Xbox Sales Dropped 13 Percent in Q4, But Game Pass Hours Played Were Up 22 Percent

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Microsoft has just reported its earnings for Q4 2023 (unusually, their fiscal year runs from July 1 to June 30) and it was a bit of a mixed report card for the company’s Xbox division. The gaming division results improved by a razor-thin margin year-on-year, with revenue being up 1 percent, which was below Microsoft’s expectations.

The lower-than-expected growth can largely be blamed on Xbox Series X/S console sales, which were down 13 percent year-on-year. Sales of the Xbox Series X/S have been down year-on-year for several quarters in a row at this point, as Microsoft’s next-gen console just can’t seem to pick up momentum against Nintendo’s Switch and Sony’s PS5. Microsoft’s Amy Hood also admitted that first and third-party game sales were weaker than expected for the quarter. While it’s unclear what third-party games may have underperformed, the first-party game was almost certainly Redfall, which was released in May to withering reviews.

That said, as mentioned, gaming revenue was still up 1 percent, driven by a 5 percent year-on-year increase in Xbox content and services revenue. Given we know first and third-party game sales were down, that means the increase almost certainly came from one source – Xbox Game Pass. While Microsoft declined to supply subscriber numbers, according to Hood, hours played on Game Pass in Q4 were up 22 percent year-on-year. Microsoft has been making some moves to increase Game Pass subscribers and revenue recently, including bringing back their classic $1 subscription deal for new users, folding Xbox Live into the service as “Game Pass Core,” and