In its Q2 fiscal year 2020 results, Microsoft had reason to celebrate when it came to figures for Xbox Game Pass subscribers and monthly active users on Xbox Live. However, it saw significant drops in many key sectors including gaming revenue which dropped by 21 percent or $905 million. Xbox One console sales also dropped by 43 percent for the quarter ending December 31st 2019.
As for game sales and services revenue, that fell by 11 percent or $295 million. According to Microsoft, this is “primarily from a third party title, partially offset by subscriptions growth.” Niko Partners senior analyst Daniel Ahmad on Twitter noted that the third party title was Fortnite. It saw lower spending year-over-year and thus resulted in lower royalties for Microsoft.
The drop in console and game sales isn’t completely out of the blue though. Microsoft is gearing up for the next generation of gaming with the Xbox Series X launching in holiday 2020. It’s a given that console hardware sales tend to slow down near the end of a generation’s life-cycle. The real question is whether Microsoft’s early reveal of the console, which took place at The Game Awards 2019, and subsequent marketing will translate into success for the brand.