As Microsoft has recently released their Q4 earnings reports for 2019, many reporters and gamers in general have noticed something that at first might seem alarming: an almost 50% drop in hardware sales for Xbox. Although it would be easy to see those numbers and begin panicking that this means the end of the Xbox age for Microsoft, it’s actually not bad news at all. If anything, it’s a good omen for what Microsoft has in the works.
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While the drop in Xbox hardware sales cannot be attributed to one specific cause alone, there are several reasons that are likely at play. Something that seems to be most commonly pointed out is the fact that Microsoft’s Project Scarlett, their next-generation console, has been announced and is set to release in the holiday season of 2020. With the latest and greatest piece of hardware set to be released by Microsoft so soon, it is very likely that many gamers who are considering purchasing a console right now are making the decision to wait a short time and invest in something that will be much more powerful than the currently offered Xbox One.
Another well accepted reason this sales drop is occurring is due to Microsoft’s shift from being a company that offers gaming hardware for the masses to one that focuses on subscription-based gaming and high-end hardware. It hasn’t been too hard to notice that in recent years Microsoft has been moving their Xbox platform more into subscription territory with Game Pass and Live subscriptions becoming larger portions of their revenue. In addition to being console-based, these subscriptions have been migrating into the PC gaming world as well. More and more of the Xbox’s gaming is becoming available right from your PC, and it appears that Microsoft is planning on continuing to move in this direction.
It’s been interesting to see Xbox moving into subscription gaming, but only time will tell how far Microsoft will move their future platforms into this new field. With new forms of gaming such as Google’s Stadia being released so soon, Microsoft will have to make a decision as to how far they want to dive into subscription-based PC offerings with their Xbox platform. Even if they keep their Game Pass and Xbox on PC service fairly tame, though, it is likely to become the direction that they move their casual gamers into.
As mentioned earlier, the power of the next generation Project Scarlett console likely plays a part in this forward movement of Microsoft’s gaming offerings. While the subscription services and PC compatibility will appeal to many casual gamers that have been using Xbox in the past, it appears that the next generation console offered by Microsoft will be aimed at more “hardcore” gamers. While the exact price of this console hasn’t been released yet, no one is expecting it to be affordable. The slowing of the Xbox One’s hardware sales seems to be explained fairly easily and should even be expected seeing this direction that Microsoft is moving. With a pricey, high-end console on the way and subscription and PC-based gaming being offered more readily to casual gamers, the Xbox One is really just being phased out as all consoles eventually are.
So with a little investigation it appears that the widely reported drop in Xbox sales this last fiscal quarter of 2019 really isn’t such a big deal for Microsoft. It just reflects a shift their company is making to follow trends in the gaming industry.
In addition to this drop in sales not being an issue for the Xbox and gaming dimension of Microsoft, it is also clearly not an issue for the company as a whole. Microsoft pulled in a record $33.7 billion in revenue for 2019 which shows a substantial increase from last year’s earnings. It is very clear that both the Surface products and Windows software being sold by Microsoft are still doing very well, with both increasing year over year. All of this positive financial evidence should even further drive home the point that the future of Xbox gaming is in good hands, and the current decrease in sales of the Xbox One really is nothing to worry about.
