Microsoft Forecasts Significant Growth in Gaming Revenue from Ads and Mobile Transactions
Microsoft's gaming executives have projected substantial growth in gaming revenue from advertising and mobile purchases in the coming years, according to a May 2022 presentation that was inadvertently published on a court website. The disclosure emerged as part of Microsoft's battle against the Federal Trade Commission (FTC) over the pending Activision Blizzard acquisition. Earlier documents have revealed Microsoft's ambitious goal of achieving $500 billion in total revenue by the 2030 fiscal year and analyzing its corporate clients' usage of rival products.
Gaming Revenue Projections
The presentation outlines plans for a new Xbox console set to be released in 2028, following the Xbox Series X and Series S. While the document does not explicitly mention the $68.7 billion Activision deal, it suggests that Activision would play a significant role in achieving the revenue targets outlined. The presentation forecasts gaming revenue to double to $36 billion in the 2030 fiscal year, compared to $18 billion in 2022. Actual gaming revenue for fiscal 2022 reached $16.23 billion, according to an annual report.
Expanding Sales and Subscriber Base
Completing the Activision deal would enable Microsoft to expand sales transactions across consoles and PCs, while also potentially attracting more subscribers to its Game Pass library. The growth in these two categories is factored into the fiscal 2030 revenue forecast. However, Microsoft anticipates even faster growth in two emerging areas: advertising and mobile transactions. While Microsoft collaborates with Yahoo to sell display ads for Xbox consoles, these ads are not yet widespread.
The Impact of Activision Blizzard and King Digital Entertainment
Activision Blizzard's acquisition of King Digital Entertainment, the company behind the popular Candy Crush franchise, in 2016 has proven beneficial. Through this deal, Activision Blizzard gained revenue from in-app purchases and advertising. The King subsidiary contributed $2.79 billion in revenue to Activision Blizzard in 2022, representing an 8% increase.
In conclusion, Microsoft's projections indicate a significant growth potential in gaming revenue from advertising and mobile transactions. As the company seeks to close the Activision transaction and expand its sales and subscriber base, the inclusion of Activision's portfolio, particularly the mobile-focused King Digital Entertainment, is expected to play a crucial role. These projections highlight Microsoft's strategic focus on diversifying revenue streams and capitalizing on emerging trends in the gaming industry.
Implications for New Businesses: A Hot Take
Microsoft's projections of substantial growth in gaming revenue from advertising and mobile transactions offer valuable insights for new businesses, especially those in the gaming and entertainment sectors.
Embracing Emerging Revenue Streams
Microsoft's focus on advertising and mobile transactions as key growth areas underscores the importance of diversifying revenue streams. New businesses should be open to exploring and capitalizing on emerging trends and opportunities in their respective industries.
The potential impact of Activision Blizzard's portfolio, particularly the mobile-focused King Digital Entertainment, highlights the strategic value of acquisitions. New businesses should consider strategic partnerships or acquisitions that can enhance their offerings and contribute to revenue growth.
In conclusion, Microsoft's gaming revenue projections provide important lessons for new businesses. Embracing emerging revenue streams and considering strategic acquisitions are key strategies that can drive growth and profitability. As the gaming industry continues to evolve, businesses that can adapt and innovate will be well-positioned for success.