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Microsoft’s deep pockets will make a difference
Sony held onto its position as gaming’s second biggest money maker for the financial year ending 31st March, but it looks set to fall a position once Microsoft’s acquisition of Activision Blizzard is finalised. PlayStation pulled in $18.2 billion in revenue for the previous fiscal term, which was eclipsed only by Tencent’s eye-watering $32.2 billion. Apple rounded out the top three with $15.3 billion.
In the research, compiled by Newzoo and reported by Venture Beat, PlayStation actually saw a 2.3 per cent dip year-over-year, due largely to PS5 stock issues and the easing of lockdown restrictions. Many people were pushed towards gaming during the height of the pandemic, which saw a huge increase in engagement on games consoles like the PS5 and PS4. With those issues now easing, many are slowly returning to their usual routines, leaving less time for gaming.
Regardless, it looks like Sony’s position in second place looks likely to fall, as Microsoft’s acquisition of Activision Blizzard is likely to make its gaming department a bigger money spinner than PlayStation’s – unless, of course, it responds in kind. The Xbox division pulled $12.9 billion in revenue for the previous fiscal year, while Activision Blizzard managed $8.1 billion.
Nintendo, for the sake of interest, registered $8.1 billion, but it’s worth remembering that profit and revenue are not the same, and the House of Mario is extremely profitable despite its revenue being lower. It’ll be interesting to see how the PlayStation business matures over the coming generation, as it looks to new growth vectors, like the rebooted PS Plus subscription and PC gaming.
[source venturebeat.com, via eurogamer.net]
About Sammy Barker
A true PlayStation veteran, Sammy’s covered the world of PS gaming for years, with an enormous Trophy count to prove it. He also likes tennis games way more than you.
Comments (56)
So, if my math is in the right ballpark, it will take almost 9 years for Microsoft to make the money from Activision/Blizzard that equals the purchase price. And that’s not even taking into consideration operating costs of those studios in the meantime. $69 billion is an enormous amount of money.
It’s a good point made that revenue does not equal profit.
It’s still all about the games, and Sony and Nintendo win on that front, with Sony’s games being more akin to my taste.
Crazy to think that…barring an unannounced Forza release…Xbox will go all year without a single first party studio exclusive. They released Ghostwire Tokyo for PlayStation, but nothing for Xbox. Insane.
But hey! GamePass!
"To carry on war, three things are necessary: money, money and yet more money"
Unfortunately Microsoft has that in spades.
Sony will just need to rely on the quality of its games shining through to survive and grow.
It slightly depends what and how Microsoft embed Activision. If for example some non-COD titles become single platform then they won’t theoretically be worth as much. It’s likely one of the reasons things like COD are staying cross-platform.
@Th3solution Microsoft are on another level. If their share price goes up X% due to the acquisition then they can make that money back in other ways. It doesn’t have to purely be in revenue and profit.
Also note the data that this post is based on is REVENUE not profit.
@lacerz Xbox/Bethesda just delayed Starfield and Redfall to 2023 (!) so there is that
crazy to think that Tencent and apple are 1 and 3 in making the most gaming revenue
do apple even make any games?
I feel like you can’t really tabulate "money makers" by revenue only without anything on costs and profits
@lacerz that just goes to show Microsoft are making tons of money in gaming despite its lack of exclusive games it must be gamepass driving revenue
The revenue from mobile is absolutely nuts.
Thankfully, Nintendo and Sony are doing well enough with the traditional console model that it should still have a long future ahead of it.
@trev666 I guess Apple’s revenue is mostly from app store and Apple Arcade, so 3rd party stuff… not unlike the majority of Sony’s revenue.
@lacerz I’m not an xbox gamer (despite having a xbox 360)
but isn’t the main appeal of xbox gamepass and not exclusives?
It’s like going to a donut shop and complaining about not having burgers, sure it would be nice to have a 2 in 1 shop but that doesn’t mean the donut shop is lacking. (and yes, I want a donut now)
@trev666 Apple Arcade is huge for Apple, $5 a month and hundreds of games over their platforms (iPhone, iPad, MacOs, Apple TV) they really did a great job with their own game pass. Add in the 30% they get off of mobile games/transactions…huge platform.
@Th3solution Accounting just doesn’t really work like that though. ABK is an acquisition. ABK has value and it’s an all-cash deal. They are trading a liquid asset for tangible and intangible assets with the acquisition. They are taking cash that has value and buying something that also has value and in turn makes even more cash. So, the only place the company is poised to lose money is if the operating expenses of ABK is actually higher than the revenue brought in, which isn’t likely. Not to mention with inflation, the cash on hand is becoming worth less and less so it pays to spend it now.
Activision/Blizzard games going straight into game pass would surely have an effect on revenue from them so it would not be a case of just adding the Activision/blizzard revenue to the Xbox revenue, unless the subscriber count, or sub fees, went up proportionately to counter this.
now sony apple Microsoft and Nintendo make alot of their money by taking a cut of everyone else’s games by selling it on their own eco system.
how do Tencent make so much money ?
They forget to say how much Bungie’s revenue could bring to Sony too, I think they make about 2 to 3 billion a year so there’s that.
If they are doing the math with future what-ifs then why would they not add Bungie to Playstation’s chart?
@AdamNovice was thinking the same thing:)
Get us some new First Party games and all will be well again. Oh and buy T2 while you’re at it. I’d love to see the Xbox lot crying about GTA being an exclusive PlayStation game.
@trev666 Tencent make their money by buying shares in as many places as possible. They have their fingers in a lot of pies.
It let’s them keep a relatively low profile, while pulling money in from a silly amount of sources.
@AdamNovice Bungie reportedly pulls about 200-300 million per year in revenue.
@SwittersB Because that might affect their precious narrative.
PlayStation just recently dabbled in the PC market and it already is a bullet-point for the company as it rakes in money.
The acquisition for Insomniac and the porting studios probably already earned their investment back and than some. There is a way to do this smarter and result in quality AND quantity and PlayStation is doing it.
Meanwhile Xbox studios are struggling and management is failing while buying a lot of problems.
Excluding ps plus, because I subscribed when it just gave discounts on the store. But I thank don’t for not strong arming me into another subscription service.
@SwittersB
Good point!
It says it doesn’t include hardware revenue either. (In small print)
When a narrative needs to be made ya know ?
@SplooshDmg I must have misread it from somewhere.
does anyone know how PC/Steam makes ? i thought PC would be up there
@lolwhatno You can’t generalize fans of one platform as being some kind of hive mind. I own every platform and use them for different reasons; with regard to Xbox specifically, while GamePass is great, I don’t intentionally subscribe to it as a rule, unless I find a promo or discount on it. Since I don’t have a lot of free time for gaming, I would rather just buy the games that I’m most interested in, (and often physically at that ?) and play them on my own time, not when a service tells me I have to play now, or else it may be gone next week.
I also did buy Xbox for some exclusives, such as Halo infinite, Gears 6, potential exclusives like Doom, Wolfenstein, and my absolute #1 most desired exclusive, the reimagined (and hopefully not trash) Perfect Dark. Some Xbox digital titles are Play Anywhere, which gives you the PC version as well for free.
I got a lot of my multiplatform releases for Series X because it’s the most powerful console of the three, PS5 for Sony exclusives, and Switch for 1st party, most retro/indie titles, or if I want portability.
@Th3solution Microsoft does not need to make the money back from Activision’s revenue or at all. Expecting them to make the money back and still have the ownership of Activision is like expecting to buy a house, Airbnb it, and get the whole mortgage paid back in a year purely from rent revenue.
Point is: ownership of an asset becomes itself part of your net worth, and it actually increases in value alongside with inflation, unlike money in hand, that devaluates alongside inflation.
At the end, any acquisition grows your company size, and that’s what investors demand the most. Investors want the company to grow, not to hoard money. Earned money is expected to be invested in further growth.
@trev666 Tencent has a hand in something like 11 of the top 20 highest grossing mobile games. They (mobile games) make obscene amounts of money, so anyone who buys into that market will make a pretty penny out of it. Microsoft doesn’t have any real presence in the mobile market, but Activision owns King, who makes the Candy Crush games, and they are somewhere in the top 20. Sony has a larger presence in mobile, but specifically Fate/Grand Order is made by Sony, and it’s somewhere in the top 10 most profitable mobile games.
I don’t know many gamers that decide their next console purchase based on how much money the company makes. What games do they have?
@HMazzy111 there’s is zero chance T2 would be for sale when they have the biggest IP in the world and can sell it on multiple platforms. There’s even less chance Sony has that kind of money to spend on T2. But since you want to see Xbox fans crying over losing a game. Should xbox fans want to see COD go away and see Sony crying? That would cripple their gaming profits. Hence why when Microsoft bought Minecraft and A/B sony called them and asked if they would still be on PS. It’s not Sony or Microsoft’s intent to put the other out of business, thats not good for the industry. Healthy competition is and it’s a better gaming world with Xbox and PlayStation both doing well. As a owner of both i want to see them both do well.
@SplooshDmg I’m no accountant or business expert, by any stretch and I realize that it’s more complicated than simply adding ABK’s revenue to Microsoft’s to come up with their next fiscal earnings, as the article implies. But unless MS plan to turn ABK over and resell it, surely the cost of acquiring it is part of the equation of profitability.
@Tharsman Bingo! You nailed that. That is exactly how investors think. They want to see money spent to become more money and ownerships. The A/B deal for Microsoft is a huge happy face for investors.When MS announced that Sony stocks fell by the Billions. Which i felt bad for cause Sony is horrible with money to begin with. Outside of PlayStation they aren’t really killing it in any market these days. Not to say they don’t have some great products, they do but they need PS to do well.
@Rural-Bandit
I think you missed my sarcasm. But thanks for the LENGHTY response.
@Tharsman Thanks for the insight. I would never be accused of being a clever business man; I shall certainly die poor. I was under the impression that MS purchased Acti-Blizz to make money off their IP — Like buying the house to rent out over time. So apparently the money made on rent is immaterial as long as it covers the cost of house upkeep and that the house doesn’t burn down or get trashed.
@Tharsman Exactly and the fact that those Assets become MS assets and regardless of Platform release, will still be an asset that tends to go up in value. Buying a Publisher also gives them ALL their Publishing revenue from the old releases too and right to publish straight into Game Pass – just like we saw with Bethesda. Knowing that ‘older’ releases (Crash, Spyro, Prototype etc) will be on Game Pass and playable ‘anywhere’ at no extra cost is still an Asset and may drive more traffic, and thus ‘growth’.
The fact that ‘Xbox’ (not just the Console but the entire MS gaming division) is growing, growing its studio collection, its Assets (IP’s for example) and of course its ‘user’ base is more important than ‘profit’ margins as that growth has a bigger knock on to the ‘Long Term’ value of their Shares, their Company. If MS wanted to sell ‘Xbox’ with all those Studio’s, IP’s Publishing rights etc, its worth a LOT more today than a few years ago – which matters MOST to the company owners/shareholders etc.
Publishing Rights are worth more than ‘IP’s’ as they bring in immediate revenue – every game sold by that Publisher now goes to the new owner. Embracer won’t get any money for Tomb Raider, until they Publish their own game – Square Enix will still get money for the Tomb Raider trilogy they Published – hence why Bungie, with its Publishing rights cost 3.6bn and Insomniac (with more IP’s) cost less than 1/10th of that – because they don’t own the Publishing rights to the games they made…
A/B, despite its revenue and assets was actually losing ‘value’ and with numerous ‘issues’, was in no position to recover that value in the foreseeable future – possibly see their ‘share price’ drop lower and lower. Hence why ‘98%’ of Shareholders were happy to accept a ‘fair’ price for each share. Yes it may of ‘peaked’ higher during ‘1’ week or two, but average out the share price for that quarter, when it spent more time around $90 a Share, and $95 is about the average.
@Th3solution as a landlord myself, I use the example due to personal experience. Mind you, I am a private individual and DO want to make some cash to put into my pocket, but even if my rent revenue was lower than my mortgage payment, I cant tell Uncle Sam I lost money when filing taxes, because I still built equity and that is considered profiting.
Microsoft still will want to make money going forward, the more money they make relative how much money they spend to make games, the more money they have to invest into future projects and studios, therefore the faster they grow. They are just not looking to «recover» what they spent, they are looking to increase their monthly revenues so they can keep the expansion cycle going and going.
MS has an extra incentive: Activision is a huge publisher and getting all those titles, back catalog and future releases both, into Game Pass, makes that service even more appealing, and we all know that top priority at XBox is to make Game Pass as ubiquitous as possible.
Doesn’t matter. Capgod will surpass them all!!
@Th3solution Well, I’m not trying to be condescending, but I am an accountant. When ABK becomes a subsidiary of MS, ABK earnings are MS’s earnings, same case as Bethesda and Mojang. It all goes onto the balance sheet and income statement in the end.
The acquisition of ABK isn’t really factored into profitability the way people want to think it is. It’s an all-cash deal, so it’s being bought with retained earnings, which are profits that have already been earned and are now just resting in the bank. If financing was involved then that’s a different story as they would be adding new liabilities to the company, but they aren’t. It’s just trading cash assets for things like land, equipment, franchises, etc. All things that have their own value. When major purchases like this are made the expense is factored with what’s called depreciation. You don’t just hit the books with 68 billion at once. You have what’s called a chart of accounts, and the new assets go into an asset account, not an expense account like buying say office supplies, or paying wages. You are hitting your retained earnings account on one side, then you are hitting new asset accounts on the other side. You then have what’s called an asset detail and the new assets are broken down into a depreciation expense and is then expensed out over a number of years little by little. So, when you get down to it, this depreciation expense is even tax deductible. It’s the way any business works. All the way down to a small business buying something like an expensive new machine. So really, the only way it effects MS’s future profitability is that they are just making more profits than before. I tried to keep this fairly concise and not totally meander into accountant jargon. The whole process is pretty interesting, really.
Capcom already surpass everyone this year without releasing a damn thing. How is that?
Only the gods know and they’re getting 30% more on their salaries. Amazing what the gods can do.
@EVIL-C I never generalized xbox fans, just the console itself.
I said "Isn’t the main appeal of xbox gamepass", I didn’t say the only appeal and I certainly didn’t say that it’s the reason xbox owners brought the console in the first place.
@HMazzy111 No thanks needed buddy, anytime. I’m always here to help. ?
@SplooshDmg What’s that sound?!
Oh, nevermind, it’s just an entire gaming forum population’s heads landing on their keyboards all at once when exposed to accounting procedure descriptions
Pretty sure you lost them at "deprecation expense"
@NEStalgia Hi, my name is SplooshDmg. My hobbies involve long walks on the beach, bank statements, government tax forms, and long waits on hold to speak with state agencies that aren’t very helpful.
@SplooshDmg Wonderful explanation but —“The whole process is pretty interesting, really.”
…I had to laugh at this statement. ?
Although I am somewhat interested in business from a social standpoint, like the strategizing, the effects on commerce, etc., yet the number crunching and the way all these figures are manipulated just makes my eyes glaze over. ? But your post is actually concise enough and informative, thanks!
@Th3solution Accounting is fun! Said no one ever! 
Me –
Before the pandemic – I played LOADS of games
During the pandemic – I played LOADS of games
After the pandemic – I played LOADS of games
I hope Microsoft doesn’t get Activision in the end to :-/
@SwittersB l think bungie is not going to be part of playstation, but in parallel under Sony.
@SplooshDmg Tell me more about your extensive pocket protector collection organized alphabetically by country of manufacture and pen barrel diameter accommodation!
At least it didn’t devolve into credit markets!
@SplooshDmg My girlfriend in college made accounting fun for me. For about 6 months lol.
I don’t know about Microsoft surpassing Sony. I still don’t believe their business model is sustainable. Look at how streaming services are starting to reevaluate their agressive prices and insane budgets for new content.
Overtaken by a company that no longer wants to sell you games but subscriptions. Not saying it’s a bad thing, or maybe I am I dunno. All I do know is that Sony seems to want to head that route as well, it’s just that Microsoft has a head start on them. Nintendo’s online offerings and the new ps plus were all born from Gamepass’ (unsustainable success) just wait for those price hikes. It’s gonna happen once everyone is used to subscription gaming. Look at the state of television. Instead of paying for channels, you’re paying for apps.
@ATaco with even a raise to all 3 services they all equal more in value then monthly cost. If GP or PS+ or switch online charged more and gave more or stayed the same they would still be great value. Paying for apps is a very popular approach for many companies and i can’t see the wrong in that. These services aren’t intended to replace sales, so living next to them seems to be a non issue and everyone has a choice to pay to play the way that best fits them regardless of platform. Not saying you said it was bad but i don’t see how anyone can’t see the value in either 3. Especially GP. As for TV it’s a great way for certain people to watch and enjoy without buying cable and over paying all good things for all people that consume in ways that best fits their style.
@Rural-Bandit I both agree and disagree, to an extent. I just can’t see Microsoft continuing to bleed money with Gamepass forever. They’re going to make changes so that their investments eventually see profit. I can’t tell you what that will look like because it could be years down the line but I just don’t have a good feeling about this. When Netflix first came out, it was great…an amazing value and it was robust enough that people were able to comfortably "cut the cords" and drop their pricey cable subscriptions. Look at it now though and we’re back to the scammy cable prices and tactics, just rebranded. I just don’t trust subscriptions because they always start so appealing, to reel you in, before they start sneaking in the scammy practices slowly and overtime so people just shrug and keep paying for less and less.
@Shepherd_Tallon @trev666 Tencent also have their own stores, a bit like iOS/Steam but focused on mobile. The Asia Pacific territory is by far the largest, around 47% of global market according to the same Source. NetEase also a big player over there. They are the equivalent of Apple and Google in some ways, or probably more like an even successful Facebook.
They also have many of the worlds most popular games PUBG battlegrounds, crossFire, dungeon fighter online, Honor of Kings etc. It wouldn’t be surprising if you’ve never heard of some of these? Many in the west haven’t, but some of them peaked at over 1 billion players which makes GTAV’s player count look like small fry. Let that sink in!
Apple is almost exclusively thorough their store and the 30% cut they take on EVERY game sale and MTX/in-app purchases. There’s no physical either where the profit may be less. At its core this was one side of what the Epic v Apple case was about. Epics argument being Apple shouldn’t be taking as much as 30% considering they make a profit on the sale of hardware too. Epic only charge 12% for example. A huge 18% difference for Devs and publishers. Epic argued this was different to console manufacturers which typically sell hardware at a net loss and make their money back in software. Hence they argued 30% for Sony/Microsoft/Nintendo was more understandable.
As far as I’m aware Apples Arcade service isn’t very popular, they changed strategy a little after a year because it hadn’t gained traction, but It is a great little service that sidesteps most of the worst of mobile. No advertising, no MTX, no time gating, full games many by renowned developers. It’s a shame it doesn’t appear to be succeeding as much as they hoped. Hopefully it weathers the storm as it’s a positive step for mobile gaming.
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