For its fourth fiscal quarter ending 6/30/2023, Microsoft reported gaming revenue was up 1% year-over-year. Xbox content and services grew 5% while Xbox hardware declined 13%.
Analysis
Microsoft’s video game performance continues to significantly underperform the industry. The poor sales for Xbox hardware is in stark contrast to record sales for Sony’s PlayStation 5. Clearly Microsoft needs approval of its Activision Blizzard acquisition to remain competitive in the video game industry.
The good news is that looks like the merger will get approved, assuming Microsoft is willing to compromise. One item presented on a wish list of areas where Microsoft could ease government concerns is greater transparency in reported information.
Unlike Sony and Nintendo, Microsoft provides a bare minimum of detail in its financial filings. Public information around hardware sales and subscriber base is crucial for third-party content providers to make informed development decisions.
With the Activision Blizzard acquisition Microsoft is buying a position as a long-term player in the video game industry. As for the Xbox Series X/S, chances for a turnaround are slim, the upcoming Starfield is looking like a solid title, but not one that will significantly increase the core hardware base.
