]

Why would anyone celebrate it if they did make more than PlayStation? All it confirms is the monetization and subscription models they been laser focused on forcing on us. Didn't they even have a subscription to sell the Xbox itself? Why the hell would you support this? Just chill out with the fanboy disorder for 2 seconds and have some dignity as a consumer.

[Huey_My_D_Long]

If these guys read the leaks and still MS, ain't nothing you can do or tell them...
I wonder wholl buy Xbox when MS leaves the gaming space? Cause they aren't hitting 100 million subs by 2027.

[PhillyDonJawn]

Lmao the down votes.

[Babadook7]

The down votes might be because of this funny bit.

“so Xbox is making more profit than Playstation,”

Maybe he meant profit margin? Even that isn’t known.

[jjb1981]

I hope you got your cut.

[DarXyde]

I think you need to Google accountability margins.

I think the author of this article does, too.

[S2Killinit]

@Obscure
No it is not more profitable than Playstation. He corrects the questioner and says “its a %”

MS have a higher profit margin (%). That does not mean they have a higher profit, only that they make a higher % on each console installed/sold. That means they make more profit on each individual that buys their console.

[jesujohn]

Lmao the dude puts a disclaimer - "Comparing this number with the other Big 3 players isn't exactly straightforward. The accountability methods may be different. We're not entirely sure how Microsoft calculates its accountability margin"

[crazyCoconuts]

Right. Why wouldn't they use standard accounting terms instead of making up new ones. And how are they accounting for the costs associated with, say, the huge Zenimax purchase? Lots of ways that could be handled.
Dunno, corporate accounting can be a creative and tricky thing..

[Christopher]

Division allocation of losses can get creative at times.

[shadowT]

I am wondering if the $3.7 billion for Bungie are included oder excluded in the Playstation numbers.

[ChasterMies]

Sony Group reserved 2 trillion yen (~$14B) for the acquisitions back in 2020, to be spent over three years. So the Bungie purchase shouldn’t affect Sony’s profit on its quarterly investor report.

[thesoftware730]

DeusFever,

So potentially, could MS have done the same?

lol, why is it one-sided? MS doesn't set aside budgets for different purposes?

BTW, the chart shows them doing exactly that, setting aside budgets lol.

[jznrpg]

@thesoftware MS could but Xbox could not

[thesoftware730]

Jznrpg,

Huh, that's like saying,

Sony could, but PlayStation could not.

Not sure what point you are trying to make.

[PhillyDonJawn]

Wait am I reading this right? Xbox profit more than PS! Wow who would've thought. Yall wanted to see the numbers so bad here ya go

[Babadook7]

No

The old adage applies here

“Lies can travel the globe before truth gets a chance to put its boots on”

[Rimeskeem]

Great, so making worse games gets you more profit?

[Crows90]

More profit?
By selling less? Making less games? Something doesn't add up.

I want sales numbers not profits. I guess if you account for early gen expenses in consoles then I guess Ms is more profitable since they sell less consoles and therefore less of a loss.

But still...how exactly is this accounted for.

[Hofstaderman]

When you have to answer to shareholders but are actually being outsold by your competitors year on year you would have to engage in considerable mental gymnastics to confuse everyone...

[lelo2play]

Minecraft makes money...
Bethesda online games make money...
Cloud games make money...
PC games make money...
Gamepass makes money...
Xbox makes money...

[Babadook7]

And Xbox makes half of what PlayStation does. This is why they come up with clever combination statistics to hide the true comparison.

[green]

Mercedes Benz and BMW sell millions more cars a year than Porsche but Porsche makes billions more in profits. Ferrari intentionally reduced the amount of cars they make to improve their profit margins.

Running a profitable business is more than just "selling more"

[SeTTriP]

Yeah because for every ten (maybe more) Benz's or BMW's you sell that's one Porsche also Mercedes and BMW are mass market cars and Porsche isn't, so that doesn't account for total employees, payroll, how many facilities and bills to pay to keep the facilities open and operational etc basically overhead isn't as much.

I swear you guys make the most disingenuous points then you have people thumbing this sh!t up.

Do you people think about the information presented to you or just blindly agree because it fits a narrative?

[Sephiroushin]

not when they are in the same range of price and one spend a lot more but sell a lot less; probably many of their expenses were carry by parent company MS and not by the xbox division perse.

you comparasion is also stupid because Ferrari is making less car so they are more limited therefore can sell the millionaires at higher price increasing their profit, xbox is not a premium asset that millionaires want to show off, they cant make less xbox or games to sell them more expensive… btw mercedez has better profit than porsche not by each car but as a whole they do.

And also toyota and ford sell a lot more and make more in profit so yea selling more can increase your profit you just have to know how to do it.

[thesoftware730]

Hahaha, Crows

"I want sales numbers not profits"

Profits come in many different forms than the standard 'game sales' that you place on Sony. MTX, GP subs, Cloud, all games being released on PC, All, not some, and of course console sales, MS is in all of those lanes, Fallout 76, Halo: Infinite, Elder Scrolls Online, and Minecraft, just to name a few, all generating long-term users who buy a shit ton of MTX and DLC on every platform.

Why do you think Sony is releasing PC games now, why do you think they Switched (they did, even if you don't believe it) their focus on multiplayer Gaas? FOR PROFIT lol.

Profits are all that matters brother, you keep fighting the good fight.

[sagapo]

Why sales? As a business it’s the profit that counts. More profit means more money to invest in whatever.
But yeah, kinda suprised Xbox has more profit than PS 🤷‍♂️

[BeHunted]

There are over 3.1 million PC Game Pass users paying full Price per month.

[FinalFantasyFanatic]

I believe there may be some some creative accounting going on, with the amount of money they are burning on acquiring developers/publishers, the low sales count of Xbox hardware (that and both Microsoft/Sony sell hardware at a loss, at least to begin with)...

[PhillyDonJawn]

Wanna know why they profit more than PS? Ppl all over game pass calling it unsustainable (appear to be sustainable afterall). But we've had 3rd party Devs say PS 1st party budget was unsustainable

[outsider1624]

Have you seen the amount of money MS is paying just for the games to be on gamepass? For sony it wouldn't be sustainable. They're not like MS..who can throw money around.

[TheCaptainKuchiki]

That's ridiculous because PS has more paying subscribers than Xbox. So whatever Gamepass makes, PS+ should make more

[FinalFantasyFanatic]

That and the cheap Game Pass deal people have exploited for so long, I find it hard to believe Game Pass made more, especially this year.

[PhillyDonJawn]

Not exactly, PSnow didn't have much subs they fused it with ps+. You'd have to add Gold sub on top on GP to get an accurate comparison

[Babadook7]

“Wanna know why they profit more than PS?”

Whoa whoa whoa. Where did you get that from?

[anast]

Phil said that they might close down their gaming department if he doesn't get enough subs. Now this looks like, "I'm going to take my ball home, if you don't play the way I want."

[Nacho_Z]

Zero chance that Xbox is more profitable than PS and we find out about it from a leak rather than them shouting it from the rooftops. There's a reason they're always coy about talking about profits and only mention revenue.

[TriniOutsider]

Oh, it's an article from Derek, one of the biggest Xbox shills on the internet. The dude admits these things might not be right. But Xbox fanboys are playing it up as a win for some reason.

[thesoftware730]

Well well well.

Massive irrelevant spins are imminent!
This will be funny.

[Asplundh]

I don't believe that they're profiting more than Playstation, if that was the case they would be showing the figures and touting about it like they use to. But I do think they're making more than what some would like to believe.

[PhillyDonJawn]

They need therapy after seeing this

[dveio]

It's great to get some more insights since the AB deal was held at court.

While these documents finally cast some light on Xbox revenue, margins and profits, it's unfortunately quite shallow data, tbh.

It only shows (unusual) data from July '22 to March '23. Regarding both companies, April, May and June are missing for a full coverage of the fiscal year.

Second, Phil Spencer, as the document shows, answered that the margin dropped from 12% to a single-digit number by the time. I don't want to evaluate this, but it contributes to an incomplete picture.

And, third, the article indicates that it is not known how Microsoft calculates its accountability margins, unlike Sony.

So at least to me: nice data, but shallow and incomplete.

Too incomplete for me to form an educated opinion on how Xbox Gaming Division really holds up against Playstation.

[ApocalypseShadow]

It's incomplete like Microsoft games on game pass but the fans still think it's a win. Just check the above comments.

They don't have all the fact as always, but are still whistling Dixie.

[The3faces]

So Xbox actually makes more $ than PlayStation and gamepass Is profitable contrary to what I've been reading here on N4G from the Sony crowd. I'm sure this will ruffle a few feathers lol

[TheCaptainKuchiki]

It says nowhere that gamepass is profitable

[moomoo319]

Gamepass only made $35 mil for the entire year? That’s azz cheeks.

[moomoo319]

Oh hell nah u not about to downvote this lmao please explain to me why thats a good number. It isnt in any universe. They are spending enough money to fund a small country on gamepass just to get a drop in the bucket back.

[bleedsoe9mm]

No PS6 confirmed

[anast]

"Consumers and competitors finally get a concrete answer" This is false

"We're not entirely sure how Microsoft calculates its accountability margin," This is true.

[Reaper22_]

Microsoft is making a lot of money with xbox. To the people who wanted to know how much they're making, now you see. Xbox is doing great. They're even making more than sony.

[jwillj2k4]

Then there wouldn’t be a leaked document saying Xbox goes bye bye in 3 years unless they can turn things around.

[TriniOutsider]

I hope all the folks who disagreed with my comment. Know that he pulled down the chart after admitting he had no clue what he was talking about.

Just go and check his Twitter page.

[Babadook7]

Yeah. It’s nonsense.

[Rimeskeem]

So they lied through the teeth after swearing oath and bought 2 massive companies from it?

God I hate MS. I wish there was a good alternative to Windows.

[QuantumMechanic]

Ubuntu Desktop is very stable and fully-featured. I would always use it if it weren't for a couple of critical Windows apps I need.

[CantThinkOfAUsername]

Interesting choice of words that 'Accountability Margin.' No other company uses such margin, not even Xbox's parent company, Microsoft. Phil could claim anything since no one has any idea what that means.