Putting Microsoft's faltering Xbox console sales in context

Yesterday Microsoft Announce It achieved a 31 percent discount on Xbox hardware in the first quarter of 2024 (ending March) from the previous year, a decline it says was “driven by a decline in the volume of consoles sold.” And it's not because the console sold well a year ago either; Xbox revenue for the first calendar quarter of 2023 It was already down 30 percent From the previous year.

Both of these data points speak to a console struggling to significantly grow its player base during what should, historically, be its strongest sales period. But getting broader context for these numbers is a bit difficult because of the way Microsoft announces its Xbox sales numbers (i.e. only in terms of quarter-over-quarter changes in total console hardware revenue). Comparing these annual shifts to the unit sales numbers that Nintendo and Sony announce every quarter isn't exactly easy.

Context clues

To try for some direct contextual comparison, we took the unit sales numbers for some recent successful Sony and Nintendo consoles and converted them into Microsoft-style year-over-year percentage changes (in line with each console's launch date). For this analysis, we skipped each console's launch quarter, which contains less than three months of total sales (and often includes a lot of pent-up early adopter demand). We also skipped the first four quarters of the console's life cycle, which has no year-over-year comparison point from the previous 12 months.

This is still not a perfect comparison. Unit sales are not directly tied to total hardware revenue due to things like inflation, remaining Xbox One sales, and price cuts/cuts (although the Xbox Series S/X, PS5, and Switch have yet to see an official price drop). It also doesn't take into account baseline sales levels from each console's first year of sales, making it difficult to measure total lifetime sales performance on the Xbox side (although… Recent data from Take-Two's investment call It indicates that the Xbox Series S/X is significantly outsold by the PS5, at this point).

Even with all these caveats, the comparative data trends are very clear. At the start of their fourth full year on the market, the recent hit consoles have enjoyed a general rise in their sales year-over-year. Microsoft stands out as a major outlier, generating less revenue than Xbox in four of the last five quarters on an annual basis.

These numbers suggest that the rate of hardware sales for the Xbox Series S/X may have already peaked in the past year or two. That would be historically early for a console of this type; Previous Ars analysis has shown that PlayStation consoles generally see their sales peak in the fourth or fifth year of their life, and Nintendo's handheld consoles have shown a similar sales trend historically. On the other hand, the progress of the Xbox Series S/X looks more similar to that of the Wii U, which was already mired in a “death spiral” at a similar point in its commercial life.

This is not the end

In the past, console sales trends like these have been a sign of the hardware maker's broader struggle to stay afloat in the gaming space. However, in today's gaming market, Microsoft is in a place where console sales are not strictly required for overall success.

For example, Microsoft's total gaming revenue in its most recently reported quarter rose 51 percent, thanks in large part to the “net impact of the Activision Blizzard acquisition.” Even before this (very expensive) merger was completed, Microsoft's overall gaming revenues were often down Supported in part by 'Growth in Game Pass' and strong Software Content sales across PC and other platforms.

Perhaps unsurprisingly, Microsoft has shown an increasing willingness to port some of its previous Xbox console exclusives to other platforms in recent months. In fact, after the merger of Activision and Blizzard, Microsoft is now publishing more bestsellers on PS5 than Sony. And let's not forget the PC market, where Microsoft is It continues to sell millions of games Going beyond the Game Pass for PC subscription business.

So, while the commercial future of Xbox may seem a bit uncertain, the future of Microsoft's overall gaming business is in a much less precarious state. This would be true even if Microsoft's Xbox revenue declined 100 percent.