Microsoft Has Made Nearly $1 Billion From Subscriptions in Q3; Expects Gaming Revenue Growth in Q4

Microsoft's CEO and CFO just announced that the company has made nearly $1 billion from gaming subscriptions in the third quarter of the fiscal year and expects gaming revenue to grow in Q4.

[Knushwood Butt]

1$ billion profit?

[Abriael]

revenue

[crazyCoconuts]

It's even possible that discounts (like the $1 month or stacking) are NOT counted against revenue, so that $1 month or free month due to stacking could be counted at the full $15 of revenue. That would inflate numbers, since we're only seeing revenue and not profit

[S2Killinit]

MS PR is quick to counter today’s news that their gaming devision is making less money year-on-year. So they throw big number around to muddy things up.

[porkChop]

@crazy

That's not how it works. Your revenue is how much money you factually pulled in. Profit is just revenue minus operating costs and stuff like that. You can't just inflate your revenue. If you have $100,000 come in you can't lie and say $250,000 came in just because it sounds better.

[DarXyde]

S2Killinit,

To be fair, I believe last year Q3 was a record. A decline is normal once you kind of hit a point of saturation. This is why Q4 is expecting an increase: more Game Pass markets. Nothing unusual there, in my opinion.

That said, this is where I'm personally curious...

"Nadella boasted "nearly 1 billion dollars" this quarter in revenue from subscriptions. We also hear that Microsoft's first-party games have surpassed 500 million lifetime unique users."

This feels like wordplay. Genuinely curious what 500 million 'lifetime unique users' even means.

[crazyCoconuts]

@porkchop it's an accounting thing. Revenue is gross sales. Discounts can be factored into net sales which isnt reported. So they very well could be omitting the discounts in revenue reporting

[1Victor]

@ Darx: “This feels like wordplay. Genuinely curious what 500 million 'lifetime unique users' even means.”

It m and the total sum of unique players including those whom subscribed for $1 and never again, it’s just another wordplay from Microsoft to make it seem far above what is in reality about 40+ millions active payers across all platforms

[GamingSinceForever]

You need not comment for the remainder of the week. 🤦🏾‍♂️

[Lifexline]

That's still crazy they must make a billion in profit at the end of the year and that is nothing to scoff at Most companies wish/dream they could make half of that in a year. People need to realize this is just for a quarter so assuming it doesn't grow which is unlikely they make 4 billion a year on just gamepass revenue out of that at least all that a billion has to be profit. They count every dollar so people saying that $1 counts as a wholesale must be delusional and trying to spin things really hard. Clearly you haven't worked a day in your life if you don't know how a business counts revenue.

I could see why now the government is focusing so hard on the Cloud now. I kept wondering why government is so worried about the cloud and now this makes it crystal clear why. MS does have a huge advantage with Azure and the low cost it takes them to use that to put GamePass out their no wonder they are making a profit. They are one of the biggest cloud services out there they own the technology to host it without paying anyone else. That's why Sony most likely will never match the Revenue/Profit of GamePass subscription even if they partner with another cloud provider they can't compete at least not fairly. MS does need to make concessions in order for Sony to be able to compete in this space. This is a Gold Mine for Microsoft yet people wonder why they are pushing this so hard it's a win/win situation for them and it's consumers.

[andy85]

Why does a billion have to be profit? People don't seem to understand how much paying all these devs to have their game available for 'free' day one costs. Let's take Redfall for example. Let's say if it wasnt on Gamepass it'd sell 3 million (ballpark figure). 3 million x $60 - that's 180 million that isn't getting paid out. That's one game. Now how many games are on Gamepass...so again, why is 1 billion automatically profit?

[Knushwood Butt]

It's not profit.
If I sell five old books for a total of 25 dollars, that is 25 dollars of revenue, but I then need to factor in how much I paid for them in the first place before I can calculate if I have made any profit or not.

[Lifexline]

@andy it’s called speculation look at the definition of it. Clearly neither of us know so your guess is as good as mine neither you or I know how much money they are making on it. So why act like you know any better. I’m just assuming didn’t realize I had to put that I thought it was obvious. But Microsoft has stated that Game pass is profitable and it has only grown since then so I’ll take their word over yours.

[EvertonFC]

1b then minus all the money they've shelled out to devs and pubs then and you basically get a non profit GP bleeding money.
Example redfall and starfield approx 250m Dev costs, 100m marketing, then payout 100m to all the indie Devs content on GP then payout for 3rd party GP content again approx 200m a year etc.
I'm sure you see the point ?

[andy85]

@lifeline I didn't act like I know any better , only one of us two gave assumptions to their income. I'm not assuming I know how much they're making. But you are by saying "they must make a billion profit". All im saying is paying all these all these developers is going to cost a fortune

[DOMination-]

"3 million x $60"

Although your overall point around cost of development, paying third parties etc. is valid, this equation isn't right at all if we are talking about physical and I see this mistake constantly. MS (or any publisher for that matter) don't make $60 per game sold. The retailer does.

This is how it works: Publisher sells to a distributor/vendor for around $30. Then the distributor sells to retailers for around $45. It's very rare the retailer goes direct with the manufacturer (although it does happen in some industries).

And this is why digital is better (for publishers), because the cost of production is actually rather large and cutting out distributors and retailers means that they do in fact get much closer to that $60.

[Bathyj]

It's almost impossible for them to make profit when they're spending $69B.

[TiredGamer]

It's revenue, which means profit could be zero or even negative. Even at $1B profit per quarter, it would take 15 years to make back the merger cost....

I thought they were making more on subscriptions than that?!

[EvertonFC]

Maybe a big majority of that 25m sub count was £1 GP offers or maybe alot of those 25 sub count is actually gamers just dipping in and out of GP?
We all know these companies use PR spin for shareholders numbers looking good?
I'm guessing 10m of the 25m GP numbers are gamers dipping in and out, maybe using GP 3 or 4 times a year and not 12 months.
Playstation and Xbox probably just count it as a full year sub ? When adding the total subscription numbers?

[XiNatsuDragnel]

Xbox becoming subscriptionbox???

[bleedsoe9mm]

MAU's is the most important metric to both MS and Sony

[343_Guilty_Spark]

They still think plastic boxes sold are end all be

[Redemption-64]

@343_Guilty_Spark

You might not know this, but those plastic boxes sold can lead to new users for your ecosystem. People who buy into your system by buying your consoles make far more long term loyal customers than those who sign up on their phone, which are mostly casual gamer

Sales are far more important. Let's actually give you a nice example. GOWR sold over 11M copies in just 2-3 months at full price. That revenue is literally more than half of the number MS is reporting. All from 1 game. Now compare that to MS. You can 500M unique users, but if most are free, discounted or don't spend that much money, your MAU means little

[343_Guilty_Spark]

That’s the point

[gangsta_red]

MS knows they won't be able to top PS in hardware sales. So this is another solid solution that can prove beneficial.

[bleedsoe9mm]

Hardware sales are important, but its way more important to Sony. MS sells all its games day one on PC.

[SurgicalMenace]

Why do you gather they would do that? Is it because they can't find any sustainable footing in the console industry? They've always given no reason to own an XB platform, huh? I remember a time when Halo, Gears, and Forza were ONLY available on XB consoles. That couldn't mean that they desired to become successful in the consoles sector, now could it? The pretty girl only brings up issues with the relationship after she's dumped.

[--Onilink--]

@surgicalmenace

Because it has never really represented a significant portion of the profit for any of the manufacturers? Usually for the first 2-3 years its actually a loss. Then its barely making a profit and once it starts to make more of a profit is when it usually gets a price drop.

They all make their money on software(and their cuts from purchases on their digital storefronts). Just 1-2 games per user and they are probably already making more from than they would ever make in hardware from that person.

Hardware sales matter more because it means more users purchasing that software, not necessarily because there is a significant amount of profit in the hardware itself.

Its definitely not a coincidence that now that development costs have ballooned like crazy, even Sony is going for the PC market

[SurgicalMenace]

Why thank you for your insight in the fundamentals of how the industry works but to say hardware doesn't matter when there are several sources who measure that very thing is goofy. NPD, VG Chartz, and various other cusumer reporting outlets all show each products standing in a market that all of a sudden adopted less value all because MS is not performing well. Get the hell out of here with that because if they were moving units like Sony or Nintendo we'd definitely hear about it.

I own a SX so I am well aware of why it doesn't move as many units and why it wants to focus on engagement instead of units sold. The "look how many people are playing our free games" approach is cringe, at best. Since the GP approach isn't working NOW moving units isn't as important. Okay, take all the XB and PC subs and measure their impact on the XB brand. Does that last place position and a need to acquire at an accelerated rate make more sense now?

[--Onilink--]

@surgicalmenace

Did I say it didnt matter? Or did I say exactly WHY it matters?

Of course everyone wants to boast about any kind of number they could possible boast about.
It doesnt really change the fact that they are not boasting about it because that hardware is bringing more profit (at least not directly) and if there is one thing every single manufacturer will be happy to see, is increased software sales a d increased subscription numbers.

Again, just look at Sony and Nintendo, do they like to boast about sales? Of course they do, they have every reason to do it too. But what are their recent strategies really pushing that they weren’t doing before? Subscriptions and software.

And while I hope dedicated consoles continue to be a mainstay from all manufacturers for a long time to come, once streaming becomes a mainstream thing (because just like music and tv, it eventually will), every single one of them will absolutely be focusing more on engagement, subscriptions, active users and those kind of metrics when discussing their status

[rlow1]

I guess they are doing okay. Good to hear it. According to a lot of people and
articles posted on n4g it’s all doom and gloom. Apparently not.

[Abracadabra]

Haven't you heard?
Microsoft are loosing money, and they are leaving the gaming industry. They are buying all these studios so when they leave the gaming business, they go out with a BANG! /s

[jznrpg]

1 billion revenue can still be loosing money or barely making any.
Off topic I’ve noticed that many people don’t know how to spell losing anymore ?

[Obscure_Observer]

Looks like MS has a solid revenue stream with Gamepass which will make them even more money now that PC Gamepass just got released in more than 40 countries and the $1 offer is now gone.

[jznrpg]

Or more people will not sub at full price

[EvertonFC]

Exactly, gonna be interesting when/if MS release new GP subscription numbers after starfield and redfall release and have declined and NOT gone up?
Gonna be a difficult for MS if the numbers have declined ?

[CantThinkOfAUsername]

Here's the thing, Obscure:
In one of the newly added countries, Egypt—the second largest economy in Africa with a $404B GDP—PC Game Pass costs $3 a month. I know a few gamers there, and they're as happy as kids getting candy, but how is Microsoft making any profit from $3?

[Wintersun616]

Oh oh oh, I know this one! It's because GP users buy games they can play on GP just to support the developers out of the goodness of their hearts.

/s

[XBManiac]

3$ shared accounts... Egypt people are smart people. And, also, many in the rest of the world use VPN to buy cheaper suscriptions than in their countries. That's a problem for companies like Netflix, HBO, Microsoft...

[EvertonFC]

Many gamers on here including myself have explained profit and revenue to you countless times, I'm NOT sure what you don't understand as it's not rocket science.

[Hofstaderman]

The spinning, the moving of goal posts, the fudging….so much free entertainment. Subscribe now.

[zero_jp]

At this point it’s become clear to me that Microsoft doesn’t care how much money the gaming division loses. They just keep looking at the profit the company as a whole makes and says to themselves we’re fine.

Heck I don’t even think they know what to spend their vast amounts of money on. I guess for them Xbox is a hobby? People kept saying Xbox was dead after the Xbox One tanked and here we are several years later with no end to Xbox in sight.

If this were any other company besides maybe Apple or Google they’d have shut down the gaming division ages ago. I’m really miffed as to why Microsoft is seemingly obsessed with succeeding in gaming.

Do they have some sort of vendetta against Nintendo and Sony or what? Or is Microsoft just trolling because they can? I wish I had the answer to these questions but I do not.

[QuantumMechanic]

They are obsessed with the profitabilty of software-as-a-service; acting as distributor while siphoning a cut from the content providers. Windows and Office have little room for growth now. They previously failed to cement themselves in the downloadable music sector; Steam was faster to market for PC games; and Netflix has demonstrated the promise of subscriptions. Console gaming is the last market where MS can still hope to achieve dominance.

It's really best for the consumer, the video game enthusiast, and the industry, that they fail.

[Hofstaderman]

Reports in the wild that the top brass at MS not all impressed with XBOX divisions performance. Guess the published results gives credence to this. We two years out of production issues and which wasn’t really a challenge for them and they still getting their butts handed to them.

[Abracadabra]

The amount of stupid remarks you said in one post is astonishing!

Microsoft's gaming is loosing money? Says who?
Xbox One tanked? Just because it didn't sell as much as the PS4, did it tank? Guess the PS4 also tanked because it sold less then Nintendo's console.

As for the rest, you need professional help.

[CantThinkOfAUsername]

You don't need to compare it to other consoles. Xbox One didn't sell as well as its predecessor, the Xbox 360. And it looks like that's not changing with the Series X|S for the foreseeable future.

Only Microsoft knows how their gaming division is doing. They get $15 billion in revenue a year from Xbox (and it's mostly third-party software and Live), but does that make them profit? It's anyone's guess.

[EvertonFC]

Xbox one was a disaster in terms of AAA 1st party games ? The most powerful console ever with NO AAA games for 6 years.
Xbox has realistically ONLY had 3 or 4 good years during the 360 era, they've been pants for 80% of the Xbox division lifecycle

[Deathdeliverer]

Realize this. The best PR team these gaming companies could ever have is free. There’s open minded fans. Call it like it is even though they love the brand. It’s like telling your wife/GF her junky ways bother you or her breath stinks in the morning. You love her, but you keep it real and it doesn’t change how you feel about her. You just recognize she isn’t perfect.
But then there’s the raving fans. The defense force. The leave logic at the door protectors of the brand. They will spin ANYTHING no matter the absurdity. The equivalent of believing your significant other sitting in something at work and taking off and leaving her panties at work because they were wet.
Don’t be that fan. As long as companies have people working overtime for free to smooth over their shortcomings and spread misinformation, the longer it will take to see actual change.
Sony had faults with PS3 and turned it around mid gen thanks to hell raising. Online was reamed on PS3. Huge improvement on PS4. Perfect on PS5.
Nintendo is finally getting called out on its prehistoric online. Not enough, but hopefully change comes for the next iteration.
Microsoft has been literally crapping the bed since they stopped supporting the 360, early might I add so they could beat PS4 to market. Gamespass is the best thing to come out of Xbox, for better or worse, and quick resume as a close second. It’s a games console. Not a subscription hub. Give gamespass bundles instead of month to month full price crap. Exclusive must have games are still a wait. Like the years before. Games with gold should be deleted. Halo splitscreen promised and hobbled out the door. PROMISED. Gotta be harder on these guys. Forza Horizon must be protected at all cost. It’s the only Xbox series that never disappoints.

[Extermin8or3_]

1 Billion in subscription revenue yet gaming division is down 3% overall. Hardware revenue is down 30%. They did 2.6bn in revenue last fiscal year bases ok this that night now be ore like 3.5bn but with increases in costs such as power for the data centres amd all the devs they gotta pay off. I'm not convinced they'll make much profit

[WelkinCole]

Honestly thats pretty small. If it was profit then that would be ok

Acti-Blizz alone the spent at least 69B

[CrimsonWing69]

Well, damn that’s a good chunk of change.

[XBManiac]

So... that's 4$ billion a year... How many years would need MS to compensate a 60$ billion adquisition?

[ironmonkey]

They won't it was blocked by the cma haha.

[gold_drake]

supports the theory that they dont care so much about games, but the subscription itself.

[WelkinCole]

That is the model. Thorw everything in and hope some stuff will stcik. Netflix model.