What’s the business with Xbox services and content for Microsoft? > Dr. Windows

When talking about the Xbox, it’s usually about the sales figures for the console of the same name. But they are not as important to Microsoft anymore, so when quarterly data is presented, it only talks about the development of sales of Xbox services and content.

Details regarding the sale of consoles are rarely given. When the data for the fourth quarter of fiscal 2022 was released, it was time again: sales of Xbox consoles fell 11 percent. A number that was immediately found in various reports, because as I said: when it comes to the Xbox, you still think primarily about the hardware.

What this minus eleven percent means is difficult to classify. The availability of the Xbox Series X has improved significantly recently, but only towards the end of the reporting period, although “unsold due to out of stock” should no longer be the cause of the decline. In turn, the Xbox Series S did exceptionally well last year, so maybe this year’s drop is only due to higher demand from last year. For Microsoft, less console sales means less losses, because it’s still a top-up business.

Money is earned on services and content, such as selling games and subscribing to Xbox Live Gold and Xbox Game Pass. The latter should be a driving force in the future and provide the financial backbone for Microsoft’s gaming division. Many subscribers mean high and, above all, predictable income for Microsoft and its numerous studios.

Unfortunately, Microsoft rarely gives absolute numbers that are truly meaningful. However, in January we heard that Xbox Game Pass subscribers were already 25 million. It should not be a coincidence that January was chosen to celebrate this number, as many PCs, consoles, accessories and games with free months on Game Pass were sold during the holiday season, which can certainly be attributed to this number. How much hard dollars Microsoft is actually collecting each month with Game Pass cannot be reliably deduced from this.

So how can we get smarter now to know how Microsoft’s business is going?

To do this, I locked myself in the archives for an hour and looked at Microsoft’s quarterly reports for the last five fiscal years. With one exception, the information on the percentage changes in sales compared to the corresponding period of the previous year is always given.

So you can’t just read the list below from top to bottom and add up the increases, as they always refer to the same quarter of the previous year. Quarterly information also applies to Microsoft’s fiscal year, i.e. from 1.7. to 30.6. runs. You always need to subtract two quarters to ‘convert’ your balance sheet to a calendar quarter. Q1 / 18 was the calendar of Q3 / 17 and so on …

Confused enough? OK then go!

2018

  • Quarter 1/18: + 21%
  • Q2 / 18: no information
  • Q3 / 18: + 24%
  • Q4 / 18: + 36%

2019

  • Q1 / 19: + 36%
  • Q2 / 19: + 31%
  • Q3 / 19: + 12%
  • Q4 / 19: -3%

2020

  • Q1 / 20: +/- 0
  • Q2 / 20: -11%
  • Q3 / 20: + 2%
  • Q4 / 20: + 65%

2021

  • Q1 / 21: + 30%
  • Q2 / 21: + 40%
  • Q3 / 21: + 34%
  • Q4 / 21: -4%

2022

  • Q1 / 22: + 2%
  • Q2 / 22: + 10%
  • Q3 / 22: + 4%
  • Q4 / 22: -6%

Why was I even doing this?

At first, I was almost shocked to read in the current quarterly report that sales of Xbox services and content were down six percent in the fourth quarter, as at least in my memory, I had only seen gains for years.

As the list above shows, memory is deceptive. Q4 / 20 was an exceptionally strong quarter that simply could not be continued in the next two years. Q4 / 20 was Q2 / 20 on the calendar, which is the first “Corona quarter”, so this outlier is easy to explain. From this point of view, even the fact that we managed to keep these sales at an almost stable level can be considered a success.

I have tried to average the above increases and decreases and estimate how overall revenue from Xbox services and Microsoft content has changed over the past five years by first calculating the change for each quarter and then averaging what have formed. It ended up with a 65 percent increase in sales.

We all wish we could do this in five years from our salary. Considering the various acquisitions that have been made in the meantime and the fact that Game Pass has been introduced as a new product, this is just a logical development.

Overall, Microsoft’s gaming division is doing well, and the acquisition of Activision Blizzard will again significantly expand its base. Gone are the days when you were concerned that Microsoft might pull the plug from your Xbox.

About the author

Martin Geuss

Martin Geuss

My name is Martin Geuß and as you can see, I feel at home in the Windows world. For 15 years, I’ve been telling the world what I mean about Windows and other Microsoft products, and it’s been interesting at times. The most important motto of my work is: From me – for you!

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