This article was published on 1/31 and republished on 2/1.
Microsoft showed a big boost in gaming revenue in its recent earnings call, elevated, of course, by its newfound acquisition of Activision Blizzard.
However, the “Xbox” in “Xbox Gaming Division” seems to be getting less and less relevant as time goes on. Microsoft CFO Amy Hood said there was weaker than expected performance in terms of console sales, and that next quarter’s forecast would be a year over year decline, even as gaming revenue as a whole is still ticking up.
Why is this happening? Unlike the underperforming Xbox One, there is nothing especially wrong with the Xbox Series S or X, but rather this is reflective Microsoft’s own continued messaging that: First, Xbox sales don’t matter, which is why they say they’ve refused to report them for years now. Secondly, it wants Xbox games to be playable on as many places as possible, meaning players can use other devices to play them on the cloud, or get Game Pass titles day one on their PC without a console at all.
In other words, Microsoft has been downplaying the need to buy an Xbox console and its own desire to sell a lot of them so…that’s what’s happening.
Again, the continued messaging here is that even if these sales are starting to decline year over year and coming in below forecasts, Microsoft is still touting that its gaming arm is growing. This is spearheaded by Xbox Game Pass itself, albeit we have not gotten updated subscription figures in two years now.
And of course, now that Activision Blizzard has joined Microsoft, it has King, the mobile money-printing machine, yearly Call of Duty mass sales and microtransactions, and Blizzard’s bits and pieces like Overwatch 2 and Diablo cosmetics, plus WoW subscriptions. But it did pay $69 billion for all that.
Sony, of course, is estimated to be dramatically outselling the Xbox Series S and X pair this generation with the PS5, similar to the ratio it outsold the Xbox One. But Sony has its own issues, as it may have a lot of console sales, but counter to Microsoft, a PlayStation box is the only place you can play new PlayStation games.
They are trying to change that with faster PC releases and things like Bungie’s current and future multiplayer games being multiplatform. But the company say it cannot commit to a full Game Pass model for big releases like Xbox does.
So, issues on both sides, and it’s still not clear which vision of the future is winning out. It may end up being somewhere in the middle.
Update: There’s a lot of Xbox fan pushback on all this, but I think it’s important to flash back to what Phil Spencer said about the whole “console war” debate, and Xbox’s place in the timeline:
“It’s just not true that if we go off and build great games, all of a sudden you’re going to see console share shift in some dramatic way,” Spencer told Kinda Funny in March of 2023.
“We lost the worst generation to lose in the Xbox One…We’re not in the business of out-consoling Sony or out-consoling Nintendo. There isn’t really a great solution for us…I see a lot of pundits out there that want to go back to a time when we all had cartridges and discs, and every new generation was a clean slate, and you could switch the whole console share.”
“That’s just not the world that we are in today. There is no world where Starfield is an 11 out of 10 and people are selling their P5s. That’s just not going to happen.”
This is probably the clearest picture painted of Xbox’s strategy, and why they’re tripling down on the whole “Xbox platform” thing instead of trying to catch up in Xbox sales alone. Microsoft has made a big bet on subscription services which for now, appears to be paying off, and in many way it’s something Sony is envious of. And for games like Starfield, they’re still, selling copies on places like Steam. But as Microsoft rolls out bigger and bigger games with bigger and bigger budgets and they approach a Game Pass ceiling, that could become unsustainable. It’s too early to tell, and so far, that’s not happening. It also is the case that Microsoft’s cloud-based gaming future just cannot happen in the US any time soon because of infrastructure they cannot control.
make an article about Microsoft Says You Don’t Need To Buy An Xbox, So People Aren’t
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