Xbox Revenue Decline: A Weak Year for New Games, But Opportunities Abound

The recent decline in Xbox revenue has sparked concern, but it's essential to consider the various factors at play. The 7% year-on-year decline in Xbox numbers, with a 11% drop in hardware revenue and a 6% decrease in content and services, is not entirely surprising given the current market conditions. The global supply chain issues and economic conditions have affected the entire industry, and the pandemic has skewed comparisons. However, the lower levels of engagement and monetization reported by Microsoft are more concerning, particularly in light of the weak release schedule in 2022. The absence of major first-party titles and the reliance on third-party multiplatform games have impacted Xbox engagement. Nevertheless, the extensive back catalog of Game Pass has helped fill the gap, and the opportunity for smaller publishers and less mainstream games to break through is significant. The 2022 release slate is sparse, with few major titles, but this creates an opening for new IPs and less mainstream games to gain traction. The industry is expected to struggle with engagement numbers in 2022, but 2023 promises to be a stronger year, with a wealth of titles pushed back from 2022 and the first fruits of Microsoft's investments in first-party development. Publishers should take advantage of the breathing room afforded by the thinner 2022 release schedule to make the most of this situation and punch above their weight.