Microsoft: Gaming Revenue +1% in 2018Q1, Xbox Live Users +13% to 53 million

[DomsPlaying]

*Subject should say 53 million users. Apologies. Mods can you update?*

Earnings results just posted for Microsoft. Below slides extracted on gaming division.

Main points as follows:

Gaming revenue grew 1% to $1.896 billion on strength in Xbox software and services offset hardware decline.

Xbox software and services revenue grew 21% driven by momentum in digital distribution and strong game title performance (likely Destiny2 , sports).

Xbox Live monthly active users up 13% to 53 million since this time last year.

Cancel like Kinect if posted already.

 

[ZhugeEX]

Hey Dom,

Thanks for taking the time to put this together. If you need to request a title change in the future feel free to use the report button on your post and we'll get a notification a lot quicker.

Strong growth again across Software and Services this quarter. Certainly helping to stem the decline from lower hardware revenue.

 

[nihilence]

Sounds decent? And Scorpio should help a teeny bit.

 

[Figments]

Gaming revenue grew 1% (0% CC) as strength in Xbox software and services offset lower hardware revenue.

Click to shrink...

HRM.

That sounds a bit low in terms of growth.

 

[TheThreadsThatBindUs]

Gaming revenue as a whole only grew by 1%... Given a 21% rise in software and services, together with thin margins on hardware (it's the console model) this must mean the drop in hardware sales must have been significant.

I guess XB1X is on the way, so that's to be expected anyway. There's barely a reason to buy an XB1 right now when you can either wait for the XB1X or a potential price drop on the XB1/S after the XB1X drops.

Xbox users still generate a significant amount of sales revenue in software and services for MS though. Disproportionately high, when you compare with Sony and Nintendo.

 

[DomsPlaying]

Got it! I hadn't even thought to use Report button. Thanks for letting me know.

Will definitely be interested to see how hardware goes next quarter with X1X. I can see a one-time bounce up but then it recedes after the holiday boost.

 

[Figments]

Gaming revenue as a whole only grew by 1%... Given a 21% rise in software and services, together with thin margins on hardware (it's the console model) this must mean the drop in hardware sales must have been significant.

I guess XB1X is on the way, so that's to be expected anyway. There's barely a reason to buy an XB1 right now when you can either wait for the XB1X or a potential price drop on the XB1/S after the XB1X drops.

Xbox users still generate a significant amount of sales revenue in software and services for MS though. Disproportionately high, when you compare with Sony and Nintendo.

Click to shrink...

That might be because Xbox users generally trend towards digital purchases over users of the other two brands, at least from what I've seen anecdotally. I don't have the statistics in front of me, nor do we even have the numbers to make an approximate yay or nay on that.

 

[Yerffej]

Figments

I mean that's me for sure. I don't even know why.

 

[Deleted member 437]

That might be because Xbox users generally trend towards digital purchases over users of the other two brands, at least from what I've seen anecdotally. I don't have the statistics in front of me, nor do we even have the numbers to make an approximate yay or nay on that.

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I dunno man. Amazon top best seller list ALWAYS has a ton of PSN cards at the top of the page. $240 worth.
For xbox, you kinda have to drill down the page till you find the equivalent.

Not saying amazon is the be all, end all. But it's one piece of evidence.

 

[DomsPlaying]

Update:

Perusing the 10Q statement, it says the following for Xbox hardware:

Gaming revenue increased 1%, primarily due to higher revenue from Xbox software and services, offset in part by lower Xbox hardware revenue. Xbox software and services revenue increased 21%, driven by a higher volume of Xbox Live transactions, offset in part by a decline in revenue per transaction. Xbox hardware revenue decreased 48%, mainly due to a decline in volume of consoles sold and lower prices of consoles sold.

Edit: This is mostly because of the comparison to the X1S launch last year in August. Will be interesting to compare next quarter to X1S launch quarter.

 

[FelipeMGM]

Is this growth YoY or over the last quarter?

 

[Welfare]

Hardware revenue suffered as last year saw the launch of the One S in August, while this year the YoY drops in units have been significant.

Software and services seeing enough growth to offset hardware is a strong showing. One X should provide a big boost in hardware revenue and hopefully the early part of 2018 provides enough compelling software to keep hardware from falling hard YoY again.

 

[TheThreadsThatBindUs]

That might be because Xbox users generally trend towards digital purchases over users of the other two brands, at least from what I've seen anecdotally. I don't have the statistics in front of me, nor do we even have the numbers to make an approximate yay or nay on that.

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I mean, anecdotes aside, it would make intuitive sense based on the fact that most Xbox owners are in regions with high broandband penetration and populations that are simply more used to making online purchases (i.e. US and UK).

With PlayStation and Nintendo being more global brands, it's easy to see why more software sales would be physical media-based.

 

[DomsPlaying]

This is Year over Year growth quoted.

 

[shimon]

Sounds decent? And Scorpio should help a teeny bit.

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Probably a little more than teeny bit ;)

 

[ZhugeEX]

Can somebody run the numbers using the percentage increases for hardware and software in Q1 2017 and Q1 2018 so that we can work out splits.

Thanks.

 

[TheThreadsThatBindUs]

I dunno man. Amazon top best seller list ALWAYS has a ton of PSN cards at the top of the page. $240 worth.
For xbox, you kinda have to drill down the page till you find the equivalent.

Not saying amazon is the be all, end all. But it's one piece of evidence.

Click to shrink...

Funnily enough, this might merely be evidence of Xbox users being more trusting of keeping their credit card details on Xbox Live; with the obvious converse being that PS users are less trusting given the historical PSN hack.

 

[TURBO1112]

Funnily enough, this might merely be evidence of Xbox users being more trusting of keeping their credit card details on Xbox Live; with the obvious converse being that PS users are less trusting given the historical PSN hack.

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Yep I always buy PSN cards. I just leave my CC on my xbox account

 

[FelipeMGM]

Funnily enough, this might merely be evidence of Xbox users being more trusting of keeping their credit card details on Xbox Live; with the obvious converse being that PS users are less trusting given the historical PSN hack.

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This might as well be one of the reasons

But my bet is the main reason is that you cant buy stuff on the US PS Store with a credit card from out of the US, so people all around the world buy those cards

On MS Store there is a way to change the region you are purchasing content

 

[DieH@rd]

When can we expect Sony's Jul-Sept report?

 

[djplaeskool]

Funnily enough, this might merely be evidence of Xbox users being more trusting of keeping their credit card details on Xbox Live; with the obvious converse being that PS users are less trusting given the historical PSN hack.

Click to shrink...

True. Haven't the $10/20/50 PSN cards been aggregate Top 10 sellers on Amazon every single year (or at least in the Gaming category) since the hack?

 

[DomsPlaying]

When can we expect Sony's Jul-Sept report?

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Sony is Tuesday, 31st usually after close of trading in Japan.

 

[Atram]

When can we expect Sony's Jul-Sept report?

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Next week

 

[kadotsu]

When can we expect Sony's Jul-Sept report?

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October 31, 2017 [Tue] 16:30 (JST)

https://www.sony.net/SonyInfo/IR/calendar/presen/

 

[Figments]

True. Haven't the $10/20/50 PSN cards been aggregate Top 10 sellers on Amazon every single year (or at least in the Gaming category) since the hack?

Click to shrink...

Man, Sony's just never gonna live that down, huh?

 

[jayu26]

Probably a little more than teeny bit ;)

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I don't know about that. We are far more likely to see One S type situation again, after initial wave settles down.

Man, Sony's just never gonna live that down, huh?

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They haven't proved that they should. Not yet.

 

[TheThreadsThatBindUs]

True. Haven't the $10/20/50 PSN cards been aggregate Top 10 sellers on Amazon every single year (or at least in the Gaming category) since the hack?

Click to shrink...

I believe you're right... I often wonder though, whether the cost of producing PSN cards is more or less than the cc processing fees Sony will pay Visa and Mastercard for card transactions... It could be that users opting to use PSN cards works out cheaper for Sony that users using their CCs for transactions (i'm sure the difference is marginal at best).

 

[TheThreadsThatBindUs]

They haven't proved that they should. Not yet.

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In terms of network security? Why would you say that?

 

[Kolx]

I believe you're right... I often wonder though, whether the cost of producing PSN cards is more or less than the cc processing fees Sony will pay Visa and Mastercard for card transactions... It could be that users opting to use PSN cards works out cheaper for Sony that users using their CCs for transactions (i'm sure the difference is marginal at best).

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What about retailer cut? anybody knows whether it's the same as games or different?

 

[Knight613]

Well 1% is still better than nothing I guess.

Depending on how the One X does, they at least are probably going to have a nice earnings report for next quarter.

 

[TheThreadsThatBindUs]

What about retailer cut? anybody knows whether it's the same as games or different?

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I may be grossly incorrect, but I don't think retailers earn much if anything for virtual currency cards (informed minds please correct me if i'm wrong).

I think they work like gift cards.

 

[Trago]

Hey Dom,

Thanks for taking the time to put this together. If you need to request a title change in the future feel free to use the report button on your post and we'll get a notification a lot quicker.

Strong growth again across Software and Services this quarter. Certainly helping to stem the decline from lower hardware revenue.

Click to shrink...

Scorpio.

 

[jayu26]

In terms of network security? Why would you say that?

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Well for one, the recent Sony Pictures hack. I know it had nothing to do with PlayStation and no credit cards were compromised. But these things do compound on general public's view of Sony and their online infrastructure.

I believe you're right... I often wonder though, whether the cost of producing PSN cards is more or less than the cc processing fees Sony will pay Visa and Mastercard for card transactions... It could be that users opting to use PSN cards works out cheaper for Sony that users using their CCs for transactions (i'm sure the difference is marginal at best).

Click to shrink...

Interesting point. I would like to know this as well. I have friend who might be able to answer that. He works for basically the middle man between credit card companies and their customers.

Edit: Second thought, he probably wouldn't know shit about it. Even if he does, he probably can't tell me.

 

[TheThreadsThatBindUs]

Well for one, the recent Sony Pictures hack. I know it had nothing to do with PlayStation and no credit cards were compromised. But these things do compound on general public's view of Sony and their online infrastructure.

Click to shrink...

I would generally expect the gaming public to be informed enough to understand that Sony pictures and Sony PlayStation are two completely separate companies with completely separate IT infrastructures...

...or maybe I'm overestimating the general gaming public though.

It's also worth pointing out that the Sony pictures intrusion was achieved through social engineering (phishing), so there's no amount of network security is going to save you from a poorly informed employee clicking on a bad link in an email they're not supposed to.

 

[Figments]

Well 1% is still better than nothing I guess.

Depending on how the One X does, they at least are probably going to have a nice earnings report for next quarter.

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Hopefully it does well. Though I'm not crossing my fingers.

Scorpio.

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Dammit, not here too. The memes should've been left behind in the move.

 

[jayu26]

I would generally expect the gaming public to be informed enough to understand that Sony pictures and Sony PlayStation are two completely separate companies with completely separate IT infrastructures...

...or maybe I'm overestimating the general gaming public though.

Click to shrink...

Tell you what, I am wary of putting my credit card on PSN, but don't care when comes to sites like Amazon.

Dammit, not here too. The memes should've been left behind in the move.

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Embrace the meme. Embrace it.

 

[Trago]

Dammit, not here too. The memes should've been left behind in the move.

Click to shrink...

Gotta keep my boy Statham covered while he makes his way here. :P

In all seriousness, Xbox One X will certainly boost their hardware numbers, but I'm not too sure by how much. They're hyping the living crap out of the console. And maybe people will pick the console up in droves.

They also gotta get people to use their Windows Store somehow, but no one likes the Windows Store. They gotta expand their MAU.

 

[RexNovis]

I dunno man. Amazon top best seller list ALWAYS has a ton of PSN cards at the top of the page. $240 worth.
For xbox, you kinda have to drill down the page till you find the equivalent.

Not saying amazon is the be all, end all. But it's one piece of evidence.

Click to shrink...

Generally speaking Xbox users don't have to resort to paid cards because their stores payment service isn't an awful clusterfuck. PSN cards are so high on Amazon because folks are buying them in other regions to use and because Sony's payment systems are extremely prone to issues.

 

[Edigar]

Considering the U$500,00 price point of Xbox One X, i expect the hardware revenue to show huge increase on the next quarters.

 

[Figments]

Embrace the meme. Embrace it.

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Gotta keep my boy Statham covered while he makes his way here. :P

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No.

 

[KillerMan91]

That might be because Xbox users generally trend towards digital purchases over users of the other two brands, at least from what I've seen anecdotally. I don't have the statistics in front of me, nor do we even have the numbers to make an approximate yay or nay on that.

Click to shrink...

I don't know if this is true anymore. Sonys gaming division has seen huge growth in their digital revenue every year. PSN had revenue of 6.48 billion last FY.

 

[Trago]

Considering the U$500,00 price point of Xbox One X, i expect the hardware revenue to show huge increase on the next quarters.

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Totally forgot that it's $499. It will definitely increase hardware revenue.

 

[Kill3r7]

Considering the U$500,00 price point of Xbox One X, i expect the hardware revenue to show huge increase on the next quarters.

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Yes but also keep in mind that MS had an incredibly healthy November and December last year. It will be interesting to see how aggressively they pricecut the XB1S this holiday season.

 

[TheThreadsThatBindUs]

Tell you what, I am wary of putting my credit card on PSN, but don't care when comes to sites like Amazon.

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Considering the difference in network infrastructure and sophistication between the two, I'd say I'm not surprised at all. PSN basically runs on Amazon servers in the first place.

 

[DomsPlaying]

Can somebody run the numbers using the percentage increases for hardware and software in Q1 2017 and Q1 2018 so that we can work out splits.

Thanks.

Click to shrink...

I think I have the splits worked out for this quarter vs last from a dollar standpoint. Can you or anyone check my work?

In Billions:

Software & Services: Up 21%
2017Q1: $1.327
2018Q1: $1.606

Xbox Hardware: Down 48%
2017Q1: $0.558
2018Q1: $0.290

Total Gaming Revenue:

2017Q1: $1.327 + $0.558 = $1.885
2018Q1: $1.606 + $0.290 = $1.896

 

[Kill3r7]

According to Reddit; Nadella on the conference call stated that PUBG is running on MS Azure, both PC and X1.

 

[Figments]

According to Reddit; Nadella on the conference call stated that PUBG is running on MS Azure, both PC and X1.

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Huh.

Does that mean PUBG is gonna get a UWP version, as well? Or have they been running on Azure servers since the PC launch?

 

[jayu26]

According to Reddit; Nadella on the conference call stated that PUBG is running on MS Azure, both PC and X1.

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So PS4 version probably also has run on Azure. More revenue stream for MS.

 

[Kill3r7]

Huh.

Does that mean PUBG is gonna get a UWP version, as well? Or have they been running on Azure servers since the PC launch?

Click to shrink...

Not sure. I think he was highlighting the growth in commercial cloud ARR $20 billion this quarter.

 

[Welfare]

According to Reddit; Nadella on the conference call stated that PUBG is running on MS Azure, both PC and X1.

Click to shrink...

I saw on Twitter that in the conference call he also said there were "high expectations" for Gaming and the Xbox One X. Whatever that mean exactly is unknown but it looks like One X is expected to do very well for them.