Microsoft reported its fiscal fourth quarter earnings results Tuesday with a mix of good and not-so-good news on the gaming front. The company announced continued growth for Xbox LIVE while Xbox console sales are generating less revenue due to a combination of factors. How much this can be attributed to the pending launch of the Xbox One S and Xbox Scorpio is up for debate.
Xbox and gaming revenue took a 9 percent year-over decline for the fiscal quarter ending June 30, 2016. This represents a decrease in revenue of $152 million. Microsoft pointed towards the continued decline in Xbox 360 sales as a reason along with promotions for the Xbox One that reduced the current-gen console’s price greatly. Whether the Xbox One showed an increase or decrease in unit sales year-over-year went unmentioned.
“In gaming, revenue declined 9% or 8% in constant currency, driven by lower Xbox 360 unit volume and reduced Xbox One pricing,” Microsoft stated in the earnings call transcript captured by Seeking Alpha.
Clearly, some Xbox One consoles were sold during the fiscal quarter, however. Microsoft reported growth in active Xbox LIVE users and revenue from the online service.
“Our overall gaming ecosystem showed healthy growth with 49 million monthly active Xbox Live users, or a 33% increase, and 4% Xbox Live revenue growth,” the company added.
Microsoft began using the monthly active user metric for Xbox LIVE users instead of consoles sold with its first quarter 2016 earnings report. This has caused some to criticize the company for attempting to hide poor Xbox One sales when compared to Sony’s PlayStation 4. Others have defended the console maker, as the amount of monthly active users is the kind of metric that investors are looking for.
Either way, Microsoft going an entire earnings report without mentioning an increase or decline in Xbox One console sales is curious. This may largely be due in part to the pending launch of the Xbox One S on August 2. The new console is smaller and geared towards those with 4K HDTVs with support for HDR. The 2TB version of the console will launch first at $399 with plans for 1TB and 500GB editions later.
The Xbox Scorpio is targeting a late 2017 release date as Microsoft announced during E3. It represents a significant leap in processing power meant to support 4K and virtual reality gaming. This, plus the planned Xbox Play Anywhere initiative, has Microsoft confident in the future of the console despite the last quarter decline.
“We continue to drive growth in gaming by connecting fans on Xbox Live across Windows 10, iOS, and Android,” Microsoft CEO Satya Nadella explained during the earnings call. “Just this quarter we launched our Minecraft Realms subscription on Android and iOS. Overall engagement on Xbox Live is at record levels, with more than 49 million monthly active users, up 33% year over year. At E3 we announced our biggest lineup of exclusive games ever for Xbox One and Windows 10 PCs. And we announced Xbox Play Anywhere titles, where gamers can buy a game once and play it on both their Windows 10 PC and Xbox One. We also announced two new members of the Xbox One console family, the Xbox One S and Project Scorpio.”
Overall, Microsoft saw growth in its commercial products and cloud services while personal computing revenue declined. Revenue from the troubled phone business declined 71 percent. The company still beat Wall Street’s expectations with $22.6 billion in revenue reported for the 2016 fiscal fourth quarter.
Did the anticipation of the Xbox One S and Xbox Scorpio announcements hurt Xbox One sales during the last quarter? Sound off in the comments below.
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