Forbes: Microsoft's Xbox Revenue Is Plummeting, And Here's Why That's Fine
We knew it was coming, and now it’s here. The console industry is entering into a transition: both Sony and Microsoft have confirmed the existence of the PS5 and Xbox’s Project Scarlett, development on major AAA current-gen games is slowing down, and people are starting to look to the future where their hardware purchases are concerned. It means that current-gen hardware purchases are going to start slowing down considerably, and we can see that in Microsoft’s recent financials for the fourth quarter of the fiscal year 2019.
Microsoft saw a 10% decline in its gaming business, largely thanks to a 48% drop in hardware sales from last year. That’s a massive plunge, but I doubt it phases Satya Nadella or Phil Spencer all that much: the concept of a console generation started to change during the time of the Xbox One and PS4, but the basic framework is still intact. And that basic framework involves drumming up hype for the next generation at the expense of the current one. It’s just a tough time to get excited about buying current-generation hardware, and that large 48% figure is also likely due to the fact that last year’s hardware sales were elevated due to the peak of Fortnite fever.
So, hardware sales are down but it’s more or less to be expected. There’s one major bright spot in this data for Microsoft, however, that dovetails well with the companies plans for the entirety of Xbox going forward. While software and services declined year over year (again, blame the absence of true Fortnite fever), Microsoft noted 14% growth in active Xbox Live users as well as growth in subscription revenue. That’s good news for the company because subscriptions and online activity are central to the company’s plans going forward: over the past few years, it’s been building out its Game Pass subscription service and announced an expansion to PC at E3 this year. Not only is Game Pass becoming more and more important to the Xbox brand going forward, but it’s also assumed to be central to the company’s upcoming streaming plans. So growth there means that Redmond could be well poised to capitalize on a lot the groundwork it’s been laying since Phil Spencer took over Xbox.