In their latest quarterly report, Microsoft has announced a 13% drop in Xbox gaming revenue for the last three months of 2022, but states that Game Pass subscriptions have reached “new highs”.
It was part of a mixed quarter for Microsoft, as they saw a major drop off in other personal computing areas – Windows OEM licensing and their PC hardware sales both dropped 39% – countered by increases in revenue across productivity and business areas like LinkedIn and the Azure cloud. For Xbox, it highlights what was a lacklustre year with few major first party or exclusive releases when compared to PlayStation or Nintendo.
That led to an expected drop off in revenue when compared to the end of 2021, which had the launches of Halo Infinite, Forza Horizon 5 and Age of Empires 4. There was a 12% decrease in revenue through October–December 2022 because of this, though this was offset by growth in Xbox Game Pass subscriptions.
There’s no update on how many subscribers Game Pass has, though with Microsoft emphasising continued growth, we’d anticipate that it’s between the previously announced figure from 2022 of 25 million and the next significant milestone of 30 million. Microsoft previously admitted that Game Pass growth had slowed as they had reached the saturation point of the percentage of Xbox owners willing to subscribe.
Something that’s potentially more concerning for Xbox through this generation is that Xbox hardware revenue also dropped by 13% versus the same quarter in 2021. There’s mitigating factors here, with Microsoft choosing not to raise console prices in 2022 (though expect price increases in 2023), and then slashing the price of the Xbox Series S by around 20% through Black Friday and across the Christmas buying period. Combine that with the aforementioned lack of first party games sure to impact consumer choice when weighing up Xbox against PlayStation, and it’s not surprising to see revenue slip year-on-year.
Microsoft will have expected all of this, and will similarly look to the first half of 2023 to arrest this slide. Later today they will be holding an Xbox and Bethesda Developer_Direct stream to showcase major first party games – Forza Motorsport, Redfall and Minecraft Legends and the next The Elder Scrolls Online expansion – all of which are due out in the first half of this year. There’s also the long-awaited sci-fi RPG Starfield from Bethesda, which will be showcased separately and is also anticipated for release before the summer. All of this could make for a significant push in Xbox spending to round out Microsoft’s financial year.