Xbox console sales plummet, but Microsoft’s gaming business is still doing great

Microsoft revealed Xbox console sales dropped significantly in its report for the latest quarter.

A 42 % drop in Xbox console sales follows a drop of 31 % which took place in the previous quarter, as was recently covered on Forbes.

This means that Microsoft is falling behind Sony even more in the new-gen console wars. Actually, according to unofficial data on vgchartz.com, Sony has sold more than 59 million PlayStation 5’s consoles to date, while Microsoft’s combined total for the Xbox Series X/S stood at about 29 million. Meanwhile, Nintendo’s dominance continues as there are now 141 million Switch consoles out there.

But despite the fall in console sales, Microsoft still had a pretty great 44 % revenue increase in the quarter, thanks mainly to its controversial acquisition of Activision Blizzard last year (and all the perks that come from being the owner of the Call of Duty franchise, of course).

Microsoft CEO Satya Nadella spoke of “building up content pipelines” that could be accessed on a variety of devices. Not only Xbox consoles (the sales of which are in a significant decline) but also on PC, mobile phones, cloud and Amazon Fire TV.

Also, Microsoft exec Amy Hood spoke about delivering “a broad set of content to more users in more places”, and “build something that looks more like, to us, a software annuity and subscription business” also saying Microsoft is “encouraged by the progress and how we’re making progress with Game Pass”.

Of course, Microsoft’s strategy for its gaming division since the pandemic has been centered on Game Pass, which now has 34 million subscribers. But the company has been criticized for increasing the price of its Xbox Game Pass Ultimate subscription recently, while also adding a new tier to its service called Xbox Game Pass Standard, which does not give access to releases such as the upcoming Call of Duty: Black Ops 6 on launch day.

Games like Call of Duty: Black Ops 6 could give Xbox Game Pass a boost this year.

But even if Microsoft seems to be moving away from console hardware, it is still planning to release a refreshed version of its flagship Xbox Series X console in the near future. Codenamed “Brooklin”, the new machine will have more storage space (2 TB), but will have no disc drive and be cylinder shaped. It will also consume less power than the current model. Also, it will come with an improved controller featuring haptic feedback like Sony’s DualSense.

Sony itself will also be releasing a souped-up PlayStation 5 Pro console (presumably this fall), while Nintendo also has a Nintendo Switch 2 console in the pipeline.

Microsoft fell significantly behind Sony and Nintendo in the Xbox One generation and has not recovered since then, and it’s not clear whether it will be able to come close to the Japanese companies ever again in terms of console sales. It may not have to if its Game Pass service keeps growing, even though Microsoft has had trouble with this. Nonetheless, the Redmond giant is a much bigger company than Sony and Nintendo, and can endure the bad times better.

There is also the PC, of course, which may yet turn into a cash cow in the future (and where many Game Pass subscribers play on). For the time being, though, the Xbox platform will have to settle for third place, something Microsoft might not care about much if this year’s Call of Duty ends up being another megahit.