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Microsoft will reportedly judge Xbox division based on Xbox Live numbers

Microsoft hasn't offered a concrete update on how many Xbox One consoles it has sold for some time. Now a new report claims we may not get that information as often as we have in the past, as the company is allegedly ditching that success measure for the Xbox division in favor of looking at the engagement numbers of its Xbox Live subscribers.

Microsoft didn't reveal any hardware sales numbers for the Xbox division in its recently announced quarterly financial results, saying only that its hardware revenue was down due to selling a smaller amount of its now 10 year old Xbox 360 console. However, it did mention that it saw "healthy growth" in the last fiscal quarter, both in revenues and in monthly active users, for its Xbox Live subscribers. Indeed it stated that Xbox Live now has 39 million users, up 28 percent from a year ago.

Now Game Informer states that, according to their sources, the Xbox Live numbers are the ones that Microsoft is most interested in measuring:

"Microsoft will not be using console shipments as its primary metric for success beginning with this quarter, we have been told. The company is more focused on engagement, leading it to choose Xbox Live usership as its leading statistic.""While that doesn't mean we won't hear about console shipment statistics, it won't be something we should expect to see every quarter. Microsoft also indicates that the 39 million Xbox Live users reported today are more narrowly defined now. We've been told that this metric now reflects users that have logged in within the past month. No differentiation has been made between gold (paying) and silver (free) members."

This report comes as many feel that Microsoft will not win the current console war in terms of hardware units that are sold, with Sony's PlayStation 4 apparently winning this time around.

Source: Game Informer

  • I've been on Xbox Love since day one. It is one of the few things it saw coming before everyone else did.
  • Is "Xbox Love" some sort of console fetish group?
  • Yep.
  • X-Lax Live.
  • X-Lax Love (bad joke being taken too far)
  • It makes sense. The Xbox One hardware is a bit of a loss-leader. Xbox Live subs are pretty much full profit.
  • But there're lots of Xbox accounts that are not even used. People just create and abandon..maybe for WP or anything...lots of zero gamerscores. I don't think those can be considered and included in the community growth statistics. Will just yield a wrong analysis IMO.
  • In the article, someone has said they're more narrowly defining it now, to include only users who have logged in within the past month. Much better statistics that way.
  • They are only going to report paid accounts. There is no need to report revenue of accounts that are not paying. If people are paying for Xbox Live and aren't using them I don't see how that is a loss for Microsoft.
  • Wrong, it even says above that there'll be no differentiation between Silver and Gold accounts. All that matters are logins.
  • Which make sense. If you're an active user, paid or not, you're adding value to the ecosystem.
  • Silver users can still buy through the store and use apps that generate revenue. So my assumption would be that they'll still count in a user engagement metric.
  • This is true. My mother and father have an Xbox One so they can Skype to their grandchildren from their living room, but my mother buys movies from Xbox One store. They only have Silver accounts. They don't play many games but do have a few that don't require a server or multiplayer gaming.  I think she's spent a couple hundred on movies since she first started buying/renting them. Oh.. they do watch TV through the Xbox One as well. They love being able to change channels with their voice an not have to remember specific TV channel numbers.
  • That's really cool. Maybe my Dad needs One.
  • Haa I see what you did there. But for sure man, I wish my parents learned to use technology -_- specially when they get older, it would be super convenient for them to talk to their TV connected console and not have to get up to change inputs lol. They still walk up to the TV to do this aha they're so old school.
  • It says right in the article that they didn't break down paid accounts versus free accounts. Bullshit metric if you ask me that is solely being used because if it was based on sales, theyd have to fire a bunch of the xbox team
  • Or the odd game achievement that requires 2 accounts
  • The number is active current users. It states that. Not dormant accounts. Active users.
  • I have two Xbox Ones, but only pay for one subscription now. My girlfriend plays on my home console so she gets access to gold and all digital purchases. I previously needed purchase gold for both accounts on the 360. I wonder how many paying subs they will lose because of this new policy. I am pretty sure an unlimited number of accounts have gold as long as one account does.
  • This really does make sense.  As XBOX is leaving the preconfined structure of the xbox.  It will be mobile on computers, xbox, and phones.  No need to care about console sales.
  • Except console sales are revenue being on xbox live is only revenue if they are gold subscriptions.
  • Exactly the point I wanna make
  • Consoles are typically sold at a loss...
  • Silver users can still be a source of revenue through the store and various apps. Also paid advertising would be interested in all the users they can push 'content' to.
  • Wrong. Silver users can still purchase all sorts of things.
  • @Sin Ogaris I work at Microsoft in a totally different department, but this is consistent with the way we're trying to go.  Leadership has been hammering us about the idea that revenue recognized and sales are "lagging indicators" of success meaning they are really the result of some previous success.  To generate new success there are so called "leading indicators" of success.  Those generally end up being measurements of things like engagement, customer satisfaction, etc.  The theory (which I believe in) is that if you get enough people excited about a product and using it then the problem of people paying for it solves itself.  This isn't a quarterly tactic that is designed to make Q2 look fantastic, but when we celebrate a quarterly victory in 2 years this type of thinking will be one of the reasons why. The risk is that "freemium" models are often difficult to turn into revenue generators.  I'm naturally leery of freemium in general.  Xbox Live Gold subscriptions seem to be doing fine, though, so I guess I don't need to worry about it.  The point is that we are explicitly choosing to look at leading indicators rather than lagging indicators.  This is not only true in areas where we're behind in some numbers (like phones or consoles) but also in arenas where we dominate.  This includes Windows and Office. I work in the Cloud and Enterprise Group and work on a tool that sits on top of Azure, so it's a cloud based tool that you could roughly equate to Xbox Live Gold in this scenario.  Since we sell to enterprises it often happens that we make the sale but the enterprise never gets around to rolling out our software.  Our internal metrics are not sales (which have generally looked great since I've been there, I believe) but number of licenses being actively used.  We get $0 more through that usage and in fact you could make the case that it causes additional overhead and is a net negative to our immediate business numbers.  What's better than money where you don't even have to provide the service, right?  That said, since our focus is on increasing engagement we are paying a lot in human time (which equals money) to make sure that as many customers as can will not only purchase the software but will move to the implementation and utilization step. That was a hard transition at first because we went from, "Hey our numbers are awesome!" to "Wait, that's really low.  This sucks!"  Given the 8 months or so we've been doing this that number has already started to rise, our customer engagement is up, based on amount of feedback we get and ideas we get to make things better, and our product is becoming dramatically better as a result.  I believe the product I work on will be nearly ubiquitous in enterprise environments within the next few years.  That wouldn't necessarily be the case if we weren't focusing on engagement (proxied by active license usage) as a critical metric instead of merely units sold.   In short, your analysis is exactly right.  This isn't about revenue.  That is, however, an intentional decision.
  • Well...this puts a lot of things into perspective. This also opens in my mind a world of possibilities. OMG...MS needs to acquire Netflix.
  • @SomeDude681 I like your point about leading vs lagging indicators, but if memory serves, MS are pretty happy to trumpet good sales on the occasions they have them; they just seem to avoid announcing bad ones. I might be wrong, but I'd suggest it's a fallacy to say that you can't hear about sales in order to hear about engagement. The thing that worries me about that is that if you don't look at sales, you're basically refusing to measure outcomes; in two years' time when current engagement starts to be realised, will sales still be ignored? Probably, if they're bad, and the logic behind today's decisions won't be questioned. If they're good, then they probably will be (rightly) trumpeted, at which point the idea of sales reporting being antagonistic to engagement reporting will be shown to be incorrect :) Having said all that, it's late and I've had beer, so I apologise for any fallacies of my own.
  • Very fair points.  Sales will have to be disclosed to analysts and investors (and therefore everyone) and I'm sure people in sales aren't getting commission on engagement numbers.  The perspective I shared is for those of us on the engineering side and what our leadership says they are trying to use to guide their own decisions.  The realities of sales people being sales people will likely still be reality. From a practical standpoint I agree with everything you've said.  There's probably some contradiction between my statement and yours, but I'm not going to try and rationalize them.  I'm OK with a focus on a "higher" objective while still trying to meet objectives that don't quite fit on that plane.
  • THey care about console sales, but they wont announceit  because it becomes internet food source for console wars.     
  • Game attach rates are far more important than console sales, and while neither sony or MS have released these figures for many months, the attach rate for xbox was way higher than for the PS4 when they stopped releasing the numbers. Selling more consoles is great, it expands the potential licensing revenues from games, but if the owners of those devices only purchase 3-4 games over several years compared to a compeditor who might sell fewer systems but 3 times as many games then your console has failed. I don't know if the PS4 and Xbone are sold at a loss like the PS3 and 360, but I'd be very surprised if the margins aren't razor thin and need the software license fees for the console divisions at sony and MS to be profitable.
  • The hardware units are not where it's at.  Since July, the Xbox One has outsold the PS4 when you look at games sold at retail.  It also is thought to sell more digital copies of games as well.  The customer attach rate for the console is better than 2:1 compared to the Playstation. Console sales are a poor measurement of who "wins" the console war.  The PS4 is more like this generation's Wii.  It's been an impulse buy and is often purchased by or for a younger demographic that has little or no spending power.  The Xbox Live numbers tell the story of an active and enthusiastic community.     The attach rate for the Xbox is onlu likely to grow as big exclusives hit the Xbox while the PS4 goes through a winter without much of anything special to offer.  That's why they did the price cut.  They need to get more people to casually buy games. As it stands, the PS4 has to sell more than twice as many consoles as the Xbox One just to move as many games.  Sure, the PS4 looks great when you look at the big launch titles.  But when you go further down into the library you find that the Xbox does much better as games get older or with lesser known titles.  PS4 owners only tend to buy the big name titles while Xbox owners are much more enthusiastic and buy smaller titles down the line more frequently.   Phil Spencer has stated this.  The Xbox does much better in overall game sales per console and accessories per console.  That's where the money is made with game consoles.  The console itself is either a money loser or barely makes a profit.  Sony got casual fans revved up for its console, but many are not spending money to buy games to play on it outside of one or two major titles a year.     The console sales aren't relevant.  Overall games sales are.  If the Xbox sells more games for the generation, it is the Xbox that is the winner no matter how many more PS4 consoles there are.  That will make Microsoft and the developers more money.     Though I will say that I would not be surprised to see the Xbox One surpass the PS4 in monthly sales through the end of the year and into early next year due to the launch titles.  The reaction to Halo 5 will be interesting.    
  • I will admit I have a lot more games on the One than on my PS4 however that is solely because I had an Xbox 360 and no PS3 so I am more attached to achievements than trophies. As a device the PS4 is a hell of a lot more reliable than my One though (which can often be very frustrating at times, but it has the games I like so I deal with it).
  • Well the ps3 trophies are just... Icons. Nothing you can do with them. You level up but what do you unlock? Nothing of value really. Xbl achievements actually give you something you can utilise and spend albeit it's predominantly on a digital avatar. However even then it still marks a sense of accomplishment. I have a x1 and my older bro has the ps4. Both have been reliable, although I am somewhat concerned about my hdmi output port on the x1 as it was pretty flaky. But it's a long while since it acted up (random black screen, just audio playing - similar effect to cheap hdmi cables).
  • Haven't had any reliability issues on the Xbox One.     Know several people that are the same.  Have both consoles.  Have purchased more games on the Xbox due to achievements, online play, etc.  Also know some that could only afford one console and now regret buying the PS4, largely due to the slew of exclusives.  One friend is kicking himself because of Halo 5.  Thinking about trading in the PS4 and moving to the X1 because of it and all the other titles.  
  • I have issues where I cannot open apps/games I need to hard reset the machine for it to start working again. Also at other times in the dashboard I need to press buttons repeatedly for it to register, so I mash A to run a program/see notifications or "start" to get into the menu. It's not often it happens, but its annoying when it does, but not enough to stop me using the console.
  • I've had that happen once, and I've had a One since launch.  I'd rather that then the multiple times my PS4 has decided to shut down because its getting too hot and it's jet-engine cooler is seemingly unabled to keep things cool.
  • I agree, I have two Xbox ones in my household and the 360 was much more reliable. Ignoring the UI for this discussion, there are many times where I had to completely reboot the system to regain functionality. Booting from a hard reset takes forever as well.
  • Well said.
  • I really don't care about the battle, as long as Microsoft gives us Games and features... :)
  • Yup...but they (Microsoft) will need those to motivate themselves in order for us to get those goodies.
  • How about when they screw customers over by taking away features instead, like Kinect gesture navigation?
  • Give it up. Sell your Xbox and Cray about something else.
  • I have no respect for someone who mocks the plights of disabled consumers and chooses to defend multi-billion-dollar corporations for anti-consumeristic decisions. Take off your blinders before you fall off a cliff. Or, don't.
  • Typical of a person like you to make things up about people. I never mocked anyone. You however continue to use disabled veterans as your excuse for being angry about losing a feature you enjoyed. Doesn't matter, I don't live my life trying to seek the respect of a person like you. I can't wait for the update to hit everyone so I can sit and picture the look on your face as your head gets ready to implode with rage. I'll giggle as I watch the update download and install.
  • Well said Posted via the Windows Central App for Android
  • Typical of egotistical maniacs like you to dismiss the plights of others and baselessly accuse people of things that are irrelevant to their arguments, not even realizing that your offensive accusations are also fallacies. These disabled veterans are my friends and family, so that's a big eff you to you. Regardless, though, and, as already explained to you, that Microsoft is screwing over disabled veterans in their decision to kill Kinect gesture navigation is irrelevant to the larger argument: Microsoft is screwing over ALL consumers who bought an Xbox One for that reason. It is not okay for a company to design, market, and then sell a product or service that does something and then, after taking customers' money, steal those features back away. That is indefensible, and the fact that you are trying to defend a multi-billion-dollar corporation for doing so--while simultaneously exposing yourself as a sociopath--is as mind-boggling as it is despicable. In short, you are a terrible human being, taking joy in others' misfortunes. Normal humans' react with empathy. It is not okay for Microsoft--or any company--to pull this crap, and it's not okay for nescient apologists like you to champion it.
  • Wow... I think you might be the only person using Kinect gesture for navigation. I use voice and my controller.
  • There are quite few of us, actually, but we're in the minority. That said, minorities deserve rights too, especially when they made their purchasing decisions based on Microsoft's promises that "Kinect is Xbox One", that it would never be unbundled (now a lie), and that you could always control your Xbox One using Kinect only (now a lie). I have a huge problem with rich companies selling things, taking the money, and then subsequently nerfing those products. That is anti-consumer and any company that does that deserves to be sued. I don't undersand why anyone would tolerate, let alone support such moves. Even if this were about a feature I didn't care about, I would absolutely empathize with my fellow Xbox owners about whatever the stolen feature was, which is why it's vexing that there are such hateful sociopaths on here that adopt the opposite mantra.
  • Of course its not anti-consumer.  Anti-consumer would have been to continue to sell the One with the kinect at $100 extra, or sticking A/V sockets on the back instead of HDMI because a vanishingly small number of ppl want to use a 51cm CRT TV. Since unbundling the kinect they got a HUGE sales boost.  More sales means more devs will see the console as being worthy to develop for means more games means more choice for YOU the gamer. Stop bitching about market realities.  The world doesn't revolve around YOU no matter your imagined entitlements (sociopathic benahiour if ever there was).
  • There are some disabilities that don't allow for voice navigation or controller navigation, but gestures can still be used by these people. These aren't people that will be playing Halo, but they may be using the Xbox One to watch movies, and it may be the only way they can watch movies without getting assistance from someone else. It allows a bit of independence in an otherwise dependent world for some. I've done a fair amount of volunteer work with some who are disabled in these ways, and it makes you feel good to see some of them be able to reclaim even a minute amount of independence in any area. 
  • Removing features?  Like sony did seemingly every month with the PS3?
  • Well xbox live is a service so yeah... no brainer really and in regards to shipment numbers, personally I feel they are meaningless as there is generally no direct correlation between numbers sold to consumers and shipped. For instance 100,000 units can be shipped however if they sitting on shelves, they haven't been purchased by consumers.. have they? However if a company had to keep restocking, then that does show demand and only in this scenario there is a direct correlation between numbers shipped and sold. So the only way to measure units sold is the number of unique activations (first launch). As I highly doubt all the consoles have the same serial number lol.
  • Remember, Microsoft is focusing hard on cloud services (OneDrive, Office365, etc) and so them focusing on Xbox Live revenue makes sense and does fit into their overall strategy. Hardware is used to push cloud revenue. You only need to buy one Xbox, but you pay an annual fee to use it online. That latter is where the revenue is.
  • The market is flooded. Do not vomit the same mistake as the Atari did.
  • Even if 7 of those 39 million subscribers are gold Microsoft is still making over $40 million a year.
  • So my mom who plays AlphaJax once a month on her Windows Phone is an active Xbox Live member. Not really sure that's a good metric. I predict Xbox Live Gold subscription growth will stagnate and Xbox gamers figure out then can play Xbox games online for free on Windows 10.
  • That's fine, the best part of Live is you can do that too...
  • Yeah but hose aren't real time users. Those who play games on android phone sre not exactly google play users. Everyone iPhone user who plays games is not a game centre user. Microsoft needs to figure this out. There are tins of gmail account like ppl have created like trash. But the most genuine users are the ppl at enterprise who use outlook daily for their productivity purposes.
  • Actually it depends on what version of the wp xbl api their using id assume as not all games actively report to xbl on wp some only call in during achievement unlock & some call in during game save sync
  • I think you're misunderstanding a user 'engagement' metric. In the case of your mum that would actually skew the stats towards the negative i.e. a user that is not engaged with or spending through the service.
  • Microsoft made it clear enough to us at Gamescom. Xbox success is no longer about how many boxes they sell to sit under TVs. Xbox is bigger than that now.
  • Especially since they seem to want to blur the line between Xbox and PC.  I remember reading somewhere that MS said it's mission was not to have Xbox and PC games, but just to have Xbox games that run on the console and on the PC.  
  • You're right about that. Hardware numbers were more relevant in the Super Nintendo, Genesis days. Nowadays active subscribers is a far more relevant metric. As far as I'm concerned Xbox has already won this generation. There are more games and better games on the Xbox platform and undeniably more features and functionality than Sony can offer with it's hardware and service.
  • Which is why I expect this to be the last stand alone console that Microsoft makes.
    Within a couple of years, when the time comes for a hardware refresh, I fully expect Xbox functionality to built into either Surface devices and other OEM machines. It's moving to a pure service, like Steam, and more within the lines of other growth cloud businesses within Microsoft.
  • I think it's time hope it's better than the games for Windows live thing.
  • Yet, Microsoft Studios has only released two Xbox games for Windows Phones in the past year. And  Windows 10 has been out or nearly 3 months now and yet the Windows 10 Xbox Store is sparce, save for Minecraft Windows 10 Edition beta and a few ports from Windows 8. There is no reason why, after announcing more than a half a year ago that ID@Xbox was coming to Windows 10 that we have yet to see any new ID@Xbox games in the Windows 10 Store.
  • As long as I get top games and features I'll stay with Xbox.
  • Well if I get a Xbox one its not for live. I have a PC that I do my online playing with.
  • Nintendo and Microsoft are gonna make this a short generation.
  • I think this will be a short console generation too. Even the PS4 is underpowered when it comes to delivering games at 1080p, if the X1 can't run a game at 1080p usually the PS4 can't either, it just runs it at a slightly high resolution than the X1.
  • Slightly higer res, but often a lower and far more fluctuating framerate as they made such a huge song and dance about 1080 that they won't allow their devs to use anything but 1080, so what has to happen when things get busy, framerates drop.  Xbox just lowers the resolution down a bit to 900p, usually, in realtime and maintains the framerate. I just wish sony would stop artificially boosting the contrast on the PS4 output.  A game like Starwars Battlefront looks better on the PS4 NOT because of any higher resolution crap, but because there is more contrast in the picture (which introduces quality dropping black/white crush).  Surely Dice coded the game to have the SAME colors and contrast output on both platforms and yet sony boost the contrast by15% or so, resulting in a less accurate but more eye-pleasing picture.
  • It actually makes sense in the new oriented Microsoft. Posted via the Windows Central App for Android
  • I think MS needs to go back to a much simpler dashboard like the original 360 had. The PS4 for dashboard is very similar to the blades that the 360 use to have. The PS4 is much easier to navigate around in, the X1 dashboard still seems very clunky and slow when compared to the PS4.
  • They have to because that's what I miss from the 360 the simplicity.
  • Agree completely, the new setup is there to sell ads and content. Instead it should be a simple and intuitive interface with easy access to all of your content. All menus and sub-menus should be consistent in appearance. Kinect/Cortana needs more natural language processing so you can open content with real English, not cryptic robot commands. Advertising can be placed in the marketplace where it belongs.
  • There is the new dashboard soon? ;)
  • The new dashboard is still pretty clunky even after the latest update I got last night. It seems more stable now but still not as easy to navigate like the 360 was.
  • Sad they have finally waved the white flag only two years in, but as long as they churn out new first party games and keep supporting Kinect and TV I will keep supporting them with my Xbox live gold subscription. Have yet to buy a playstation as it would only be used for games.... So boring....
  • What? Sorry. The ps4 software numbers overall are now behind xbox one since July. People impulses bought the ps4 initially with promises of games. But basically Sony screwed people over. With no exclusives and this indie policy bs. People aren't buying games on the ps4 and worse people are starting to regret their purchase 2 years in.
  • Makes sense like Office 365 it's regenerating income. Does how many users fully engaged. Easy for analyst's to follow too Posted via the Windows Central App for Android
  • Cool.
  • The units sold for each system, mean absolutely nothing. It never has it Nintendo would have been out a long time ago. The games and having consistent services being paid for us what matters. Having that solid and profitable means regardless of how many units or hardware are sold, you'll still be relevant for years to come.