Video Game Hardware Spending Stays Flat Due To 29% Xbox Drop

Microsoft is in the middle of a campaign relaying that you do not need an Xbox to play Xbox games, given that they are available on many devices through cloud streaming. And it seems the public is taking that to heart, as we have yet another report of plunging Xbox sales from Circana.

The news is that year-over-year, video game hardware spending was flat in November, despite a 15% growth in PS5, because of a 2% Switch decline and a much, much larger 29% Xbox decline. Gaming subscription revenue rose 8%, though how much of that is attributed specifically to Xbox Game Pass is not clear.

November was a very important month to watch for Xbox given that it was the first time a huge Call of Duty game was launching on the platform while being free with Game Pass. While Microsoft did report a surge of Game Pass subscriptions, they did not give exact numbers. Unit sales on all platforms went up dramatically, a 60% year-over-year increase.

But clearly that did not have a positive impact on hardware whatsoever. What exactly does it mean when you spent $69 billion in part to acquire the world’s biggest (non-GTA) video game series, release it, and it does nothing to boost your hardware? Yes, very obviously Microsoft is focused on Game Pass, but it’s so focused on Game Pass that the idea of needing an Xbox console for any specific reason is quickly becoming non-existent, thanks in part to the “Xbox everywhere” idea, and also due to its former exclusives often heading to PlayStation.

Microsoft stopped reporting console sales all the way back in the Xbox One generation when they were losing to Sony by 2:1. Estimates indicate that ratio is worse now. Xbox’s Phil Spencer has said outright that the console war is over, and the XB1 generation set them back so far it was and is essentially impossible to come up. So they have to adapt.

But it remains a hard-to-imagine idea that Xbox is going to live on with the “box” of it barely being relevant at all. Perhaps Microsoft is satisfied with the shift to Game Pass and those subscriptions continuing to print money, but Call of Duty was one of the last cards it had to play, and now that that’s over, what is going to drive significant subscriptions from here? You might have previously said big releases like Avowed or Fable or Perfect Dark if those turn out to be great, but now it’s easily possible, if not likely, those also head to PlayStation. So the draw is just…free day one with Game Pass. Or at least some tiers of Game Pass, as they’ve now changed that too.

No, I don’t think Xbox is going away, but it is changing into something almost unrecognizable in the name of being forward-thinking.

Follow me on Twitter, YouTube, Bluesky and Instagram.

Pick up my sci-fi novels the Herokiller series and The Earthborn Trilogy.