Microsoft’s big bet on subscriptions is paying off hugely. The company announced that its Xbox Game Pass service brought in “nearly $5 billion” in revenue over the last year, a major first-time milestone that highlights the success of its “Netflix for games” model.
The achievement was revealed in Microsoft’s latest earnings report. Overall, it was a strong year for Xbox’s software and services, which saw a 13% jump in revenue this quarter. Much of that success is likely thanks to the company’s new strategy of releasing its exclusive games on rival consoles like the PlayStation 5. Microsoft CEO Satya Nadella even boasted, “We are now the top publisher on both Xbox and PlayStation this quarter.”
But it wasn’t all good news. While game sales and subscriptions are booming, actual console sales are struggling. Xbox hardware revenue plunged by 22% this quarter, a steep drop that shows fewer people are buying the physical consoles. This is likely a direct result of Microsoft raising the prices of its Xbox Series consoles and accessories earlier this year.
Interestingly, Microsoft didn’t share any new subscriber numbers for Game Pass, so we don’t know if the service is still growing from the 34 million members it reported back in February 2024. The company’s pricing strategy is also in flux, as it recently backed away from plans to raise the price of some new games to $80. The latest numbers show a clear trend: gamers are embracing the subscription, even if they aren’t buying the box.
