Microsoft is not gaming's underdog, Xbox revenues beat Nintendo

Microsoft has assuaged consumers, investors, and gamers with claims that it will still be the gaming underdog after the $68.7 billion Activision-Blizzard merger, but Xbox is actually beating one of its major competitors right now.

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In a new blog post discussing the merits of the Activision-Blizzard merger, Microsoft assures readers that it will remain number 3 in the pecking order behind Sony and Nintendo. "Greater competition in traditional gaming, where Sony and Nintendo will remain the biggest," Microsoft said.

This is an interesting claim and it's certainly not all-encompassing (for example, PlayStation makes most of its money from microtransactions, and that's not the more traditional hardware-software market). In fact, Xbox is actually beating Nintendo right now in revenues. Weaker yen has carved out sizable chunks of converted earnings from all Japanese games companies and Nintendo is no different.

According to public data made available from Microsoft and Nintendo, Xbox revenues have outpaced Nintendo during the June 30, 2021 - 2022 period. And that's without the boost from the Activision buyout. Xbox will surely stay ahead of Nintendo once Activision-Blizzard's multi-billion revenues are included (Activision made $8.8 billion revenue in 2021, which is more than half of Xbox's total-year earnings).

Why such a weird date range? Microsoft's fiscal years run from July to June, so we extracted Nintendo's revenues in yen for the according period and converted them using the "as of" foreign exchange rates provided in Nintendo's earnings documents. This does include the critical holiday period for both platform-holders.

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The results show that Microsoft has made a record-breaking $16.22 billion in revenues from Xbox gaming from June 2021 to June 2022.

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Nintendo, on the other hand, made $14.08 billion in net sales revenues during that same period. That's a difference of over $2 billion and is a result of the weakening yen.

On a yen basis, Nintendo's earnings for the period were 1.68 trillion yen, which when converted in today's rates delivers an even lower USD rate of $11.68 billion.

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A comparison of revenues from Nintendo, Xbox, PlayStation, and Activision-Blizzard over the July 1, 2021 - June 30, 2022 yearly period. Note that the combination of Xbox and Activision revenues are above PlayStation's for this period.

This small bit of info provides more perspective on Microsoft's assertions. It's not that Microsoft is completely wrong about what it's saying. There's truth to the claims.

However, this key data point provides critical context and is a reminder of how Microsoft has used vague sentiments in its consumer-facing comments on this merger.

The biggest example of this was the confusion on Call of Duty exclusivity. Microsoft's original communication said that Call of Duty would remain on PlayStation for the term of any existing agreements, and would be "made available" on PlayStation "beyond the existing agreement and into the future."

But Sony's Jim Ryan publicly confirmed the $30 billion franchise would eventually be removed from PlayStation.

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Microsoft is in third place in hardware sales--this much is true. Nintendo does beat Xbox in hardware, but that's hard to pinpoint because Microsoft keeps that kind of data under wraps.

It is also a given that Nintendo and Sony are beating Microsoft handily in software sales too. Xbox makes most of its revenues from content and services, which includes game sales, microtransactions, and Game Pass subscriptions. Without more contextual data we can't delineate between these and determine how much Microsoft makes from game sales, for example.

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Microsoft makes most of Xbox revenues from content and services, which lumps game sales (digital and physical) with microtransactions and subscriptions like Xbox Game Pass.

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With an $8 billion lead, Sony makes most of its gaming revenue from add-on content, which includes microtransactions in key games like Fortnite, Call of Duty Warzone, and Apex Legends. Digital software is second, hardware in third, and network services is next.

However, Microsoft did inadvertently reveal that the PlayStation 4 has sold "over twice as many" Xbox One consoles, so we know the Xbox One has sold less than 58.6 million units.

The numbers are pretty clear. The PS4's lifetime sales are at 117.2 million. The Nintendo Switch is currently at 111.08 million units and is expected to outsell the PlayStation 4 by year's end.

Microsoft's post seems to downplay the sheer enormity of the Activision-Blizzard deal. Apart from the incredible share buyout price, Activision is among the most powerful video games companies on the planet and #3 behind Tencent and NetEase in revenues from firms that do not have console platforms.

Activision-Blizzard has eight franchises that have made over $1 billion. Call of Duty has made over $30 billion in lifetime revenues, and King has generated over $12.4 billion since being acquired in 2016.

There will be five monetized Call of Duty titles on the market soon, including Modern Warfare 2, Warzone 2.0, Warzone mobile, Warzone 1.0, and Call of Duty Mobile. Nearly all of Activision-Blizzard's games are live titles that will fit perfectly with Xbox Game Pass (the fit is so perfect that no other company besides maybe EA would synergize better).

These are just a few things that aren't mentioned by Microsoft but are publicly available online.