Microsoft Earnings Call - FY23Q3 | 4% decline for MS Gaming, Xbox HW down 30%

[anonpuffs]

If GamePass grew by 3%, then that means it grew from 25,000,000 to 25,750,000. They never share offical numbers so this is likely wrong.

That's not gamepass. That's all their gaming related subscriptions.

 

[VillaiN]

If GamePass grew by 3%, then that means it grew from 25,000,000 to 25,750,000. They never share offical numbers so this is likely wrong.

Its just subscription growth, likely in revenue. Including GP, xbox gold, es online subs, fallout 76 etc. It can literally mean even they lost number of GP subs but some other subs started paying full price instead, new sub revenue for ES online, new gold people paying....

Anytime they dont report hard numbers for GP we know something s fishy.

 

[Ludwig]

That's not gamepass. That's all their gaming related subscriptions.

Its just subscription growth, likely in revenue. Including GP, xbox gold, es online subs, fallout 76 etc. It can literally mean even they lost number of GP subs but some other subs started paying full price instead, new sub revenue for ES online, new gold people paying....

Anytime they dont report hard numbers for GP we know something s fishy.

Alright. I see. Then yes it could mean literally anything. It also say content, what is that referring to then

 

[Satoru]

Subscription is ~1B, right? So per month, they averaged 333M in subscription revenue. I'm going to assume a bunch since I have no data sources, but I'll try to pain an overall "nice" picture for Microsoft here.

First, subscriptions should include, as a bare minimum:

• Gamepass
• Live Gold
• ESO / F76 revenue

We then have several gamepass subscriptions available

• Gamepass PC/console: $10 month
• Gamepass Ultimate: $15 month
• Live gold: $10 month (included in Gamepass ultimate)

Good accounting principles say that they should count the full price as revenue and then deduct taxes / freebies / etc as part of expenditure, so that's what I'll do. I have no idea if Microsoft employs these (some companies don't).

Assumptions

• We have a rough estimate of 15M players using Gamepass on PC. We don't know if this is Gamepass PC, Gamepass Ultimate, or a combination of both, so I'll split in half.
• Live gold + Gamepass PC / Console can be bundled as their cost is the same
• Only 10% of all users have Gamepass Ultimate, so as to help boost the final subscription numbers

With all of that said

• 90% of PC Gamepass users have the base subscription, which would mean 13.5M users with Gamepass PC. That's 135M/month, or 405M across 3 months.
• The above leaves us with 1.5M gamepass ultimate users. $15 x 1.5M x 3 months = 67.5M
• The total revenue of Gamepass PC + Ultimate would be around 472.5M, leaving us with 527.5M for Console Gamepass and Live Gold.
• 527.5M ÷ 3 months ÷ $10 = 17.6M console subscriptions

So, in a world where gamepass ultimate is only 10% of their PC subscription portfolio, Bethesda games generate zero revenue, and Live Gold doesn't exist, Gamepass would have, at most, 32.6M subscribers. Now, I can't be arsed to do any more math, but I'd say that those numbers are not great, especially when my math is heavily skewed towards giving them a lot of leeway so I can get a bigger number of subscriptions. I'd say, realistically, they are not at 30M subscribers.

 

[Gediminas]

Q1 was 'up 13 %'

Q2 was 'down 13 %'

and now we have that.... 'down 30 %'

However if Q1 was up, you have to consider they could have been stuffing channels, as they refer to channels being overloaded in their financial report under devices. This isn't proven to be the case in Xbox but my speculation.

Your intuition? Right?

 

[Satoru]

Your intuition? Right?

Microsoft is also both a company that has 4M parked in retail channels while also having a product shortage.

 

[Old Gamer]

Microsoft is also both a company that has 4M parked in retail channels while also having a product shortage.

Bundles don't count, haven't you heard?

 

[arvfab]

Bundles don't count, haven't you heard?

Remember when 'shady' Sony was being 'anti-consumer' for forcing bundles and people still bought them? When those bundles were being used as an excuse for huge sales of the included games?

And now we have a bundled console not selling and the bundled game not charting. But somehow it's because of supply constraints...

 

[Gediminas]

Microsoft is also both a company that has 4M parked in retail channels while also having a product shortage.

maybe they shipping through Tesla, SpaceX

 

[riesgoyfortuna]

The bundle argument its pretty desperate ps5. Got abusive bundles and Still sold everything

 

[Nhomnhom]

These numbers are going to look a lot better when you add in all the ABK revenue.

 

[Yurinka]

The software numbers are better than I expected, but this hardware sales decline doesn't show a good future for their console:

 

[AshHunter216]

The software numbers are better than I expected, but this hardware sales decline doesn't show a good future:

If they can't right the ship, their investors might eventually pressure them to drop the hardware market and become in-essence, a big third party publisher.

 

[Heisenberg007]

Will Phil Spencer be fired? ()

I hope not. He is the best Xbox CEO that PlayStation could ever hope for.

 

[Yurinka]

So, in a world where gamepass ultimate is only 10% of their PC subscription portfolio, Bethesda games generate zero revenue, and Live Gold doesn't exist, Gamepass would have, at most, 32.6M subscribers. Now, I can't be arsed to do any more math, but I'd say that those numbers are not great, especially when my math is heavily skewed towards giving them a lot of leeway so I can get a bigger number of subscriptions. I'd say, realistically, they are not at 30M subscribers.

I say that realistically they continue stagnant at around 25M-26M. A jump to 30M or 32.6M would have mean a massive jump on their subscriptions revenue, which didn't happen, and also they would have announced their new amound of subscribers to brag about good growth.

If they can't right the ship, their investors might eventually pressure them to drop the hardware market and become in-essence, a big third party publisher.

I think this is what they have planned since many years ago, since they have been slowly moving their focus from their own console to include also the rest of consoles and PC.

And also moved their business focus from selling consoles and games for it to a game subscription and cloud gaming.

The natural next step on this path is to do a Sega, kill their own console and remain in console only as a multiplatform 3rd party publisher.

They are supposedly working on their next generation of consoles, but I think it's possible that Xbox Series would be their last one.

 

[Box]

So MS enters markets they think they can crush all existing market competitors and control utterly. They will throw any and all resources at this market, until the moment they realize that they are unable to control and dominate. Then they will abruptly withdraw, regardless of previous time and money spent. The best example of this is mobile phones. Over a more than decade period, they threw unlimited money at mobile phones (including multiple acquisitions like Danger and Nokia's phone division) to try and push all competitors out. They were actually an early market entrant in the nascent smartphones business. Unfortunately for them, Apple invented the iPhone and revolutionized smartphones overnight. They were slow to react to Apple (Steve Ballmer famously laughed at the iPhone) and Google were much quicker to acquire Android. MS was slow, produced a series of poor quality products in the Windows Mobile and then Windows Phone llines, spent a ton of money, and got nowhere. The moment Satya Nadella took over as CEO, he put the Windows Phone division to the axe.

Nadella also wanted to axe Xbox, another of Bill Gates' and Ballmer's pet projects, but was convinced to stay his hand. Now it's nearly a decade into Nadella's reign as CEO and MS once again was slow, produced a series of poor quality products in Xbox One and Xbox Series S/X, and now they are at the final spending lots of money phase with this $70 billion acquisition of Activision Blizzard. Make no mistake about it, MS is once again near the end of their monopolist's playbook here. If they are unable to push back against Sony after they have finished this acquisition and denied Call of Duty to PS, it's probably going to be the end. Regardless of previous time in market and money spent, they will drop the guillotine on Xbox if their final gambit to destroy Sony fails. This is how MS works and how they think.

 

[Gediminas]

I say that realistically they continue stagnant at around 25M-26M. A jump to 30M or 32.6M would have mean a massive jump on their subscriptions revenue, which didn't happen, and also they would have announced their new amound of subscribers to brag about good growth.


I think this is what they have planned since many years ago, since they have been slowly moving their focus from their own console to include also the rest of consoles and PC.

And also moved their business focus from selling consoles and games for it to a game subscription and cloud gaming.

The natural next step on this path is to do a Sega, kill their own console and remain in console only as a multiplatform 3rd party publisher.

They are supposedly working on their next generation of consoles, but I think it's possible that Xbox Series would be their last one.

yes, they moved to digital in pretty big way.
their next console, if it will be created, going to be streaming-cloud-digital based with minimal creation of hardware.

 

[ARCANE]

Maybe Microsoft should have sent Sting to 10 Downing Street last week

 

[Nhomnhom]

So MS enters markets they think they can crush all existing market competitors and control utterly. They will throw any and all resources at this market, until the moment they realize that they are unable to control and dominate. Then they will abruptly withdraw, regardless of previous time and money spent. The best example of this is mobile phones. Over a more than decade period, they threw unlimited money at mobile phones (including multiple acquisitions like Danger and Nokia's phone division) to try and push all competitors out. They were actually an early market entrant in the nascent smartphones business. Unfortunately for them, Apple invented the iPhone and revolutionized smartphones overnight. They were slow to react to Apple (Steve Ballmer famously laughed at the iPhone) and Google were much quicker to acquire Android. MS was slow, produced a series of poor quality products in the Windows Mobile and then Windows Phone llines, spent a ton of money, and got nowhere. The moment Satya Nadella took over as CEO, he put the Windows Phone division to the axe.

Nadella also wanted to axe Xbox, another of Bill Gates' and Ballmer's pet projects, but was convinced to stay his hand. Now it's nearly a decade into Nadella's reign as CEO and MS once again was slow, produced a series of poor quality products in Xbox One and Xbox Series S/X, and now they are at the final spending lots of money phase with this $70 billion acquisition of Activision Blizzard. Make no mistake about it, MS is once again near the end of their monopolist's playbook here. If they are unable to push back against Sony after they have finished this acquisition and denied Call of Duty to PS, it's probably going to be the end. Regardless of previous time in market and money spent, they will drop the guillotine on Xbox if their final gambit to destroy Sony fails. This is how MS works and how they think.

The Xbox brand makes MS look like a complete joke. It's not a great look at all.

 

[Dick Jones]

Maybe Microsoft should have sent Sting to 10 Downing Street last week