2023 has proven to be a challenging year for Xbox, as revealed in Microsoft's latest earnings report for the quarter ending September 30. The report highlighted a significant 30 percent decline in revenue from Xbox hardware compared to the same period last year. It's crucial to note that this drop in revenue does not stem from the recent price increase of the console, which saw a hike from $20 to $70 effective October 3.
In addition to the console price increase, Microsoft also raised the price of its Game Pass Ultimate subscription from $20 to $30 in October. However, despite these price adjustments, the revenue from Xbox content and services has remained relatively flat compared to last year. Microsoft reported growth in Xbox subscriptions and third-party content, but this growth was partially negated by a decrease in first-party gaming content.
The Xbox division was one of the hardest hit by Microsoft's decision to reduce its global workforce earlier this year. As a result, several projects were canceled, including the highly anticipated modern reimagining of Perfect Dark, a first-person shooter originally released in 2000. The studio responsible for this project was also closed down, marking a significant setback for Xbox fans.
Additionally, another notable cancellation was Everwild, a project that had been in development by the Xbox studio Rare for an extended period. These cancellations amidst employee layoffs have raised concerns about the future of first-party titles for Xbox.
Despite the struggles within the Xbox division, Microsoft reported an impressive overall revenue of $77.7 billion, reflecting a 17 percent increase compared to the same period last year. The company also saw its operating income rise by 22 percent, showcasing resilience in other areas of its business.
During the earnings call, Microsoft CEO Satya Nadella shared some highlights, emphasizing the company's ongoing investments in artificial intelligence (AI). He announced plans to increase Microsoft’s AI capacity by 80 percent this year and indicated that the company would double its data center footprint over the next two years. These strategic moves are expected to bolster Microsoft's presence in the tech landscape, even as the Xbox division navigates its current challenges.
