Phil Spencer, CEO of Microsoft’s gaming unit, arrives at a federal court in San Francisco on June 28, 2023.
Loren Elliott | Getty Images
In 2022, Microsoft executives predicted that gaming growth would come from advertising and mobile purchases over the next few years, according to documents recently inadvertently posted on a court website.
The disclosure, made in Microsoft’s May 2022 presentation, is the latest inside information to emerge as a result of the software maker’s battle against the Federal Trade Commission over its pending acquisition of Activision Blizzard. Earlier documents showed that Microsoft had set a goal of $500 billion in total revenue by fiscal 2030 and was analyzing how its corporate clients were using its competitors’ products.
In July, federal judge Jacqueline Scott Corley of the U.S. District Court for the Northern District of California ruled in favor of Microsoft and Activision. Since then, the two companies and others involved in the case have sought and received approval to redact the documents before the court releases them.
According to Tuesday’s court order, in response to an earlier court request on Sept. 14, Microsoft sent a link to documents that included a May 2022 presentation. After the court uploaded the documents to its website, the parties said the documents contained nonpublic information and Corley removed them from public view.
The presentation describes plans for a new Xbox console scheduled for release in 2028. It would be followed by the Xbox Series X and Series S, which were available in 2020. These consoles are the successor to the Xbox One, which debuted in 2013.
The document does not mention Activision’s $68.7 billion deal, which was announced months earlier. But Activision appears to be key to achieving the type of revenue described in the presentation.
It shows that gaming revenue will double to $36 billion in fiscal 2030, compared to a forecast of $18 billion for fiscal 2022. Actual gaming revenue in fiscal 2022 was $16.23 billion, according to an Annual Report.
It’s unfortunate that the company’s plans are being made public as they are, Phil Spencer, Microsoft’s general manager of gaming, said in a post Tuesday on X, formerly known as Twitter.
A Microsoft spokesperson did not immediately respond to a request for comment.
Completing the Activision deal would see Microsoft expand transactional sales across consoles and PC, as well as attract more subscribers to its Game Pass library. Growth in these two categories is included in the fiscal 2030 forecast.
However, we envision faster growth in two emerging categories: advertising and mobile transactions. Microsoft partnered with Yahoo sell display ads on Xbox consoles, but they are not ubiquitous.
In 2016, Activision Blizzard acquired King Digital Entertainment, the company behind the Candy Crush mobile game franchise. Through this deal, Activision Blizzard received revenue from in-app purchases and advertising. King subsidiary gave Activision Blizzard $2.79 billion in 2022 sales grew by 8%.
“Activision is truly a mobile-first publisher,” Spencer wrote in a 2020 email to CFO Amy Hood and other executives, which was included in a new cache of documents.
The 2022 presentation showed that Microsoft believed its ad revenue would grow to $1.4 billion in fiscal 2030 from about $100 million in fiscal 2022. And it indicated that management saw mobile transaction revenue reaching 2.6 billion dollars, compared to none in fiscal 2022. these two categories are $4 billion, or 11% of total gaming revenue.
Microsoft is now looking to close the Activision transaction by October 18. The UK’s Competition and Markets Authority is reviewing a new proposal for a deal that would involve the sale of Activision’s cloud streaming rights to Ubisoft.
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