Microsoft recently reported its FY20 Q3 financials, including an insight into its gaming efforts, and how the Xbox portfolio has navigated the new challenges of a global pandemic. Quarterly gaming revenue predominantly stayed flat, with a one percent year-over-year decline, and Xbox content and services increasing two percent. It suggests consistently steady returns across Xbox One, Windows 10, and other Xbox services regardless of the global climate — laying the groundwork the upcoming generation.
CEO Satya Nadella provided additional context around those figures, reporting 10 million Xbox Game Pass subscribers, and 90 million active Xbox Live users. It's the first instance of Microsoft disclosing hard data concerning Xbox Game Pass, while also the first Xbox Live update in almost a year, demonstrating growing confidence around the Xbox service portfolio. So, what's changed?
The spotlight falls on Xbox Game Pass
Microsoft has always alluded to newfound success with Xbox Game Pass, pushing the Netflix-style subscription service as the centerpiece of its service-driven Xbox offerings. While debuted on Xbox One with over 100 titles for its flat monthly fee, we've since witnessed its extension to PC, coupled with the steady expansion of included content.
Xbox Game Pass and Xbox Live Gold both showed promise in the prior quarter, with subscriptions helping mitigate an otherwise an overall 11 percent decline in content and services revenue. Xbox Game Pass user counts doubled, alongside "a new record" for active Xbox Live users — increasing once again with these latest financials. But Microsoft stopped short of the numbers we'd been hoping to receive.
Countering the impact of COVID-19, Microsoft describes "all-time record engagement" across the Xbox platform. It positions Xbox Game Pass and Xbox Live as valuable sources of entertainment in an era of stay-at-home guidelines and social distancing. And it's not unreasonable to assume that amid societal shifts, that's reflected in a sizeable uptick for Xbox Game Pass numbers.
Given the current landscape, it's understandable why Microsoft is so keen to flaunt its Xbox Game Pass subscriber base. Sony's closest comparable service, PlayStation Now, saw one million subscribers back in October, suggesting an immense void between the duo.
Microsoft has made continued strides to demonstrate the value of Xbox Game Pass, both for consumers and developers onboarding with the service. It's an easy sell from a purchasing perspective, stocking benefits geared toward Xbox newcomers through to the most passionate users.
Over 300 games between Xbox One and PC offers an impressive initial draw, recently onboard some heavy hitters like Red Dead Redemption 2. Also inclusive of upcoming first-party Xbox Game Studios releases, it provides an affordable entry point for flagship Xbox properties like Halo, Gears of War, and Forza. Microsoft has even attempted to emulate the success of Twitch Prime with "Xbox Game Pass Perks," granting in-game add-ons and cosmetics for members.
Promotions have also made Xbox Game Pass more lucrative, with its signature $1 deal getting users started with minimal investment. Other Xbox Game Pass promotions attempt to hook existing Xbox Live users, converting a portion of their prepaid memberships into the Xbox Game Pass Ultimate tier, spanning Xbox One, Windows 10, and the Xbox Live Gold service.
And while Xbox Game Pass' impact on developers is less clear-cut, we've seen unparalleled success from some.
Regardless of discussions behind the scenes, Xbox Game Pass finally appears to have found its place in Microsoft's modern Xbox offerings. With a new console generation on the horizon with Xbox Series X, and Project xCloud slated to mobilize the Xbox platform across smartphones, the value of its services has never been more evident.
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