Can the Xbox Save Microsoft?

Microsoft (NASDAQ: MSFT  ) is hoping that diehard gamers will save the day. Shares of the software giant moved sharply lower on Friday after posting disappointing quarterly results, but one of the rare pockets of inspirational growth in the report was a 20% spike in transactional revenue within Xbox Live.

Microsoft revealed that there were 46 million Xbox Live subscribers earlier this year, and apparently they're growing more comfortable in spending money within the platform. That's important, because the video-game industry itself is mired in a funk.

Industry sales have been sliding for four years, and things aren't getting any better. Trend tracker NPD Group reported late on Thursday that industry sales fell 15% in June, weighed down by a 30% plunge in hardware sales.

No one's freaking out just yet, though. With Sony (NYSE: SNE  ) and Microsoft set to update their consoles later this year, it's perfectly natural for gamers to be holding back from buying new systems. Why buy a PS3 or Xbox 360 when the PS4 and Xbox One are now just a couple of months away?

However, keep in mind that the industry's been slumping since 2009. It wasn't the anticipation of new consoles that was holding back gamers then. The growing popularity of apps played on smartphones and tablets has siphoned off a lot of casual video-game players. It's not just Microsoft's Windows business that's been hurt by the growing popularity of iOS and Android devices.

The silver lining is that Microsoft's Xbox 360 is the top dog in this country. The console has been the top-selling system for 30 consecutive months, and momentum would certainly suggest that the Xbox One will be the country's top choice later this year.

Sure, Microsoft didn't do itself any favors by pricing its system $100 more than Sony. Microsoft also upset the gaming community with restrictive features of the new platform, though it did backtrack on the more controversial measures, something that Sony savored in pointing out during last month's E3 conference.

Hardcore gamers are still a potent market for Microsoft. They make up one of the few categories that's gaining ground on the competition. On the other hand, the pie is getting smaller. Microsoft conceded on Thursday that it shipped 100,000 fewer Xbox 360 systems in its latest quarter than it did during the same period a year earlier.

However, the 20% increase in transactional revenue -- despite the overall decline in Xbox platform revenue during the quarter -- points to a future where Microsoft can deliver digital goodies to tens of millions of players. As Microsoft expands its Xbox One system beyond gaming, ambitiously aiming to transform everything from the way we watch TV to shop online, it's one of the few reasons to get excited about Microsoft in an age where PC sales continue to slide and Windows becomes less relevant in an operating system-agnostic world. It will never be enough to offset the high-margin Windows revenue that investors have enjoyed for years, but it should help slow the software giant's slide in relevance.

Don't let Mr. Softy down, diehard gamers.

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Read/Post Comments (12) | Recommend This Article (3)

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  • Report this Comment On July 20, 2013, at 1:33 PM, philthymcnasty wrote:

    They better hope those die hard gamers don't see the steam sales going on now. 45 dollar games marked down to 9 dollars, 60 dollar games marked down to 12. They even have titles from the ps1 ported to pc. They want direct download, yet they refuse to give a discount? Greed is not good, Greed alienates customers and sends them into the arms of people that under sell you.

  • Report this Comment On July 20, 2013, at 1:56 PM, Bunnyking77 wrote:

    The last 3 months have been awful for the XBOXone, Microsoft's new XBOX and their whole PR campaign has attacked their core base which is gamers.

    The Sony's PS4 is $100, more powerful and already has an edge in sales, and popularity.

    I still think the XBOXone will sell, but it won't be as popular, and only those XBOX fans who stick it out past the inconceivable amounts of consumer alienating practices of MS, will be purchasing their video game system.

    The PR is really strong in the mainstream media, but us gamers know better.

    The XBOXone has youtube channels full of vitrol, and videogame magazines, even the most loyal to the MS brand are not spinning their lies as hard because it has become very unpopular to promote XBOXone.

    Like I've said, only mainstream and non-video game websites and news articles try to spin the news favorably towards MS.

    The unpopularity of the XBOXone combined with Window's trying to push software subscriptions and things that the past iterations of windows offered for free, are a real put off.

    PC sales are down, MS just admitted to working hand in hand with the NSA to steal our privacy.

    I dunno. I'm good off Microsoft for a while.

  • Report this Comment On July 20, 2013, at 2:07 PM, TelsaRowe wrote:

    Complete group of idiots. Microsoft's xbone is already sold out. It has more pre-orders already than the xbox360 and its still 4 months from launch. It costs $100 more because it comes bundled with the kinect where as you have to purchase the ps4 eye separately.

    Decline in video games? Not even close. AAA titles have been growing and the industry is healthier than its been in a while because of the consolidations of many gaming studios. I love how every motley fool idiot has been parroting the same nonsense they read on some internet site and assume its scripture.

    "Decline of the console and rise of the mobile"

    LOL! Here we are with every game publisher, gamestop, sony and msft at or near 52 week highs. Here we are 4 months from the new console launch and the ps4 and xbone are sold out with more pre-orders than the previous console generation. Pathetic article and even more article pathetic comments. Next time try to get command of what it is you are talking about before publicly making a fool of yourself.

  • Report this Comment On July 20, 2013, at 2:24 PM, Greggoo wrote:

    When will the string pullers and people with a high money stake riding on MS relize whats happening.

    The CEO Mr. Ballmer is a Good Corp Mainteance Man but not a catch up swings on waves leader .

  • Report this Comment On July 20, 2013, at 3:04 PM, stefanog1 wrote:

    Personally I hate the Xbox. It's a good system just I don't like COD or Halo and any game that is good on Xbox I can get on PS3. So why would I want one? Those games are their best sellers and I'm not interested and I'm not a Sony fan either. Nintendo is my personal fave. Don't get me wrong Sony is good but Xbox not so much. Just my opinion though.

  • Report this Comment On July 20, 2013, at 3:13 PM, boldog03 wrote:

    XBOX was number one for 30 months because of RROD that simple everyone who owned one had to buy two or more.

  • Report this Comment On July 20, 2013, at 7:06 PM, ao1jmm wrote:

    Microsoft is not going anywhere any time soon. Save? another FAIL article!

  • Report this Comment On July 20, 2013, at 8:00 PM, BattleTorn wrote:

    Way to live up to the name - fool.

    You do realize that Microsoft, in itself, is no where near needing saving, right?

    Unlike other companies, they've had good financial reports for years - and aren't selling off assets to do so. They had what 50billion in revenue last year?

    Furthuremore, that the Xbox division, by itself, within Microsoft isn't anywhere near the size to save the company if need be.

    *slow clap*

  • Report this Comment On July 20, 2013, at 8:21 PM, deputyspade wrote:

    Battlestorn, Microsoft just posted a $900 million loss on their surface tablets. Their entertainment and devices division (which includes xbox) has never made a cumulative profit. They are not doing near as well as you believe they are. They have lost about 8 billion dollars in that division overall since 2001. Read this article if you don't believe me. http://www.wired.com/gamelife/2013/05/xbox-one-gaming/

  • Report this Comment On July 20, 2013, at 9:46 PM, symbolset wrote:

    The Xbox One is a desktop PC. It will have Office. When Microsoft's OEM partners figure out what the plan is here, there will be open rebellion.

  • Report this Comment On July 21, 2013, at 7:07 AM, MAK1973 wrote:

    people be smart, don't buy an Xbox after the crap they tried to pull on the buyers. always on internet connection, no game sharing. etc...

    you know they want to put that stuff but because Sony PS4 would have slaughtered them if they kept going with their idiotic ideas.

    to bad they don't have competition in the PC space, if they did we would never have had w8 or for that matter Vista and 7.

  • Report this Comment On July 21, 2013, at 8:48 AM, badgerzilla wrote:

    Microsoft had IBM behind them thus businesses followed and IBM compatible computers ran MS DOS this giving businesses confidence in Microsoft. Unlike the positive spin which Bill Gates puts on Microsoft's mistake all come from them being too far ahead technology wise, I don't agree. Novell made the network, Microsoft copied and went to war with Novell for committing the crime of developing on the Windows platform. Mozilla or Lynx were the first browsers and Microsoft copied but IE soon lost out to Chrome. The copying in not working anymore. Therein lies the crises. People don't see Microsoft as a quality oriented company anymore. Windows 8 is proof positive that Microsoft sacrifices quality for speed to market and people can plainly see that.

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