Microsoft's 2016 fiscal year ended on June 30, and the company issued a press release detailing highs and lows across its Xbox gaming division.
Although Microsoft no longer discloses Xbox sales numbers, a significant drop in hardware revenue tells the story: hardware revenue fell 33 percent compared to Q4 of FY 2015, owing to both fewer consoles sold and the lower price of those consoles.
On the other hand, revenue pulled in from Xbox Live jumped 4 percent compared to Q4 FY 2015, and active monthly users climbed to 49 million. (Active users are defined as anyone who's signed into Xbox Live under a paid Gold or free Silver account within the past month.) There were more transactions over Microsoft's online gaming service, and consumers spent more money per transaction.
All said and done, Microsoft took a hit on gaming last quarter: a drop of 9 percent, which works out to a decrease in sales of 152 million.
The health of Microsoft's other division provide a framework for how Xbox is doing overall. Sales of Surface 4 and Surface Book accounted for a 9 percent increase in that division, while phone revenue plummeted 71 percent.
What's important to point out here is that gaming accounts for less than 10 percent of Microsoft's total revenue. Phil Spencer and other executives in the gaming division may be pinning their hopes on the Xbox One S, the console's "Project Scorpio" hardware refresh due out in 2017, and Play Anywhere. Unless those and other initiatives can turn things around, the majority of Microsoft very likely views Xbox as expendable.
David Craddock posted a new article, Microsoft details Xbox revenue and other data during Q4 of FY 2016
Damn, those are rough numbers.
This is what drives me nuts about finance. Of course they knew mentioning the S would immediately decrease sales. But, it doesn't matter to finance and they'll still punch someone in the gut over it internally. Corp America dictates that you talk about a new version of your existing product for competitive reasons, AND sell more of your existing products because of finance and C level bonuses.
But, the real story should be the games. Xbox just hasn't has a large number of must-have games in the last half year to drive console sales. I can't say if I believe if they hope Scorpio may help solve that or not. If they could line up like 3 exclusives that really make Scorpio shine (and still work on Pre/S models) that would certainly get the masses to think about Xbox again.