Microsoft has published its financials for 2018 Q1. Revenues for Gaming remained flat with a 1% increase y-o-y, mostly due to falling hardware revenues (- 48%). Xbox Services did grow substantially though, both in terms of revenues (+ 21%) and users (+ 13%). Microsoft does not provide a breakdown of these Services, but Game Pass
launched last June may have played an important role in the increase.
CEO Satya Nadella mentioned in the earnings conference call that Game Pass was “off to a good, very good start”. This is encouraging for Microsoft: while I am bearish about the chance for Xbox One X of having any mainstream appeal, a cheaper combo Xbox One S + Game Pass is very attractive for whoever wants to enjoy a large selection of games at a reduced price.
I’ve talked quite a lot about Backward Compatibility this year, as it has become a differentiating factor between Microsoft and Sony. I am not sure there is a lot of appeal in running games that old (the original Xbox was released 16 years ago) but Microsoft’s efforts really give the sense that they care about their ecosystem. In appearance it looks like Microsoft is focusing on the past (not necessarily a good thing when trailing that much behind Sony) but this could very well pay off on the next generation as we’re getting much stronger signals from Microsoft than Sony that the Xbox ecosystem will be preserved going forward. I just hope it won’t hinder Microsoft to bring truly disruptive innovations for the future Xbox hardware.
Subtitled Pocket Camp, Animal Crossing will hit the App and Play Stores worldwide at the end of November. There was plenty of speculation regarding the monetisation model for this new title, and Nintendo has confirmed that it will go free-to-play with in game micro-transactions for this title. Two factors made it an easy decision: 1) The success of Fire Emblem Heroes - a free-to-play title with micro-transactions which grossed more than Super Mario Run (a premium game) despite a much smaller number of downloads; 2) The fact that Animal Crossing’s gameplay relies a lot on item collection, which is ideal for micro-transactions and should guarantee huge revenues for Nintendo.
Sad story that of Kinect, a device often ridiculed for its lack of meaningful applications in gaming. There’s definitely a lot of truth to that and Microsoft’s insistence to include Kinect with the Xbox One - even if it meant a premium and less computational power for the console - remains one of the biggest mistakes in Xbox Division history. But innovation is often about finding the right application for a new technology, or even failed technology. With the development of Augmented Reality and the need for depth sensing, no doubt that Kinect-like technology will find its way into many devices, starting with the Iphone X (“sadly” from one of Microsoft’s competitors) and its front dual-camera enabling facial recognition.