Microsoft has significantly altered the specifics of its revenue generation and reporting methodologies. The way Microsoft’s revenues are reported will include a lot more details about the growth and metrics obtained from Xbox Content and Services revenue. However, the company has chosen not to disclose certain key parameters involving the Xbox, Microsoft’s dedicated gaming console segment.
Microsoft revealed that it will no longer include Gaming Revenue or Xbox Live Monthly Active Users in its earnings reports. The announcement was made at an Investor Update. The company will keep Gaming Revenue in its SEC filings. However, Microsoft has clearly indicated that its financial focus, goals, and targets lie elsewhere. Apparently, the company has been shifting focus away from hardware to software and digital services. If the company’s recent activities are to be observed, the changing attitude towards supporting software services has taken more precedence.
Microsoft Adds New Metrics To Its Earning Releases While Omitting Key Aspects Of Xbox Gaming:
Microsoft is reporting “Xbox Content & Services Revenue Growth”. The broad topic includes games software revenue and Xbox Live. Further expanded, the category includes Subscriptions, Cloud, and Digital game sales. Interestingly, Microsoft has also clubbed “Add On Content”. It may not be immediately clear what Microsoft is referring to, but it could include revenue generated from Downloadable Content (DLC), premium in-game services or other special add-ons that are usually offered to gamers in the games they purchase.
Microsoft is adding a new metric to its earnings releases.
Xbox Content and Services revenue growth, which includes games software revenue and Xbox Live (Subscriptions, Cloud, Digital game sales + Add On Content).
Hardware growth & Xbox Live MAU no longer disclosed. pic.twitter.com/Yu7TOrfZJU
— Daniel Ahmad (@ZhugeEX) September 18, 2019
Microsoft appears to be following the industry-wide trend that several companies have adopted in the recent past. The trend towards not publicly releasing their sales and earning isn’t a good practice in the general sense, but there’s a simple logic behind Microsoft’s choice.
Xbox Subscription Services, xCloud, And Xbox Game Pass Revenue To Matter The Most?
Microsoft has been committed to Xbox Game Pass & xCloud, two of the most promising software-based services for the dedicated gaming console. Needless to add, these services have made the Xbox One gaming console a much more valuable purchase in the process. Some analysts even claim that Microsoft may have just become one of the most serious players in the fast-emerging subscription-based gaming services.
Actual game sales still take place and they are still a significant part of Microsoft’s revenues. Moreover, once the Xbox Scarlett hits the markets, the revenue from game sales will witness a quick jump. However, as Microsoft has clearly indicated, investors may not immediately get the relevant data for the same. Regardless of the stellar hardware expectedly packed within the Xbox Scarlett gaming console, the significant alternations and tweaks to the Xbox Game Pass structure and content offering should take center stage in the upcoming console wars.
How much is Microsoft committed to services?
It will longer include Gaming Revenue or XBL Monthly Users in its earnings reports. (Though will keep Gaming Revenue in SEC filings.)
Instead, it's reporting "Xbox Content & Services Revenue Growth."
Includes subscriptions & cloud. pic.twitter.com/Vi8qokX6cC
— Dom (@DomsPlaying) September 18, 2019
With the sweeping change, Microsoft has made it clear that it puts a lot more emphasis on revenue being generated by Xbox services and perhaps de-emphasizes hardware. Moreover, just like several tech giants like Apple Arcade, Google Stadia, PlayStation Now, the Microsoft xCloud online Game Streaming Service will matter significantly in the long run. Most of these subscriptions are very attractively priced on a monthly basis. They instantly grant access to console-quality games. Moreover, these game streaming services are platform agnostic. They can be played without any noticeable significant drop in quality and gameplay experience, on multiple platforms, including the dedicated gaming console, PC, Nintendo Switch, and other cloud platform-supporting hardware.
With the announcement, Microsoft has noted that it is shifting priorities. Although the alterations to the way it reports earning may not have much impact, it does signify what Microsoft values more. Those interested in knowing more about the ways in which Microsoft will report its earnings can click on this link.