Microsoft reported the fourth quarter earnings for its 2015 fiscal year on Tuesday, and the Xbox division performed well enough. Sales of the Xbox One are up along with revenues. However, the long-term prospects for the console outside of North America and the U.K. don’t look so rosy. The Gamescom convention in Germany at the start of August looks like the Xbox One’s last chance to gain a foothold in continental Europe against the PlayStation 4.
The good news for Microsoft is that Xbox console sales (Xbox One and Xbox 360) increased from 1.1 million to 1.4 million units worldwide in the fourth quarter, when compared year-over-year. The split between the current-gen and last-gen consoles wasn’t provided, but it is likely that around a million or more of those units were solely Xbox One consoles. Sales of last-gen console have fallen off a cliff this year, so it seems unlikely that the Xbox 360 sold more than a couple hundred thousand units.
— VentureBeat (@VentureBeat) July 22, 2015
Meanwhile, Xbox LIVE revenue increased 58 percent to $205 million, and first-party video game revenue increased 62 percent to $63 million. A good chunk of that is thanks to the acquisition of Minecraft last November. The sales pace of the Xbox One is not bad, but it lags far behind the PlayStation 4, which enjoys a two to one edge in console sales worldwide.
The bulk of that edge is due to the Xbox One’s stumbles in Europe, where it was late to market in many countries, did not have a strong selection of appealing games in the region, and suffered from the lingering effects of a high launch price as well as the ill-received non-games focused unveiling that resulted in a complete 180 from the initially-announced DRM policies and the removal of Kinect.
As a result, Sony rightfully boasted that the PlayStation 4 enjoys a 70 to 90 percent marketshare in continental European countries. The divide in the United Kingdom is closer to even, but the PS4 leads over the Xbox One there, as well.
That brings us to Gamescom 2015. Sony is not holding a press conference at the convention this year, but will have a presence on the show floor. Meanwhile, Microsoft held back some of its big first-party titles like Quantum Break, Scalebound, and Crackdown to show off during a media briefing scheduled for August 4, plus a show floor presence and various events scheduled.
Xbox Head Phil Spencer understands the importance of Europe in today’s console wars. In last month’s issue of Edge Magazine (via Videogamer), he said, “We need to do better in Europe. When I look globally, mainland Europe is definitely an area we want to focus on.” Spencer reiterated this stance in an exchange with a fan on Twitter where he called Europe “critical.”
@erret84 Work on building games that Europeans love and create a good value for gamers. Easier to type than do but Europe is critical.
— Phil Spencer (@XboxP3) July 21, 2015
Officially, Sony’s lack of a press conference is because E3 happened later, and Gamescom is happening earlier, than normal. Instead, a press conference is planned for Paris Game Week in October. That makes sense, since the PlayStation E3 press conference was loaded with third-party timed exclusivity deals for DLC, with the only major first-party reveals being for games that won’t launch until 2016 or later, such as Uncharted 4: A Thief’s End and Horizon: Zero Dawn.
This diminished Gamescom presence coupled with a lackluster line-up of games this fall for the PlayStation 4 opens up an opportunity for the Xbox One in Europe that it is likely not going to see again this generation. Microsoft has to impress the millions of current Xbox 360 and PS3 owners on the continent that have not yet upgraded. The backwards compatibility announcement is part of that sell, along with the “best games line-up in Xbox history” and cross-play plus cross-buy with Windows 10.
It is unlikely the Xbox One will catch up to the PlayStation 4 sales figures this generation at this point, but it still needs to close the gap significantly in Europe to be a strong and competitive number two. This is especially true as the console war continues to evolve into Virtual Reality and Augmented Reality devices. Not to mention the fact that Microsoft doesn’t want to completely give up mindshare to PlayStation in Europe for the next generation of consoles.