Microsoft stopped announcing Xbox console sales some time ago, a move most believe was at least in part because they compare poorly to sales of PlayStation consoles and Nintendo Switch. But according to one Xbox executive, that has nothing to do with it.
Speaking at the Wells Fargo 2023 TMT Summit, Xbox chief financial officer Tim Stuart insisted Microsoft decided to quit publishing console sales because console sales alone do not paint the full picture of the health of the Xbox business.
“About six or seven years ago, we stopped giving console volume externally,” he said. “And at first, it was like, 'what are you doing?' You're the Xbox business, you're not giving us consoles, that makes no sense. But it was really the first point of us saying, no, no, it's about content services.
“Our business is PxQ [the product of price and quantity], more customers spending more money. And that's really how I think about our model. So, when we talk about content and services externally, that's our [key performance indicator]. And for that number to go up, you need more gamers and you need more gamers spending money. And we've really focused on that with our internal teams as a — here's how we grow the business, go bring more users in and find ways for them to play.
“And it goes a little bit to — and my last point here is about business model — we call it business model optimisation, but really business model diversity. And if a gamer comes in, they can subscribe to Game Pass, they can buy a game digitally, they can have advertising to fund their gaming that way. And so however they want to monetise, we're trying to find a way for them to spend money with us. And we've seen that as a very, very good accelerant in this content and services landscape.”
Stuart’s comments echo those made by Xbox executives before, but come at a particularly tough time for Xbox console sales. According to recent data for October, Sony’s PlayStation 5 is “comfortably” number one in Europe, with sales up an incredible 143% over October last year. The near seven-year-old Nintendo Switch is second despite a 20% drop in sales year-on-year. But the Xbox Series X and S have seen a whopping 52% drop in sales. Microsoft itself has admitted it has lost the console war.
In contrast to Microsoft’s position, Sony and Nintendo do publish console sales figures. Perhaps there’s no surprise there, given how healthy they are. PS5 has now sold an impressive 46.5m PlayStation 5 units three years after the console launched. The Nintendo Switch has sold an eye-watering 132.46 million units as it nears its seventh birthday.
Microsoft’s argument that console sales alone do not reflect the health of the business is backed up by its efforts to bolster its Game Pass subscription service as well as its push into the PC market and mobile. It has been some time since Microsoft announced Game Pass had 25 million subscribers. Stuart said the number had grown, but failed to offer an updated figure.
“But even things like Game Pass, we last announced 25 million Game Pass subscribers,” Stuart said. “It's obviously grown since then. But Game Pass is this millions and millions of subscribers month in and month out, which for me, I love because it's more of a paid annuity as opposed to that you're betting on those big game launches every quarter or every year, but a Game Pass helps us smooth it as well.”
Clearly, Microsoft is driving toward the mobile game market. Its $69 billion buyout of Activision Blizzard was as much about King’s $20 billion mobile smash hit Candy Crush Saga as it was about getting Call of Duty on Game Pass, something Stuart acknowledged. In fact, Stuart talked about the limited nature of the console business, which he described as a “couple of hundred million” market and “not growing that fast”, and the PC games business, which is “300 million or 400 million”. Mobile, however, is a market in the billions.
“The most gamers in the world play on mobile,” Stuart said. “We think about the console landscape and part of the real evolution of the deal was, hey, look, we've got a fixed console audience with Xbox or relatively fixed, but not growing that fast. You've got a couple of hundred million kind of console addressable market. You've got 300 million or 400 million kind of in that PC gamer market, and then you have billions in the mobile market.”
The question for Microsoft is of course how it carves out a significant slice of the mobile game pie. Its efforts so far have failed to achieve the blockbuster success it’s clearly after. With King’s Candy Crush and Activision’s Call of Duty mobile games on board, overnight Microsoft is a major player here. But what’s next? Halo on mobile?
“Mobile games are hard to make,” Stuart said. “You have to have the DNA, you have to know how to AB test. You have to know how to do performance marketing and how you think about getting installs. And we've tried on our own a few times. We've got a great Minecraft mobile experience on iOS and Android and other things. So, we've got some foothold, but what Activision, Blizzard, King does on mobile is impressive. And what they've done with Candy Crush being one of the biggest ones from King, but also you think about Call of Duty Mobile, that's the most players playing is, frankly, to Call of Duty Mobile. You think about what they've done with Blizzard and Diablo and World of Warcraft Mobile, they just talked about at BlizzCon a few weeks ago and like I said, Candy Crush.
“So, they're taking their IP into the mobile landscape, and they know how to do it, how to build it, how to iterate quickly, and that's just the DNA is gold. And we can then leverage that with our IP and take the learnings into our business and say, okay, how do we go now address these new - frankly, these new billion gamers that we've never had a chance to go reach before.”
For now, thoughts are still very much on the Xbox console business, and Microsoft’s commitment to pump out more exclusives from its huge first-party studios network amid plans to launch mid-gen refreshes of both the Xbox Series X and S at some point in 2024. It’s promised announcements at next week’s The Game Awards. Perhaps fans will get a clearer idea of what’s to come then.
Wesley is the UK News Editor for IGN. Find him on Twitter at @wyp100. You can reach Wesley at wesley_yinpoole@ign.com or confidentially at wyp100@proton.me.
