In its latest quarterly report, Microsoft announced a 13% decline in Xbox gaming revenue for the last three months of 2022, but says Game Pass subscriptions have hit “new highs.”
It was part of a mixed quarter for Microsoft, as they saw big declines in other personal computing areas — Windows OEM licensing and their PC hardware sales both fell 39% — offset by increases in productivity and revenue Business units like LinkedIn and the opposite Azure cloud. For Xbox, it highlights what has been a lackluster year with few major first-party or exclusive releases compared to either PlayStation or Nintendo.
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This led to an expected drop in sales compared to late 2021 when Halo Infinite, Forza Horizon 5 and Age of Empires 4 were released. That’s why it saw a 12% drop in revenue from October to December 2022, although this was offset by growth in Xbox Game Pass subscriptions.
There’s no update on how many subscribers Game Pass has, but with Microsoft emphasizing continued growth, we expect it to be somewhere between the previously announced 2022 figure of 25 million and the next significant milestone of 30 million. Microsoft previously admitted that Game Pass’s growth had slowed as they reached saturation point in the percentage of Xbox owners willing to sign up.
Something that’s potentially more concerning for Xbox this generation is that revenue from Xbox hardware is also down 13% compared to the same quarter in 2021. There are mitigating factors here, as Microsoft has opted not to increase console prices in 2022 (although price increases are expected in 2023). , and then drop the price of the Xbox Series S by around 20% through Black Friday and the holiday season. Combine that with the lack of first-party games mentioned above, which is sure to impact consumer choice when weighing Xbox versus PlayStation, and it’s not surprising that revenue is falling year on year.
Microsoft will have anticipated all of this and will similarly look to the first half of 2023 to halt this slide. Later in the day, they’ll be hosting an Xbox and Bethesda Developer_Direct stream to showcase key first-party games — Forza Motorsport, Redfall and Minecraft Legends, and the next The Elder Scrolls Online expansion — all coming out in the first half of this year will. There’s also Bethesda’s long-awaited sci-fi RPG Starfield, which is being presented separately and is also due out before the summer. All of this could result in a significant boost in Xbox spending to round out Microsoft’s fiscal year.
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