Fortnite's Decline Is Reportedly Hitting Microsoft's Gaming Business The Hardest

Fortnite
Microsoft capped off its record fiscal year with $33.7 billion in revenue during its most recent quarter, to go along with operating income of $12.4 billion and a profit of $13.2 billion. Not too shabby. However, gaming revenue took a hit, and there is speculation that Fortnite, one of the most popular games on the planet, is the reason why.

Epic Games has a cash cow on its hands with Fornite, the free-to-play game that has generated over $1 billion in revenue for the developer since its inception. It also popularized the battle royale craze, leading to games like Apex Legends storming the scene in hopes of being just as a lucrative. Nevertheless, Fortnite is not pulling in as much cash as it used to, and that might be affecting Microsoft's bottom line.

During a recent earnings call with investors, Microsoft's chief financial officer, Amy Hood, put some of the blame on the drop in gaming revenue on a "tough comparable from a third-party title in the prior year offsetting continued momentum in Xbox Live and Game Pass subscriber growth."

Hood did not mention Fortnite by name, but according to Niko Partners analyst Daniel Ahmad, that is indeed the title she was referring to, USA Today reports. At issue is that Fornite players are spending a lot less on in-game goodies than they used to, and that is having a trickle down effect on Microsoft's gaming division, which saw a 10 percent decline overall.

Even though Fortnite is a free game, it generates revenue by selling V-bucks, an in-game currency that can be used on skins, dances, and other stuff. According to SuperData, Fortnite generated $2.4 billion in revenue in 2018, ranking it as the most lucrative free-to-play game.

In January of this year, however, revenue has taken a massive 48 percent hit in month-over-month sales across all platforms. The decline has continued throughout the year.

"Fortnite gets a boost from Season 9 but is still far off from its peak. Fortnite made $203 million across console, PC and mobile, up significantly from April but down 38 percent from May 2018. Console continues to contribute the largest share of players and revenue," SuperData noted last month.

A 38-percent drop in year-over-year revenue for the month of May is nothing to sneeze at, and aligns with Microsoft's latest revenue figures and Hood's comments on gaming revenue.

It's not all Fortnite's fault, though. Microsoft saw a big dip in hardware sales, which is not surprising given that a new generation console is too far off in the distance.
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