Microsoft’s fourth-quarter financial results for fiscal year 2022 have revealed that its video game business from Xbox to PC is taking a bit of a bruising.
In the three-month period ending June 30, 2022, Xbox Content and Services revenue dropped 6 percent. Overall gaming revenue which dealings on console and PC revenue decreased $259 million, a 7 percent drop from the fourth quarter of 2021.
The drop in gaming revenue was attributed to “a decrease in Xbox content and services and Xbox hardware.” Microsoft doesn’t report revenue numbers for Xbox Content and Services, but it says that drop was due to “lower engagement hours and monetization in third-party and first-party content.”
Microsoft did say that the dip in Xbox Content and Services revenue was offset by “increased Xbox Game Pass subscriptions.” How much of an increase? Only the shadow knows. Microsoft won’t say, and typically doesn’t make a habit of sharing that information in its financial reports.
Xbox hardware revenue (sales of Xbox devices) dropped 11 percent year-over-year. That’s an interesting drop since as recently as Q3 2022, Xbox hardware sales were increasing year-over-year.
The combined metrics paint an overall picture of a platform that hasn’t had many major game releases since last November.
Where are the Xbox games?
Microsoft spent the last few years acquiring a number of companies that are now first-party studios, but it’s been a hot minute since any of them released first-party games. Halo Infinite launched last November, but content updates for the game’s multiplayer have been slower when compared to other live service tiles.
With multiple game projects getting publicly and privately delayed (Bethesda’s Starfield was set to come out this fall, now it’ll be out in 2023), it’s easy to say that there’s just less fresh content for players to spend money on.
A screenshot of Bethesda’s Starfield, which was recently delayed into 2023.
That said, this isn’t all because of Xbox’s first-party delays. The note about lower engagement and spending in “third-party services” is eye-catching as well. Plenty of third-party publishers have also delayed titles. Xbox obviously wants a cut of in-game spending on titles from Ubisoft, Take-Two, and other major publishers. If those games get delayed, Xbox is impacted too.
The slowing release schedule for Xbox was especially visible during its 2022 Summer Games Fest press conference, where the platform-holder showed off a number of impressive titles, but the full-year release schedule of games it was bragging about showed most heavy hitters launching in 2023.
Do these numbers hurt Microsoft?
Microsoft’s overall financials remained very healthy in the fourth quarter of 2022. Revenue rose 12 percent from the same quarter in 2021 to $51.9 billion. Net income increased two percent to $16.7 billion. While Xbox had a rough quarter, Microsoft’s cloud computing revenue made major strides, rising 28 percent to $25 billion in the quarter.
The company’s financial report doesn’t yet include any data about its upcoming $68.7 billion acquisition of Call of Duty and World of Warcraft developer Activision Blizzard. Once that wraps up, Microsoft will have access to that publisher’s prolific revenue streams.
It will also of course, inherit its cultural struggles that have bogged the company down since the State of California filed a lawsuit against it for allegedly fostering a culture of sexual harassment and toxicity.