Gaming revenue increased overall, though, with software sales and services revenue up by 11 percent.
Late last week, Microsoft revealed it FY17 Q4 results, ending June 30, 2017. For the gaming division specifically, there’s both good and bad news, and some clear feedback for Microsoft regarding how it handles gaming hardware announcements and launches.
Let’s start with the good news. Overall, gaming revenue increased by three percent, which translates to an extra $44 million. That was due to an 11 percent increase in revenue from software and service sales. In particular, Xbox Live transactions increased significantly. So Microsoft is selling lots of games for the Xbox One, and in particular digital games.
The bad news comes in the form of hardware sales. Xbox hardware revenue dropped by 29 percent. Microsoft states some of that is due to lower hardware pricing, but it is also selling fewer consoles. So while software sales may be strong right now, future sales can’t be as strong is fewer people are buying the hardware to play them on.
No explanation is given for lower hardware sales, but it’s not hard to guess why. Gamers are always less inclined to pick up new hardware when they know a replacement is coming soon. Microsoft decided to announce the Xbox One X months before it was set to launch, and has since touted just how powerful it is compared to everything else on the market. With that in mind, why buy an Xbox One S now when the Xbox One X launches on November 7?
I’m sure many gamers are delaying picking up an Xbox One until the X launches. I also think early adopters of the original Xbox One who would have otherwise purchased an Xbox One S are waiting. That in turn means hardware sales will be lower as consumers wait and spend their cash buying games instead. It may also mean more gamers opting for a PS4 Pro instead.
Whether hardware sales increase after November depends on just how good the Xbox One X turns out to be, and just as importantly, the exclusive games Microsoft offers for it. Another Xbox One S price drop would also help in the run up to Christmas.