Microsoft’s Latest Earnings Boom Driven in Part by Video Games

To call 2020 a strange year might be somewhat of an understatement. With COVID-19 wreaking economic chaos across much of the globe, it is hard to believe that anyone is “doing well” from a revenue standpoint right now.

But there has been one boom during the world’s collective shut-in saga, and that is the video game industry. Not only is it posting record revenues and profits but also the current growth trajectory puts it on pace to displace more traditional titans of entertainment.

The only question is whether any of this will last once people are allowed to socialize again. Analysts with some history of hitting things right on the head when it comes to predicting the often wild ride that is the video games industry say that growth will not only continue but accelerate.

Perhaps that’s why Microsoft was more than happy to take a long-term bet on gaming way back in the Gates era with its Xbox. Now they’re reaping the profits of that foresight as Redmond’s latest earnings reports not only showed a significant contribution from its other “visionary” initiatives like cloud computing but also from its Xbox gaming division.

The company just reported $37.2 billion in revenue, beating Wall Street expectations of $35.8 billion, with video games surging forward to help bring home the bacon.

Microsoft’s director of investor relations Kyle Vikstrom told CNN Business, “Gaming is one of the largest and fastest-growing forms of entertainment in the world. We expect there to be more than $200 billion of revenue in this industry in 2021…We’re seeing a really great early response to the console that’s going to launch next quarter.”

Aside from the Xbox, Microsoft also owns Minecraft and recently acquired Bethesda, maker of The Elder Scrolls and Fallout along with id Software’s DOOM series. Interestingly, Bill Gates wanted to acquire DOOM’s makers back in the early days of PC gaming because it, at one point, was more widespread than the Windows operating system itself. It looks like the company has finally fulfilled that wish.

Moving on to the next generation with Sony, Microsoft is putting forth two visions for the future of gaming, the “budget” Xbox Series S and the high-end Xbox Series X. There are also rumors that the company is putting out feelers to Japanese publishing houses in the hope of acquiring them and adding to the growing stable of developers and IP that Redmond is amassing. Perhaps noting that Sony’s strategy of high-quality, triple-A exclusives helped secure it the lead in the last generation, Microsoft’s strategy makes sense if the company sees gaming as a major contributor to the bottom line going forward.

What do you think of Microsoft’s next-gen plans? Are you planning on picking up one of the company’s systems? How do they stack up against Sony’s PS5? Let us know your thoughts in the comments section below if you like.

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