Microsoft debuted the Xbox Series X/S during its fiscal Q2, and that pushed the company’s gaming revenue up 51% year-over-year. But the tech behemoth’s strength is not only in the console hardware — it’s also seeing continued gains in software and services.
Xbox hardware sales were up, of course. The Xbox Series X/S drove hardware revenue up 86% compared to the same quarter from last year. After seven years, the Xbox One had more than run its course, and demand for the new generation of hardware is high. Microsoft sold every Xbox it could make, and that suggests these hardware numbers should continue to his momentum into later this fiscal year and beyond.
But going beyond hardware, Microsoft saw growth in Xbox content and services. That segment grew 40%. This was due to an increase of Game Pass subscriptions. As consumers pick up Game Pass, it seems that many are pairing that with a membership to Microsoft’s Netflix-for-games program.
Content and services also grew thanks to revenue from third-party titles. This likely refers to selling huge holiday-window releases on the Microsoft Store as well as in-game purchases in free-to-play games like Fortnite.
All of this that Microsoft’s strategy is working well. The company doesn’t have any major first-party exclusives to rely on. Halo: Infinite is due out later this year. Until then, it must win over gamers with the value proposition of Game Pass.
Microsoft is fiercely protecting the perceived value of its subscription. It went so far as to immediately reverse a price increase for the Xbox Live Gold when it became clear that gamers began to question if Game Pass could get the same treatment.
Expect Microsoft to do everything it can to shepherd Game Pass into greener (money green) pastures in the future.
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