Will the Launch of xCloud Boost Microsoft’s Gaming Revenue?

By Thomas Price Saturday, September 19, 2020

After Microsoft had already made a major announcement regarding the newest line of video game consoles with the Xbox Series S and Series X, the company made another big announcement with the launch of Xbox’s newest cloud gaming service, xCloud. The ongoing COVID-19 pandemic has pushed the popularity of video games even higher, and Microsoft’s newest attempt to build a service for even the most casual gamers could quite possibly lead to a new crop of consumers who want to play without breaking the bank.

Considering the steep competition from Google Stadia, Nintendo Switch, and Playstation, how will xCloud break into the market, and more importantly, what kind of revenue can Microsoft expect from their gaming platforms moving forward?

Microsoft’s xCloud

The xCloud, at its core, is a cloud-based gaming service with over 150 different titles available to play on a variety of devices, including PCs and Android smartphones. Compatibility with Android devices is one of the major selling points for xCloud over Sony’s cloud-based gaming service, which currently does not offer video games for smartphones. xCloud is currently available in 22 countries, including the US.

Microsoft already had a similar service known as Xbox Game Pass Ultimate, which is still offered for $15 and boasts an impressive 10 million subscribers; however, xCloud is entirely different from it. Where Xbox Game Pass Ultimate requires the need for a fully functioning Xbox console, xCloud only requires a supported controller without any Xbox console. Microsoft has been pushing xCloud to new customers by offering only $1 for the first month of the subscription.

xCloud’s launch marks another major step for Microsoft into the cloud-based gaming service industry, which is set to continue growing dramatically within the next few years. In 2019, cloud-based gaming services generated around $158 million in annual revenue. Annual revenues have since doubled in 2020, with the industry estimated to have made nearly $600 million. Prospects for future revenue look equally optimistic with projections for revenue in 2023 looking as high as $5.1 billion. In terms of growth, this would be over 100% of what has currently been made in 2020.

Microsoft’s Value in Gaming

Microsoft as a company has continued to do extremely well in 2020 despite the effect that the COVID-19 pandemic has had on many other businesses. In its most recent quarterly report, Microsoft generated $38.03 billion. In comparison to the same quarter in 2019, this is a 12.8% increase in revenue. When expanding this to a 12-month scope, Microsoft’s revenue from June 30 of 2020 to 2019 was 143.01 billion dollars, which is a 13.65% increase in comparison to the previous 12 months.

Of Microsoft’s most recent quarter of revenue, the $1.3 billion of increased revenue can be mostly attributed to its gaming sector, which is responsible for $1.2 billion of that boost. In fact, the most recent quarter, Xbox content and gaming revenue was up 65% compared to the same quarter in 2019. In terms of console operating market share, Microsoft currently owns 35.77%, which is markedly lower than its peak earlier in the year of 58.68%. Microsoft hopes to change that with the release of the new Xbox Series S and Series X later in the year.

Final Conclusions

Microsoft’s launch of the xCloud has made it by far the most accessible cloud-based gaming service currently on the market. With a clear appeal to more casual gamers who don’t want to shell out hundreds of dollars on a full console, xCloud is set to become the standard for all smartphone gaming at an incredibly affordable cost.

Given how much of Microsoft’s revenue boost can be attributed to gaming, it is clear that xCloud is a strong effort from the company to create a much larger base of customers where the market has not already been saturated by the likes of their many competitors at Google and Sony. xCloud’s first-month offer, wide variety of games, and accessibility of multiple platforms makes it a standout amongst the competition. It should be ready to see a large increase in subscribers over the next few years, given the rise of the cloud-based gaming market as a whole and Microsoft’s staying power near the very top of the industry.

About the Author

Headshot of Thomas Price

Tom Price is a writer focusing on Entertainment and Sports Features. He has a degree from NYU in English with a minor in Creative Writing. He has been previously published for Washington Square News, Dignitas, CBR, and Numbers on the Boards.

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