The Redmond, Wash., company’s videogame business is small compared with Office 365 and its Azure cloud offerings, but the Xbox is no slouch. Microsoft’s videogame revenue has grown roughly 10% each of the last three years, to $11.58 billion in the latest fiscal year. New consoles—and a new pricing model—could boost those sales in the years to come.
“Historically, the biggest hurdle with any new-generation console, regardless of who it’s coming from, has been this upfront payment,” says Alex Giaimo, who covers game publishers for Jefferies.
“Our goal was to increase that top-of-funnel as fast as possible, get people into the ecosystem, get people into that next-gen experience, and frankly kind of kick-start this generation as fast as we can,” says Stuart. “If you can get that install base as big as you can up front, you have customers enjoying the next-gen experiences we have to offer. And from a business side, we start to monetize and build a customer lifetime value much faster than a slow build over time.”