By almost all indications, the launch of Call of Duty: Black Ops 6 has proven to be a significant success for Microsoft. While exact numbers are still somewhat hard to come by, CEO Satya Nadella expressed great enthusiasm for the launch during this week’s earnings call.
We know that the game set new records for day one players and drove a surge in Game Pass subscribers, hitting an all-time high. Additionally, it saw a 60% increase in unit sales across Steam and PlayStation compared to last year’s launch, Modern Warfare 3.
Ensuring a successful launch was critical for Microsoft, primarily for internal reasons rather than the ongoing console competition narrative.
The main challenge facing Microsoft’s gaming division now and shortly is not competing with the likes of Sony. Instead, it revolves around the need to constantly justify the significant investment made in acquiring Activision Blizzard, proving that this significant expenditure is contributing to the company’s growth and profitability.
Microsoft CFO Amy Hood also noted that launching titles like this will introduce some reporting complexities, as revenue will be recognized gradually rather than all at once. This sounded like a warning against comparing the franchise’s current performance to its historical results, particularly given the new variety in distribution and payment models.
At the very least, Steam and PlayStation numbers should contribute significantly to Black Ops 6’s Q2 revenue, even if assessing their impact on revenue from Microsoft’s platforms and services is more challenging.
Of course, there are still questions regarding this strategy; a successful launch doesn’t resolve all criticisms.
Starting the Microsoft/Game Pass era for the franchise on such a strong note is a considerable plus for the company.
How much Black Ops 6 has influenced Game Pass subscriptions is a point of interest. It’s no surprise that such a well-known franchise is helping propel Game Pass to a new subscriber record, and while this is great news for the division, the real focus should be on specific metrics: how many new subscriptions it has generated, and more importantly, how long those subscriptions will last.
Black Ops 6 serves as a strategic move to attract new users to Game Pass, but the real challenge lies in keeping them engaged and paying their monthly fees, which is a more complex retention task.
The impact of Game Pass day-one launches on unit sales appears to be less significant for now. This may not be entirely good news for Microsoft; it’s less relevant than anticipated as PlayStation and Steam remain dominant platforms. While some potential Steam sales could carry over to Game Pass subscriptions on PC, this substitution is not an option on PlayStation.
Xbox hardware sales have continued to decline (down 29% in Q1 compared to a year ago) and Microsoft expects this trend to persist in the next quarter. This limits the effect of Game Pass on console unit sales.
Even though these hardware numbers cause concern among Xbox enthusiasts, who place a lot of importance on the console’s position versus PlayStation, the overall trajectory of Microsoft’s gaming business looks solid, if somewhat unconventional.
In the most recent quarter, Activision Blizzard contributed about 61% of Xbox’s content and services revenue, indicating how this acquisition has transformed Microsoft’s gaming business. A sizable portion of that revenue is generated from non-Microsoft platforms and stores, particularly Steam and PlayStation, as well as iOS and Android.
Thus, with its larger IPs, Microsoft is developing a business model that combines Game Pass subscription revenue (primarily from the lesser Xbox platform) with direct unit sales revenue from other platforms, including PlayStation and other PC marketplaces that purchase through Steam.
Striking a healthy balance within this diversified revenue structure will be an ongoing challenge.
While it may seem chaotic compared to the traditional model of releasing first-party games exclusively on first-party hardware, this approach can also be seen as diversifying. Some games will undoubtedly perform better on Game Pass, while others will excel in unit sales in other markets, allowing each title to reach its target audience through the most appropriate channel.
Maintaining a balanced revenue structure will be crucial, especially as changes may raise questions about the relevance of various parts of the business, including Xbox’s hardware segment.
Nonetheless, the successful launch of Black Ops 6 indicates that Microsoft’s gaming division has overcome a major hurdle in this transition. As long as the overall trend remains upward, the division should be able to meet the expectations of its most critical audience: the Microsoft boardroom.
