Microsoft is doing great, except for Xbox.

Xbox has made significant progress in accelerating the peak sales of their consoles. Because of this, our future is fraught with uncertainty.

Despite the fact that Microsoft may be satisfied with the results it achieved for the quarter that it used to close off the 2024 fiscal year, not all of its divisions are functioning as well as others. It is not only helpful in gaining an understanding of how the huge corporation is doing, but it is also a good thermometer of the state of the industry, as my colleague Javier Lacort pointed out. Furthermore, in the case of the video game industry, it provides some insights into the future of the industry.

Microsoft is doing well, with a few exceptions to this description. In comparison to the previous year, Microsoft’s sales increased by 15%, reaching $64.7 billion. This results in a net profit of $22 billion, which is an increase of 10% year-over-year, while Azure’s revenue increased by 29% (albeit this is somewhat lower than what analysts had anticipated). One of the issues is that Xbox hardware income has decreased by 42 percent, which is the source of the problem.

A lengthy procedure. This significant fall is the continuation of a process of hardware decline, as Xbox has posted year-over-year declines in console sales revenue in six of the last seven quarters (and seven of the last nine quarters). This decline is caused by the progression of a hardware decline. According to GamesIndustry.biz, the internal projections of the company indicate that the sales of hardware will experience a further fall during the subsequent fiscal quarter, which will conclude in September.

This is the most severe one so far. Having said that, we have never seen such a significant decline in sales since the introduction of the Xbox Series X/S in the year 2020. Analyst Daniel Ahmad claimed that Microsoft had sold only 900,000 copies of its consoles during the previous quarter, which ended in March. This is despite the fact that Microsoft does not provide any information regarding the amount of hardware that was manufactured and sold. A significantly smaller number in comparison to the 4.5 million PlayStation 5 units that Sony sold.

The peak was included into the picture. These data provide us with a few things to consider: on the one hand, everything seems to imply that Xbox has reached its current level of sales, which is the highest it has ever been. However, it did so in 2022, which was an exceptionally early year, after having just been available for purchase for two years. As is typical in situations like these, this occurs after the fourth or fifth year of sales, as is the case with the Nintendo Switch, which has been available for purchase since 2017.

The road ahead for the Xbox. Microsoft’s gaming division saw its profits shoot up by 61%, but analysts say that this is due to the effect of the purchase of Activision Blizzard (which cost Microsoft almost 70 billion dollars, so the numbers still don’t add up, at least in the short-medium term). Despite this achievement, the gaming business is not doing too poorly for Microsoft. What is the company’s remaining option? Without a doubt, Game Pass.

These are the final physicals. In the event that things continue in this manner, Microsoft may wind up discontinuing its hardware division and concentrating its efforts on the expansion of Game Pass. This is especially true now because, as a result of recent price rises, Game Pass is expected to be more profitable. Actions such as the acquisition of Bethesda or Activision are clearly intended, even if only partially, to dominate subscription and cloud gaming. Statements that point to gaming on displays that were formerly the sole domain of the competitors are also examples of actions that are clearly oriented toward attaining this goal.

Japan’s hardware, or the hardware. To make the announcement that Sony and Nintendo will be the only companies in Japan to manufacture video game hardware is premature at this point in time. However, the reality is that every single step that Xbox is taking is moving in that direction, beginning with the very existence of Xbox Series X/S with the intention of becoming a more powerful version of Xbox One rather than a complete departure from the previous orientation. Nevertheless, there are also the partnerships with Samsung’s Smart TVs, the policy that states that consoles are not strictly required in order to access Game Pass, and the leaks that speak of the cloud as the protagonist of the company’s future plans…

There are, however, indications that cloud gaming is not yet mature, such as the failure of Stadia or the failure of ideas like Luna to gain widespread acceptance. The future of the industry is more unknown than it has ever been, and there are a lot of uncertainties that only serve to confirm this possibility.

Microsoft is doing great, except for Xbox.

Xbox has made significant progress in accelerating the peak sales of their consoles. Because of this, our future is fraught with uncertainty.

By ki0nk

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