Microsoft has just announced the launch of Xbox Music, but how important is content revenue to the Xbox business?
Total Xbox revenue is estimated at £8.3bn in 2011, which includes console sales, Xbox Kinect sales, membership to Xbox LIVE and revenue generated by Microsoft through content sales. Based on a statement in the annual report that “platform revenue grew $2.7bn or 48%”.
But how does this break down between the different components, and how much can be attributed to content?
Xbox console revenues estimated at $2.8bn in 2011; this is based on unit sales figure in the annual report of 13.7m and an average price of $205 (according to Trefis).
Xbox Kinect revenues estimated at $1.5bn. The Kinect has been recorded as the fastest selling consumer electronics device in the world, selling 10m units in the first 60 days of launch. Microsoft announced in May 2012 that the Kinect had sole a total of 19m units priced at approximately $100-$150.
Xbox LIVE membership revenues estimates at $1.85bn. In November 2010, Microsoft announced it had reached 25m Xbox LIVE members with a further 5m added in the run up to CES 2011. Then in May 2012 Microsoft revised its membership number up to 40m subscribers across the 67m Xbox consoles sold since launch in 2005. Average Xbox LIVE subscription taken as $53 per year.
So this leaves $2.15bn for content sales, which I expect can mostly be attributed to purchasing games, video content and music through Zune Marketplace, but may also include some commission on sales by third party apps.
That’s over 25% of Microsoft’s total Xbox revenue, equivalent to c.$60 per user per year!
This is still very small compared to UK consumer average yearly spend on TV content of £360 (according to Ofcom) but hugely significant to the future success of Microsoft’s Xbox strategy.