Microsoft’s fiscal fourth quarter earnings report mostly contained good news for the Xbox department. While 2021’s slow release calendar has created a sluggish market for third-party games, Xbox reported continued growth on hardware sales and Xbox Game Pass subscriptions.
- Overall gaming revenue rose by $357 million, an 11% increase year-over-year, to $3.7 billion.
- Hardware revenue grew by 172% due to continued high demand for the new Xbox Series X|S.
- Content and services revenue was down 4%, or $128 million.
The $3.7 billion is still higher revenue overall than was disclosed in Microsoft’s Q3 report. Microsoft is also heading into a killer holiday season, buoyed by the imminent release of Halo Infinite.
For now, however, the last year and a half of meteoric growth for the video game industry appears to be tapering off. Microsoft notes in its report that last year’s big numbers were driven in large part by stay-at-home scenarios, when entertainment-starved customers in social quarantine turned to video games to fill some of the gap. Now that at least some parts of the world have relaxed restrictions, home-based activities like video games are slowing down.
2021 has also been a slow overall year for new video game releases. While Microsoft’s first-party titles are on an upswing, with next month’s Psychonauts 2 marking the beginning of a slow but steady release of content, many developers have struggled with production delays due to last year’s work-from-home edicts.
As a result, several of the big third-party games that were expected in 2021 have been pushed back to later in the year, if not 2022. Since much of Microsoft’s profit margin on the Xbox depends on software sales, a weak release calendar impacts the company’s content and services gaming revenue.
Despite that, Microsoft has quietly grown its audience for the Xbox, with continued high hardware revenue for the Xbox Series X|S. Its ninth-generation console hit store shelves in November and quickly sold out, though some of that has to be attributed to its ongoing supply issues.
Microsoft does not include specific hardware revenue numbers in its earnings, and has not revealed sales data for its Xbox Series X|S consoles.
It has disclosed in various places, such as Twitter, that the Xbox Series X|S is Microsoft’s fastest-selling console so far, with more consoles sold at this point in its life cycle than any of the three previous models of Xbox.
Microsoft has also reported that subscribers to its Game Pass service exhibit much higher overall engagement than non-subscribers, playing 30% more genres and 40% more games while spending 50% more on the hobby.
The Q4 fiscal report notes an unspecified amount of growth in Xbox Game Pass subscriptions as well, though Microsoft continues to keep quiet about the actual numbers. The last time we heard anything about specifics was January, when Microsoft reported there were 18 million subscribers on Game Pass.
Moving forward into the fall of 2021, Xbox owners can look forward to releases such as the aforementioned Psychonauts 2 (Aug. 25), the Seattle-produced skateboarding indie SkateBird (Aug. 12), Namco Bandai’s latest JRPG Tales of Arise (Sept. 10), and Sega’s brawler/Japanese life sim Lost Judgment (Sept. 24), a spin-off from the popular Yakuza series.
To some extent, however, we’re all just marking time until Halo Infinite comes out. Microsoft has been uncharacteristically quiet about Infinite‘s release date, besides the previously-released “holiday 2021,” but the news broke recently that insiders could get to participate in multiplayer testing for Infinite as soon as sometime this week.
