Microsoft is very secretive when it comes to the finer details of its gaming business. We rarely get any solid info on the platform hardware sales, profit margins, or the yearly/quarterly profit figures. However, thanks to Epic’s recent testimony in a US court, many secrets of the industry were exposed. Amongst them were the revenue and profit figures of the largest companies in the world. Microsoft’s yearly profits for FY2020 (ending March 31st, 2020) were also revealed in the document.
Turns out that Xbox is actually doing much better than everything thinks. Although still behind Sony by a notable margin, it did manage to level with Nintendo which is pretty decent considering the excellent 1st-party lineup of the Japanese console-maker. Since Microsoft makes almost no profit from hardware sales, the bulk of this likely came from digital services and subscriptions such as Game Pass and 1st/3rd Party titles.
In comparison, Sony made over $4 billion from its gaming business, second to only Apple ($5.2 billion) and Tencent ($6.3 billion). Interestingly, the most profitable companies including Tencent made the bulk of their revenue (about 70%) from free-to-play games, generating nearly 3/4th of their overall profit from this model. Sony and Microsoft, on the other hand, earned the bulk of their profits from their console marketplace platforms and online services.
While PC platforms like Steam and GOG only amounted to around 5-10% of the overall PC gaming industry profits, console-makers relied heavily on marketplace revenue, with a profit margin of over 30% for most AAA titles on Microsoft and Sony PS Stores.