Microsoft Corporation has its fingers in many pies, and the firm’s new focus on hardware has won it a lot of plaudits. We’ll have to wait a while before we find out how sales of the Surface Book and Surface Pro 4 turn out. In the mean time the firm’s most successful hardware brand, the Xbox, has claimed a major victory that could frame holiday sales.
On Wednesday November 4 Microsoft revealed that sales of its new in-house first person shooter Halo 5: Guardians is the fastest selling title in franchise history. The firm said that the title racked up sales of $400M in the first week on shelves. That counts direct sales of the game and sales of console bundles that include Halo 5.
Microsoft works on Halo 5 holiday blowout
Phil Spencer, the man in charge of the Xbox One, said that “the success of ‘Halo 5: Guardians’ is a testament to the innovative work from the entire team at 343 Industries to bring this installment to Xbox One and the incredible community of fans who have come to love the story.”
The coming holiday season is going to be a major one for gaming, and more than one major title will be coming to the Xbox One in the next two weeks. On top of Halo 5, which is exclusive to the Xbox One and Windows PCs, Bethesda’s Fallout 4 and Electronic Arts Inc Star Wars Battlefront, will come to Microsoft platforms by the middle of November.
Halo 5 is likely the most important for Microsoft, however. The firm’s console business is lagging behind that of rival Sony. Investors, long impatient and unsatisfied with the firms’ focus on low margin products like the Xbox One, are still waiting for boss Satya Nadella to show the usefulness of the Xbox One.
Trying to make gaming work at Microsoft
Software sells consoles, and with Halo 5: Guardians Microsoft may have its first major advantage over Sony’s PS4. The franchise is one of the best loved in recent gaming history, and it’s the game that brought many to the Xbox family for the first time.
Mr. Spencer says that “The game represents all the possibilities of Xbox One and has earned its place as the anchor title in the greatest holiday games lineup in Xbox history.”
Sales aren’t everything for Microsoft’s gaming segment, however. The costs of making and developing the console, as well as first party games like Halo 5 are huge. Investors aren’t worried about the Xbox One making a profit, though that’s something they should likely think about, they’re worried about how much money it can make.
Margins are huge in software business at Microsoft, and hardware just can’t compete with the return that things like cloud services and enterprise software bring to the table at Redmond. Most of Wall Street simply ignores the Xbox One. It’s a small business and one that doesn’t have a major effect on the bottom line.
Hardware as a whole is a problem in the eyes of some analysts. Those that love the Xbox One will be hoping that Satya Nadella can convince traders that Most Personal Computing, the segment that contains the Xbox One and Surface, is key to the future of the firm.
Heather Bellini of Goldman Sachs reckons traders should Sell shares in the firm because of weakness in the business, and Microsoft’s intent on keeping hardware going.