The first quarter during the fiscal year 2021, which ended on September 30, 2020, was Microsoft’s best Q1 on record for its gaming segment. According to the research data analyzed and published by Safe Betting Sites, its gaming revenue soar by 22% year-over-year (YoY), to reach $3.09 billion.
Microsoft Earnings Report Q1 FY2021
The main factor contributing to this growth was an increase of 30% in Xbox services and content revenue, which translates to a $649 million increase. This resulted from robust third-party and first-party title sales as well as Game Pass subscriptions.
To illustrate the rapid growth, the total number of Xbox Game Pass subscribers jumped by 50% in less than 6 months to reach 15 million as of September 2020. The subscription service costs $9.99 monthly and allows users access to over 100 Xbox games. In April, the total number of subscribers was only 10 million.
It is worth noting that Xbox hardware revenue dropped by 27% during the period. But the company made up for the shortfall with the increased subscription and software sales.
Microsoft’s next-generation consoles, Xbox Series X and Series S launched on November 10, 2020. Launch prices are $500 and $300 respectively for the two consoles.
The American tech giant was positive about their performance in the market. It predicts an increase of 40% YoY in hardware sales for Q2 FY21, limited by the supply of available consoles.
Microsoft’s $7.5 Billion Acquisition of ZeniMax to Bolster Game Pass Appeal
Ahead of the launch of the next-gen consoles, the company made concerted efforts to bolster Game Pass appeal. A strategic move on Microsoft’s part was its acquisition of ZeniMax Media, the parent company of Bethesda Softworks.
Courtesy of this deal, which costs $7.5 billion, Microsoft is the new owner of top franchises such as Doom, Fallout, Quake, The Elder Scrolls and The Evil Within among others. Once the deal is finalized, Bethesda game titles will be added to Game Pass under first-party titles.
It also incorporated xCloud game streaming, which allows Game Pass users to stream games to the phone, tablet or PC. The service launched on September 15, 2020 and is accessible under Game Pass Ultimate, which costs $15 monthly.
Microsoft is not alone in jumping aboard the cloud gaming hype as major tech companies have made moves to get a piece of the pie. xCloud’s key competitors include Google’s Stadia, Nvidia’s GeForce Now and Amazon’s Luna.
Cloud Gaming Revenue to Hit $585 Million in 2020, $4.8 Billion by 2023
The cloud gaming industry as a whole has benefited greatly from the pandemic and is expected to surge further with the spread of 5G mobile networks.
According to a Newzoo report, the industry is set to generate $584.7 million in 2020. It would be more than thrice the $170 million it generated in 2019.
Newzoo projects that by 2023, space will have ballooned to $4.8 billion. The analytics firm had previously forecast that the industry’s revenue would reach $3.2 billion in 2023 but has revised its outlook upwards by almost 50% in view of COVID-related gaming trends.
Based on a report by Omdia, consumer use of cloud gaming is set to reach $4 billion in 2021 and $12 billion by 2025.
On the other hand, an Ampere Analysis report points to the fact that there were 25 cloud gaming services in beta phase worldwide in October 2020. These are likely to launch commercially in 2021 driving awareness as well as monetization for the relatively nascent industry.
The Newzoo report also states that the West will account for over two-thirds of the cloud gaming industry’s revenue in 2020. Europe will generate 29% while North America will account for a 39% share.
It highlighted that part of the reason for increasing the revenue outlook was Microsoft’s addition of xCloud to Game Pass at no extra cost. This, it said, would boost faster uptake than if the company had charged a premium.
Microsoft is expected to be a major driver of cloud gaming revenue according to Newzoo as it is one of the strongest players. Google’s Stadia is still struggling with a lack of exclusive titles and a limited library while Amazon Luna is still in the early stages.
Nvidia GeForce Now ran into problems with developers earlier in 2020 causing Activision Blizzard to pull all its games. Sony’s PS Now, on the other hand, only offers access to its cloud gaming service on PS 4 and PC.
At launch, Microsoft’s service will be accessible on Android phones and tablets. It also partnered with gaming hardware manufacturers to launch a range of dedicated controllers and accessories that will operate with cloud gaming. However, its lack of support for iPhone at the onset cuts out a huge potential user base.