Xbox console sales drop 13%, but Game Pass ensures gaming revenue increase

Sales of Microsoft's Xbox consoles have dropped by 13 percent in the last quarter, according to the latest earnings report.

Gaming revenue overall increased by 1% ($36m) driven by growth in Xbox content and services, but this was offset by the decline in console sales. Content and services revenue increased by five percent due to third-party content and Xbox Game Pass.

Indeed, the company set a new fourth quarter record for monthly active Game Pass users and engagement.

Said CEO Satya Nadella in an earnings call: "We set new fourth quarter highs for monthly active users, driven by strength off-console, as well as monthly active devices. And we saw record fourth quarter engagement across Game Pass, with hours played up 22 percent year-over-year."

Back in April, Microsoft reported its gaming revenue had fallen four percent and Xbox hardware revenue declined 30 percent in the previous financial quarter. Meanwhile its content and services revenue had increased by three percent.

As such, this latest quarter is an improvement, with a smaller decline in hardware and greater increase in content and services revenue.

Microsoft previously blamed its hardware revenue decline on "increased console supply" during the same period last year, so this latest quarterly report perhaps suggests that supply is less of an issue.

It's clear, however, that Xbox is still struggling in the market. This year so far has been quiet with few and underperforming exclusives - Phil Spencer had to apologise for the disastrous launch of Redfall.

Nadella remains positive about the future, citing in the earnings call Xbox's "most ambitious line up of games ever" at last month's showcase, as well as the release of Starfield and his confidence in the Activision Blizzard merger being finalised.

"I am energised about the opportunities ahead," he surmised.