In the latest earnings call with investors, Microsoft CEO Satya Nadella stated the company "continued to see strong momentum for Xbox Cloud Gaming" and reported 140 million hours streamed this past quarter. The record-breaking number of hours spent streaming games via the cloud service came even as the Xbox division reported a 7% revenue decline.
Microsoft typically keeps player counts, subscriber numbers, and other details about player engagement close its chest. Quarterly earnings calls with investors are one of the few ways the public gets to see how Xbox is doing behind the curtain.
Microsoft's $70B gamble on Activision is paying off
Xbox Cloud Gaming services are still in a Beta state, and can only be accessed by players who subscribe to the Ultimate tier of the Xbox Game Pass service. The high number of player hours for Cloud Gaming coincides with another achievement for Xbox this quarter: a 30% increase in subscribers to PC Game Pass.
So what's brought on all of this growth in cloud gaming and PC game pass? The culprit is most likely the launch of Treyarch's much-anticipated Call of Duty: Black Ops 6, which launched into the Game Pass service in November. "Black Ops 6 was the top-selling game on Xbox and PlayStation this quarter and saw more players in its launch quarter than any other paid release in the franchise's history," Nadella told investors.
Call of Duty's inclusion in the Xbox Game Pass subscription service at launch opened it up to subscribers of Xbox Game Pass Ultimate as a streamable title for the first time. This served as a low-risk way for players who had previously left the franchise or just now trying it for the first time. Players no longer needed high-end gaming PCs, flagship smartphones, or a current-gen console to try out a few matches of Black Ops 6 or the free-to-play battle royale tie-in, Call of Duty: Warzone. Likewise, it was easier than ever to convince your friends to join if they were also Xbox Game Pass subscribers.
That's not to say that Call of Duty is exclusively the savior of Cloud Gaming and Game Pass, however. Other titles from the ABK catalog, including Spyro Reignited Trilogy and Crash Bandicoot N. Sane Trilogy, have also bolstered the service and become available to cloud streaming audiences for the first time.
Cloud Gaming and the "This is an Xbox" campaign
While Cloud Gaming and PC Game Pass numbers were impressive, Xbox's overall revenue dropped 7% year over year. Xbox hardware, in particular, dropped 29%. Xbox head Phil Spencer began ringing the alarm about declining interest in console hardware before Xbox acquired Activision Blizzard King. Spencer even went so far as to stress the importance of mobile gaming access during the FTC vs Xbox hearings, stating inside that the deal was just as much about Candy Crush as COD.
Many of Xbox's strategies in the last couple of years have mirrored that reality, including the development of an Xbox handheld gaming device and the recent "This is an Xbox" marketing campaign. While the campaign drew the ire of those in the Xbox community who prioritize hardware, it seems to have been the most successful part of Microsoft's growth strategy for the brand this past quarter.
Call of Duty only launches annually, so it can not be relied on to maintain growth in Cloud gaming and Game Pass every quarter. The other half of the Xbox strategy seems to be relying on propping up those services with high-quality AAA titles like the recently released Indiana Jones and the Great Circle or the upcoming Avowed and South of Midnight.
