One of the great traditions in the accounting offices at Microsoft is to change up reporting metrics to make it harder to compare year over year performance. While this isn’t exactly the case, as the company will argue it makes things easier to understand (sometimes), for FY 2020, the company is updating how it reports Xbox sales and revenue.
Out are specific metrics like Xbox Live active users and in will be revenue growth from the services the Xbox platform offers. Going forward Microsoft will report earnings for Xbox with “Xbox content and services revenue growth” as the primary health metric.
The company defines this metric as “Year-over-year percentage revenue growth for Xbox content and services”. These services include subscriptions, cloud services, advertising, video games, and third-party game royalties.
The big missing item from the list is console sales; Microsoft was not reporting those figures under the FY19 reporting model either.
What this signifies is that Microsoft is shifting the Xbox brand to focus more on software and service sales, rather than console sales. Considering that most console sales are at about a break-even or a potential loss, the basic idea here is to show where the actual positive cash flow comes from in the Xbox org.
Not that I agree with axing Xbox Live monthly active users from their reporting, but I understand the logic. That being said, this move does feel like it’s a shift away from transparency as Year-over-Year percentage growth is meaningless if you don’t know the baseline figures. The company does note that gaming revenue will continue to be disclosed in the company’s SEC filings.