After fairly brisk performance in the all-important holiday season, Microsoft has seen sales of its Xbox console falter in the new year. Shipments of the consoles fell 20% year-over-year for the first quarter of 2015, with 1.6 million units shipped worldwide, according to its just-released financial statements.
Xbox sales falter in Q1
The Redmond-based company doesn’t break out Xbox sales between the Xbox One and the older Xbox 360, but it’s still possible to extrapolate the split between the two based on previous data. The Xbox 360 only managed to sell 800,000 units worldwide in Q1 2014, and those sales probably fell between 40 – 66% the past quarter based on trends from previous console generation transitions.
That means then that the Xbox One sold an estimated 1.12 to 1.34 million units this quarter, in line with the 1.2 million that were sold a year ago.
But flat sales isn’t all that bad for the Xbox One, but it won’t be enough for Microsoft to catch up with Sony’s growing lead in PS4 sales. Sony announced in March that it had sold 1.7 million PS4s worldwide in the first two months of the year, suggesting that the PS4’s quarterly shipments will outstrip Microsoft’s Xbox One when Sony announces its earnings next week.
On the plus side for Microsoft, Xbox Live usage rose more than 30%, suggesting that the people who own it are spending more time and money online. The new sales results may demonstrate the limits to Microsoft’s aggressive pricing now the Christmas season is over. Revenue from Xbox as a whole fell 24% year-over-year, mainly thanks to what Microsoft calls “lower prices of Xbox One consoles compared to the prior year”.
As the overall Xbox sales drop, Microsoft’s Xbox One price cuts in 2014 means revenue from the hardware is falling faster and affecting the company’s bottom line. That may be fine, as the console hardware is often sold at a loss to get consumers spending money on games, but more worrying for Microsoft is that the 9-month fiscal year Xbox revenues fell 7% due to “a decrease in second- and third-party video games revenue”. That means that publishers outside of Microsoft are selling less Xbox games than last year.
It’s not yet a dire situation for Microsoft, but they know, as Nintendo found out with the Wii, that if you can’t keep developers happy than it could spell eventual trouble for the platform.
Larry Banks is a keen follower of technology and finance. He has worked for a variety of online publications, writing about a diverse range of topics including mobile networks, patents, and Internet video delivery technologies.
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