Microsoft (MS), which has significantly restructured its gaming operations, is being watched to see if it can improve its performance this year. Satya Nadella, the CEO of MS, is focusing on the gaming business, having acquired Activision Blizzard in 2023. However, the institutional sector's performance in hardware is declining, and the number of platform subscribers has fallen short of expectations, making the gaming business a sore point for MS.
According to MS on the 2nd, the company's gaming institutional sector revenue for the second quarter of fiscal year 2025 (fourth quarter of 2024) decreased by 7% compared to the same period last year, recording $6.6 billion (approximately 8.79 trillion won). In particular, game hardware sales dropped by 29% compared to the previous year. While revenue from the Xbox content and services institutional sector, including Game Pass, increased by 2% year-over-year, the decrease in Xbox hardware sales had a negative impact on overall revenue.
MS Xbox's global console market share is on a decline. Falling behind competitors such as Sony and Nintendo, its market share has decreased to the 10% range. While a portable console device is under development, the launch date is expected to be in 2026. Additionally, with Nintendo announcing the release of the Switch 2 this fall, MS is expected to face further challenges.
CEO Nadella has grown the gaming business through aggressive mergers and acquisitions (M&A) since taking office, but the results have fallen short of expectations. As of June last year, MS's gaming business revenue increased by 5.8%, but it was only half of the growth rate (11%) set by Nadella. After acquiring Activision Blizzard, MS sought to save labor costs through various restructuring measures last year. In January 2024, MS laid off about 1,900 employees, or approximately 9% of its 22,000 employees in the video game division. It is reported that personnel from the gaming institutional sector are also included in the restructuring targets this January.
Industry sources report that the growth in the performance of content within MS's gaming business is greatly attributed to the 'Call of Duty' franchise. MS secured the popular 'Call of Duty' franchise by acquiring the American game development and distribution company Activision Blizzard for $75.4 billion (approximately 109.62 trillion won) in 2023. The game 'Call of Duty 6' released on October 25 last year became quite popular.
The gaming industry believes that MS can improve its performance only if it succeeds in securing subscribers for its Game Pass. Game Pass is a subscription model where subscribers pay a set amount each month to enjoy games serviced by MS. Game publishers receive commissions from MS.
However, even after acquiring Activision Blizzard, there are evaluations that the growth rate of Game Pass has not met the company's internal expectations. According to industry sources, game studios are reportedly reluctant to introduce their games to the Game Pass platform. CEO Nadella noted during the fiscal year 2025 second quarter performance announcement that PC Game Pass subscribers have increased by over 30%, driving performance, but the industry is concerned that this growth may not last long.
An industry insider stated, "Gamers place value on owning games," adding, "With the low penetration rate of Xbox hardware and the lack of subscriber growth, game studios are likely to be hesitant to provide their games on Game Pass. This will lead to a shortage of content."