Microsoft Published its financial report for the third quarter ended March 31, 2023, the company noted a 30% decline in xbox sales volume.
This was due to the comparable highs of the previous year benefiting from an increase in console supply.
Content and services revenue for gaming consoles rose 3 percent, even as Xbox sales fell, as part of the more personal computing segment. This was driven by better-than-expected monetization of third-party and first-party content, as well as growth in Xbox Game Pass.
For the quarter, the segment brought in $13.3 billion in revenue, down 9% year-over-year.
In gaming, revenue fell 4%, beating expectations.
For the fourth quarter, Microsoft expects gaming revenue to post mid-to-high single-digit growth. The company expects Xbox content services revenue to grow in the low-to-mid range, driven by third-party and first-party content and Xbox Game Pass.
In its investor call, Microsoft noted that the fourth quarter and fiscal 2024 would not include any impact from Activision, and that it continued to work towards ending fiscal 2023 — despite the firm opposition of the U.K. regulatory committee.
Earlier today, the UK’s Competition and Markets Authority (CMA) decided to ban the merger between Microsoft and Activision Blizzard. The agency believes that the merger will crowd out cloud gaming competitors because the merger will make Microsoft “more powerful”, such as “Call of Duty” and “World of Warcraft” for streaming media. That’s despite Microsoft’s agreement to bring Activision Blizzard games to more than 150 million devices. Microsoft believes the CMA’s decision reflects a “wrong understanding” of how the cloud gaming market and related cloud tech nologies work.
Although denied due to cloud gaming competition, the CMA did conclude that the merger would not affect competition among console services. In other words, no matter what Sony says as the market leader, it will not affect Sony.
Microsoft was barred from acquiring Activision Blizzard because of the CMA’s “disagreement” – even though the European Commission and the US FTC gave it a thumbs up. This means that if the latter two approve the merger and Microsoft goes ahead with the acquisition, it will not be able to operate in the UK. Given the importance of the UK market, this is impractical for the company.
Microsoft said it would appeal the UK’s decision, but the CMA isn’t known for revocations.
The rejection of the deal sent some shockwaves across the gaming industry, with the decision also affecting Activision Blizzard’s stock price.
At the close on Tuesday, April 25, the stock price was $86.74, fluctuating a few dollars up and down, which is normal. However, when the US woke up to news of the CMA’s verdict, the company’s shares took a hit and began selling off at $76.28. Shares continue to fluctuate, trading at $76.90 at press time.
In comparison, Microsoft shares were up more than 7.5% in premarket trading, but that was due to its strong third-quarter earnings report. The previous close was $275.42 and it is currently trading at $296.89 at press time.