Xbox boss explains how its push into Netflix-style gaming heralds a brand-new business model

Business Insider spoke with Microsoft executive VP of gaming Phil Spencer, the man in charge of Xbox, about the company's big new move.

[crazyCoconuts]

The only new thing MS is doing here is giving away the farm (albeit a small farm) in order to boost subscribers. It takes 6 months to recoup the cost of 1 game? PS won't do that because, well, they probably like making a profit.

[Cy]

More people will be willing to pay 10 dollars to try out a new game than there are people who buy new games, and a lot of those people might stick around to check out the other games on the game pass. That's the bet MS is taking. And I think it's a good bet, especially since rental stores have been slowly dying out. And this way, they get 100% of the rental revenue, revenue they would never see before. Of course, for it to work, they need to have a consistent line up of new, exclusive titles, but that would be true if they were going to make most of their money from game sales anyway. Which, by the way, is not how Xbox (the division) works. They mainly make their money through selling you Live and the occasional new console. There's ways this can backfire, but there are also a lot of ways this can be a huge success. Regardless of which one you think it is, this is easily one of the most gamer friendly things a major game publisher has done in recent memory.

[crazyCoconuts]

It's great for the gamer. I just can't tell if it's desperation or good business. I mean, if PS did that, think of all the exclusives you wouldn't have to buy. MS has less exclusives, they don't sell quite as well, so maybe there's less to lose here?

[Omegasyde]

What is the point of releasing a AAA game where a player can rent it for 10$\€? How as a Publisher would I see an incentive to this for profit unless i am piece mealing my game like hitman/tell tale games AND hosting the subscription service?

[Jinger]

@omega

How did publishers handle rental stores where people would rent instead of buy? How do they handle the used game market?

I'm sure they'll be fine and this wasn't some spur of the moment move by MS...

[Cy]

@Omegasyde

The same way publishers see incentive in putting their games on Games with Gold/PSPlus on release day. Doing that pretty much made Rocket League, and the guys who make the Van Helsing games have no problem putting their new games up on GWG right when they release. They might not get huge publishers to do this, but that isn't the intent right now. Phil even said in an interview today that it's up to the publishers themselves if they want to do this as well. Right now it's just a MS Studios thing and I think it's a great way to get people who might be dismissive of Xbox of its exclusives to give them a second look. The PS exclusives this year look great, but 10 dollars will always beat 60 dollars.

[LamerTamer]

Cy,

$10 is better than $60? Well yeah if everything else was equal but it isn't. For $10 all you get is the ability to rent it, $60 you own it. It depends if you don't ever want to own a game again. If not then this service is for you.

[Tko1111]

The volume of new subscribers per month. Or renewal will cover more than one new game.

[nawu]

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[chiefJohn117]

6 months? It all depends on how many subscribe. Average AAA budget is $50 million right? They recoup the cost with 5 million subs in 1 month.

[gangsta_red]

Some folks here are thinking too small and not seeing the big picture. Imagine if that 5 million stays over a long period of time.

It's like joining a gym membership, working out for six months then stopping, but forgetting to cancel your account. I'm betting that is where the money is being made, to the average consumer 10 bux a month is minuscule, but those costs times the number of users over the years adds up to a nice chunk of change for MS.

[crazyCoconuts]

For an individual gamer, it takes 6 months at $10/month to equal the price of a new game. So it takes MS a year of that gamer's subscription to make up for the revenue lost on 2 exclusives that i would have otherwise bought outright. And, there's all those other games that i won't buy (and MS has to pay for "renting" to us).

[crazyCoconuts]

yea, i'd guess it's probably a loss when you take gamers like me that already buy a lot, offset by maybe new xbox customers that either come over from gamefly or sony because they love this deal. that's all a net add, so they probably crunched the numbers and figured it's gonna be profitable in the end. can't wait to see how it does, and if sony feels compelled to respond

[rainslacker]

If people sub for 6 months, you'd have to consider if they're just playing one game though. Obviously, they'd likely be playing more, so when you look at overall revenue lost on those sales, then it still doesn't match up. OTOH, having the value there, means that you could realistically pull in more revenue per month, than you could by leveraging the ups and downs of a release schedule where you hit it big every few months, but also run the risk of not puling in a lot of revenue.

As far as how many subs you need to cover the cost of lost physical sales, you can not assume that it's based on each person only not spending money on one game, and they can make it back through the sub. MS still has a lot of other expenses to pay, like other publishers to get more content, server fees, marketing, etc. I'd say that for the most part, you'd actually need quite a bit more than the direct dollar to dollar comparison would be in the real world. It's also worth noting that the net revenue for a publisher with a $60 game release is actually around $35, so assuming $60 is the wrong number.

The only people I can think that this would most negatively effect without any doubt is retailers and distributors. It's already hard for them to make profit on physical game releases, and now they likely won't be selling as many copies as a whole, so the traditional retailer is likely to have a hard time going forward. That in itself could be a negative for having a lot of retailers even bothering to carry your physical products to begin with.

[Prince_TFK]

Yeah and those profit goes directly into your pocket.

Oh wait.

[gamer7804]

Before everyone grabs any pitchforks... "Just like I say on the gamer's side about choice, I just look at us just giving our publishers and our developers choice as well."

This is just another option, it's not my playstyle but i welcome options.

[RadicalCannibal]

This is the future. And the future is Xbox

[arkard]

You misspelled subscriptions

[Araragifeels]

Well if it doesn't require paying for a new xbox then I take subscription.

[arkard]

It will, either you stream it (on a cheap box) or you'd have to have hardware to run it with good graphics (download, offline play)

[bluefox755]

Nah, if it were, they wouldn't be in last place. People have largely rejected GaaS, and they will continue to.

[timotim]

Haha...well...first thing you have to do is look at the services that's been available on consoles thus far. PS Now is not an example I would use because it's a streaming ONLY service which has been very poorly supported by Sony with games that gamers actually want to play and/or games that are currently relevant. PS Now has been removed from platforms...Sony doesn't want it to succeed.

GamePass is a different beast entirely. You pay $10 bucks a month and download and play over 100 games...its simple and easy enough for gamers to understand while playing out exactly like gamers download and play games they purchase on the system already. It will have the latest exclusives, it won't have any of the negatives, it already has a good price point. You keep posting GaaS in some attempt to diminish the significance of the move but the reality is that consumers in many markets across many industries have already accepted services much like this. The gaming industry has yet to have a good gaming service...GamePass is the closest weve come to that yet. I'm not suggesting this service is for everyone...but it will make sense to a lot of people/consumers.

[BLKxSEPTEMBER]

MS as a business is CERTAINLY not in last place maybe XBOX is in last place but certainly not MS. Sony could learn a thing or two from MS when it comes to business.

[rainslacker]

I wouldn't say people have rejected GaaS. GaaS is nothing new, and MT/DLC/ongoing services for games are actually on the rise.

There are a lot of people who don't like them, but the paradigm itself is pretty successful.

[LamerTamer]

Before people complained about 24 hour DRM, but now it is ok to have everything be rent only, download only?

[Gazondaily]

Rent only ? Download only ? It's an OPTIONAL service

[rainslacker]

If the service stayed the way it is now, and didn't have any negative effects on other games, then, $10/month isn't a bad deal at all. I'd be willing to give up certain things if the price is right.

I still prefer my collection, but what MS has going here is nowhere near as distasteful as their original vision where our traditionally perceived ownership was now put under the control of a 3rd party.

[Anorexorcist]

Here we go again with the Xbox fanboys going whole-hog into this as if it is the next undisputed evolutionary step in gaming.

"This is the future. and the future is Xbox."

Where have I heard this same tired, old sentiment before???

HDDVD is the future...and the Future is Xbox.
Kinect is the future...and the Future is Xbox.
Xbox One and Always-Connected is the future...and the Future is Xbox.

[rainslacker]

Oh come on. No one ever said that last one. The defense for that came well after MS reversed it's policies.

[OffRoadKing]

I sincerely hope this is not the future of gaming.

[dreue]

Dude ahahahha so untill that is on xbox is not the place to game? Dude just stop

[LgbtWarrior]

What’s great about Xbox pass is the download to play. Not streaming which reduces graphical quality and introduces lag. Sony needs to offer a download option vs streaming. It’s not conducive for gaming. Where Xbox needs help is AAA first party games which are limited and will be for a few years. I think their next console will shine if they focus on game pass and AAA studio first party. Right now it’s too late.

[rainslacker]

Streaming as an option would actually make the service available to more people. Like it or not, streaming can remove the hardware component, and open the service to a huge number of people.

MS already said they're looking into a streaming service. Having it as an option wouldn't be bad.

I do agree that Sony should offer a download option for PSNow for PS4 games at least, or PS3 on their older hardware, but having both options is the best of both worlds.

On top of that, the quality of Sony's streaming service is greatly mischaracterized as bad, when it works quite well unless you're on a slow or laggy connection. Streaming works fine. Remote play and that game share thing Sony has where a person can take control of your game uses it, and it's not laggy. I've used PSNow with absolutely no issue during the free trial. I understand some people have had issues, but they certainly aren't commonplace, otherwise, the service would have been dead long ago.

[LgbtWarrior]

For fighting games or games with strict timing, streaming is not the way to go. There should be an option for either.

[Profchaos]

I've got both ps4 pro and of xb1. No suprise I prefer ps4 over xb1 I grew tired of the gears and halo series last gen. And my Xbox one has pretty much only used occasionally for backwards compatibility and the occasional xb1 game.

Since this news broke I've already purchased the game pass and I'm playing gears 4 and kind of enjoying it about 3 chapters in I know one paragraph above I said I was over it but actually I'm enjoying the story so far.

Will I keep auto renew of game pass going probably not the library is still fair small but I'll definitely be going back to play titles I missed hope to see quantum break on it shortly and some Forza horizon

[mark_parch]

gears 4 is awesome

[Malice-Flare]

Gamefly would object that it's a new business model for games...

[gangsta_red]

I really wish Gamefly had a similar DL service especially since they get the new games off top too.
The pure convenience of it would be worth it.

[chiefJohn117]

MS are looking at live gold and Netflix, which gave them this idea. Ms making around 500m per month from gold subs. 55-60m sub x $10(or $5) if even a quarter of those subs join game pass That's another $150m a month that can be reinvested to grow the brand. It's low risk, high reward.

I think they will tweak the new releases.(24hr worth play then remove like ea access or only have them up for a limited time such as a week or month) I feel they're experimenting to up subs and see how much more they get and how it effects these games sales.

[cfc83]

I think it's a good move. I'd get a month for sea of thieves. If i like the game i'll go in for a second month, or buy the game eventually. If i waited for just a sale they would get less money. I think Microsoft are calling it right.

[Sonic_Vs_Mario]

You'll also get 20% discount when purchasing games on Xbox Game Pass when you're subscribed to the service

[cfc83]

Very fair. If you took up the discount it would cover the months pass.

[PsBoxGamer]

Can't wait to play Sea Of thieves with my game pass!

[darx]

I'm in once that library improves.

[ElementX]

Halo 6 will be episodic so everyay well have to keep the

[ElementX]

Sorry this should've been deleted and my post below is basically what I wanted to say. I am on my mobile.

[WeAreLegion]

Just call them "episodic comments".

[ElementX]

They could start releasing episodic games to keep people subscribed.

[Prince_TFK]

Quantum Break could have been that kind of game.

[chris235]

this is heading to hardwareless console gens. and i‘m looking forward to it. no more hassle, your favourite console will be just a brand in yout tv menu. and many possibilities to cash in.

[LamerTamer]

And what if you have slow internet, no internet, or data caps? No games anymore? It is ok but not everyone wants to only rent everything.

[Kavorklestein]

No shit bro, that's why this is simply an option, not a replacement.

Good god some people are dumb. To the death they will stay adamant about combining what is actually said, with their own fucked up delusions, and acting like they are somehow one and the same.

[TheOttomatic91]

Does it? The main thing that annoys me is that I have to DL the games and lets just say I don’t have enough for a renewal then I no longer have access to games that I already installed on my hardrive. That’s kinda dumb.

[Italiano1234567]

I like to own my games and do whatever I want with them

[SkippyPaccino]

Why do they keep calling it "Netflix style?" PS Now is truly a gaming Netflix... Game pass is basically the same principle as ps plus games/games with gold games..but with a much bigger pool of monthly games... Ps now is live streaming vs download and timed license

[rainslacker]

Because some people don't want to give Sony credit where it's due. It's usually the same people who say that PSNow is laggy and unplayable, when it really isn't, as quite a few PS4 remote play features use it without issue....often using a persons own internet upstream, but can be done through Sony's servers as well. Go figure. A feature lots of people use regularly runs on the same exact software that runs PSNow on various devices.

Game Pass is more limited at the moment due to being hardware restricted. But MS has already said they were interested in a streaming service, and the only logical reason for that would be to remove the hardware requirement....and outside still having the download option, would make Game Pass the exact same thing as the sub service on PSNow.

[Snakefist30]

More like cancer other publishers like EA,Activision and Ubisoft will soon follow this trend and ruined gaming for good!

[zerocarnage]

Don't know why people think Sony has done this type of service, what rubbish.

I myself with news of this, really am glad I have an Xbox. A Netflix type of service it's a win win for Microsoft and gamers. Soon as new games get added I will buy the game pass most deffo.

Those who think it's bad haven't a clue anymore than the ones thinking it's good do, we don't exactly know yet how it's all going to properly work, all I can say is just wait for the finer details rather than casting judgement.

Netflix themselves make a ton of money, publishers who choose to put there titles on Microsoft's style Netflix won't be able to do a thing once it's up apart from say to Microsoft take it down. Remember the service is Microsoft's they are pretty much the law and what they say goes and no one can tell them how to run it.

So the ball is in Microsoft's court and they have an opportunity here to make one hell of a gaming service and I'm more likely to believe they can do it, especially when they can bring out the Xbox one which doesn't have as many exclusives as the other console devs and still manage to keep millions of gamers and subscribers to Xbox live. If anything Microsoft stuck in there pretty darn well considering and showed the gaming industry/world that exclusives were not necessarily needed in order to stay in the business which is very different to competeing at the top with exclusives.

Many especially the Sony fanboys and ms haterz thought Microsoft was down and out, then they released a whopper of a console and laughed in all there faces then all those fanboys and haters still look the joke now when they did when they first called Microsoft's demise.

[FreddyFazbear]

So someone tell me whats the difference betwee this and PS Plus aside from having more games?? PS plus can download games you want although not that plenty. And when your unsubscribed, you still have a game in your box but cannot play it unlesa you pay once again. Same will be with game pass. When you dont pay your monthly game pass, your games on your harddrive is unplayable unless you renew. so tell me whats the difference? Aside from price and number of games? its still basically renting.

[OffRoadKing]

Did you mean PS Now?

[FreddyFazbear]

Not PS NOW PS PLUS!! where you download games to your harddrive?? ps plus where its needed for you to play online?. its the games with gold competitor. The way i see it. Gampe pass is also just another rent your games while subscribed like ps plus although game pass has they say 100 games.

[rainslacker]

On Game Pass, a game is only available to play when it's available on the service. With PS+, you can pretty much keep the game as long as you added it to your library when it was available for download.

That's one difference in the actual availability of the content. OTOH, you have a larger pool of games at any given time with Game pass....assuming you haven't been adding games for years to PS+.

[FreddyFazbear]

Oh Thanks bro! that was very informative. I knew there was a small catch. Its Cheap but a game wont stay forever and can be taken out at any given time. So its not good for gamers who wants to collect games digitally. Unlike PS PLUS if you have been accumulating games since the inception of PS plus. Thanks again.

[patterson]

And like Netflix, games will be rotated in and out and you'll never own a single game. Not interested.

[Gman32]

i guess so the push to put retail stores out of business