Analyzing the Impact of Xbox Game Pass

Ainsley Bowden for SG: "Examining Xbox Game Pass, the questions surrounding it, and how it’s changing the industry."

[Spurg]

An analysis but with amount minimal amount of breaking down. This is more of an observation.

[Orionsangel]

I think the main difference between Game Pass and PS Now is that Game Pass is offering launch titles. That's the big sell for me. I'm basically getting 60 dollar launch titles for free.

On another note, Game Pass defeats the purpose of Xbox Gold. Makes no sense to keep Gold going. Just make Game Pass encompass all of it.

[HighPlayer28]

I agree Gold needs more value thats even better than Gamepass.

[ElementX]

Gold needs more value? They are giving you 360 and One games. Plus only gives you PS4 games.

[timotim]

@Element

They also give you Xbox Originals as well.

[Livingthedream]

Beyond launch titles, their streaming option. Only offers 720p whereas gamepass for PC let's you take advantage of your hardware

[Spurg]

Games pass ultimate adds the value if you want both.

[Orionsangel]

@ElementX You're missing the point. Take those free Gold games and just add them as part of the hundreds of free game pass games. We're already getting 5 free games added a month with Game Pass. We don't need a separate service called, Xbox Gold. Gold as part of Game Pass is like a service inside a service. It's pointless. Just make it so you subscribe to Game Pass and get hundreds of free Xbox One and PC games and online of course and that's it. Why muddy the waters with another extra service?

[ElementX]

I don't subscribe to Game Pass so the free Live games are a bonus for me (I usually don't even play them).

[rainslacker]

If MS wants Game Pass to be the next big thing, then they'll at least remove the Gold requirement from games gotten through it. But, doing it the way they do it now, they'd basically be making more money, because XBLG is required for online play. Business wise, replacing one service that is already making money, with another one which cost more to operate but doesn't charge proportionately more, doesn't make a lot of sense.

Could happen though, but GWG isn't what most people are signing up for when they get XBLG.

[Zeref]

Ultimate encompasses all of it.

Aside from Multiplayer and Party Chat , Gold allows you to keep GWG games forever. Not only when you're subscribed. There's also Deals with Gold that give you sharp discounts.

There's value in keeping it around for those that don't want GamePass or if they offer GWG that aren't in GamePass.

[Orionsangel]

Ultimate Game pass can give you hundreds of free games, discounts and online without calling anything Gold.

While regular Game Pass just gives the free games.

[xX-oldboy-Xx]

Look at the effect on Gears 5 retail sales in England, double edge sword this gamepass thing. I don't think it's very smart for ms to do their 'day 1 on gamepass' - but if their happy, more power to them.

[Livingthedream]

Yeah not sure if theyll make money out of this in the long run, but im going to take advantage of it. Benefits me greatly

[Zeref]

Of course it will. MS knows what they're doing.

[UltraNova]

It is smart at the beginning at least. Offer everything for nearly free to lure users in and hook them, then gradually increase the price more and more. Remember how much Netflix cost when it launched and how much does it cost today?

Don't be fooled.

[jjb1981]

It's been like a $5 increase over 10 years. Come on bruh...

[UltraNova]

Jj,

Have you read about how people were outraged by Netflix's last price hike, or how many subs they lost and how much their stock depreciated? Don't underestimate this.

I do not deny GPs current value, I simply can't trust MS's true plans with it.

[Atom666]

If only I could go back in time and protect myself from the horrors of enjoying Netflix all these years. If I had known that they'd increase the price, I would never have subscribed in the first place!

Seriously, if Game Pass becomes a poor financial choice for me in the future, I won't subscribe. Don't be fooled to think that the market won't be OK either way.

[sprinterboy]

You serious bro, I've had Netflix from the beginning about £3.99 if I remember correctly (10 years ago) now I'm paying £8.99 (that's a fiver, it's called inflation rates)

Edit: you do realise everything goes up right, bread, milk, broadband yearly increase, TV license goes up every year, gas and electric.

"don't be fooled" pmsl

[Kiwi66]

Yeah because nothing ever goes up in price /s

[rainslacker]

I remember when netflix cost me about $13/month for two rentals at a time. Didn't get into the streaming service until a couple years ago, and think it went from $13 to $15. That's not much of an increase that I worry about it.

Amazon Prime has been more problematic with their random price increases which don't seem to add any value.

The MSRP of Game Pass will go up eventually. Probably some time next gen. All the pricing now is to get people locked in, which is why they were offering 2-3 years for $1 each, because it means you may stick with them come next gen. That's a good revenue stream for MS, even if they lose money now.

As a consumer, there is nothing wrong with taking advantage of it, as MS can decide if what they're selling at a price is worth it to them.

[UltraNova]

Guys,

I know prices go up and its part of the business. Hell Netflix going up 5 bucks in 10 years is no issue I agree but we are fast approaching a situation where everyone will have a sub service inadvertently locking up content behind them so I ask you to consider this, how many sub services are you willing to join just to access the content you are "free" to access today? Do a preliminary addition now and tell me, can you afford this?

This is all I'm saying... its not about "what ifs" its about "when" at this point.

[Livingthedream]

@ultranova Netflix actually reported and increase in earnings they're still making money

[Spurg]

They have been compensated already. It isn't about sales anymore but how much gamers you can retain within the game pass subscription. With game pass being on Xbox One and PC it will increase in the millions and be a key strategy for the next gen and Xcloud.
Most of the people with common sense would have gotten the game on gamepass and will maintain that sub for other games like Blair witch, bloodstained and outer world and I can assure you with the way gamepass is going you will not have a reason to unsubscribe from the service.

[xX-oldboy-Xx]

It is about sales, it will always be about sales - at the same time you're right that ms is trying to increase and retain subscribers to gamepass.

ms doesn't make good games. Sony and Nintendo do, ms simply doesn't.

Only ms knows if this is a positive thing for them.

I think this is hail Mary from ms because they know they can't compete in console gaming as we know it.

[rainslacker]

MS makes good games. They just don't make enough of them, or at least don't have a consistent regular release schedule. Hopefully that'll change next gen when all these new dev purchases start delivering.

[Spurg]

"ms doesn't make good games. Sony and Nintendo do, ms simply doesn't."

It simply you're opinion. How is Gear 5 not a good game?

[xX-oldboy-Xx]

Sales tell me it was a failure, how's the player numbers? or do we just the people that played it for 30 min as the metric I'd success?

[xX-oldboy-Xx]

shaggy - thanks for replying mate. Are reviews to be trusted? This was ms's beacon of hope - and you muppets gobbled it up at $1 for 3 months - and then most of them deleted it.

But how do we know? Whats the truth? Call it out for what it is - smoke and mirrors. Fake ms cunts hahaha

[Spurg]

"Sales tell me it was a failure"
It pretty obvious why....and it was already mentioned.

"It is about sales, it will always be about sales. Sales tell me it was a failure, how's the player numbers? or do we just the people that played it for 30 min as the metric I'd success?

Your logic is flawed

When 3 million players are playing in the first week then it changes the picture completely.
Gears 5 brought 3 million gamers to games pass who will stay subbed once they have a taste of the abundance of games on the service.
3000000 *10 GPD per month= 30000000 million
3000000*15 GPD per month with Gamepass ultimate= 45000000 million

If Gears 5 would have turned that 3 million into tradition sales it would have amounted to
3000000*60 GPD =180 million for maybe the first month or two. But MS turned Gear 5 into a game that attracts people to game pass so they will get constant revenue from the subscription every month which will amount to much more.

And that's just the first week imagine how many gamers were brought it in the subsequent weeks.
By now game pass numbers should be in the millions considering it a killer app if you own an Xbox/PC. They should be projecting to bring in 100 million per month at a point. Plus even if sales are low COMPARED to previous games they are still making money from that end as well.

At the end of the day, Gamepass benefits both the gamers and MS. You don't have to worry about the sales.

[Zeref]

Adding XGS games day 1 increases the value of GamePass. Meaning more subscribers. As long as they can maintain a large number of subscribers they will profit eventually. Right now they spend more money than they make because otherwise they wouldn't get subscribers. But after they get a certain amount. They will start to profit like crazy.

Let's say they got just 10million subscribers.(I assume it's around 5million right now)
That's 100million dollars per month that they get. That's already over a billion a year.

AAA games usually cost between 50 to 100 million to make. They could literally afford to fully fund 1 or 2 AAA game every month and still have money left over.

note: They do get ALL the money from GamePass. They don't share it with Devs. They pay devs upfront to license their games for a certain amount of time. That's how subscription services work.

Anyway, i'm not sure why everyone is worried about this, Microsoft is a trillion dollar company. I'm pretty sure they know what they're doing when it comes to monetization.

[HighPlayer28]

Xbox Game Pass is causing disruption in the industry with its success and can become greater with better exclusives and more diverse 3rd party support. Microsoft has to make devs buy into their service so more new content can keep coming in the service. They need to get the Asian market on board with the service because thats the market their struggling to gain an audience. XGP and Xcloud are two services which could give Microsoft huge success in Asia if they can grab talented Asian developers.

[timotim]

Agreed wholehearted.

[StormLegend]

I wanna see how long MS can keep this going because spending $1 to play $60 games mean someone isn't making money. I don't care who's loosing it but I do know they can't keep it up all next generation. If so I'll be surprised.

[Wikkid666]

It's about the long game. For them them it's like a gateway drug at cheap price. 3 things will happen:
1. You love it and them keep paying at full price
2. Forget to cancel it and then you are paying full price
3. Hate it and cancel it. The promo price is a one time deal. So months or years down the road you want it or try it again. You pay full price.

[alb1899]

It is just an offer so you can try it and they are confident that then you will be happy paying the real value.
If you get the offer the right way then you got one to three years of gamepass And gold so when the next generation arrives whatever what will you buy first? The console that you have all the games alrady for one to three years or the one that you have to pay 60 for every game plus the PSN?
It is simple.

[sprinterboy]

Yeah it's great for the gamer but I don't see how it's being profitable all round especially with the £1 offers which I'm sure since gamepass launched is like 99% of gamers (don't think they'll have too many full priced subs)
I guess ms is hoping for 100m or 500m gamers to try gamepass for at least a year (on and off) in total across a 6 year gen period?
Some people just forget to cancel? My friend had BT sport and amazon prime for 2 years and didn't even know he had it pmsl.
At the end of the day you can't beat options, but like you said it's hard to see how ms are profiting and yes of course they are dangling the carrot and yes pricing will become more concrete nxt gen.
What will become apparent is gamers don't like £14.99 for a gamepass or psnow so it's gonna have to stay at ££8.99 cause gamers won't pay more than that.
Tbh though I used ea access last month £3.99 and got anthem, battlefront 2 single player, fe, battlefield 5 and replayed burnout remastered (bargain) then psnow this month £8.99 replaying gow, uc4, steep, farm sim, mudrunner, Agatha Christie, prey, mkx etc (again bargain).
I have to say though 80% of the games are shite, so glad I didn't buy steep, fe, mudrunner, farm sim, Agatha Christie, SoT, prey, gears 4, Sod etc.
These services have saved me a fortune and in all honesty kinda shows how bang average a shit load of games are.
I find the AAA 1st party to be excellent, with a handful (yes a handful) of 3rd party and Indies thrown in across the gen.

[battlegrog]

it took netflix years to prove the model and music did the same thing andnow you have many other streaming choices. Xbox it will be no different,It will work but it will take some time. Will do well

[rainslacker]

Consider people that signed up for 2-3 years at $1 each. Those people are now more likely to buy an Xbox next gen because they are invested in a service, which will provide them more meaningful content than old games on their account, which they can play on their existing hardware, friends lists, and achievement lists. All of which MS found people weren't willing to stick around for this gen.

It's a long game for MS, and right now they want people invested in the service, so hopefully they'll remain invested in it for the long run. MS isn't opposed to taking a large hit on revenue for long term gain, and MS wants to keep it's place within the gaming market, in particular, with DX12 being a primary API to make games...something that both PC and console devs are pushing them back on market share. That API works really well with their development software, which they make a lot of money on.

[ElementX]

I think a lot of, or all of Live fees are profit, not necessarily keeping the servers running. MS cloud services are raking in huge amounts of money and can more than support the cost of running Xbox Live. Even with the $1 upgrade you're paying for the years of Live, so you're actually paying say, $121 for 2 years of Ultimate as opposed to just the $1 people keep saying. $121 times 3M subscribers (just an example) is $363M in Microsoft's pocket right now, collecting interest and being invested to gain even more profits.

In addition, you have say 2M people paying $10/month for game pass, that's $20M more per month in income. If they continue for 2 years, that is a total of an additional $480M income. $363M+$480M=$843M for 2 years worth of services and more than enough to fund some games and pay other developers for free Live games and Game Pass. That $843M is only taking into consideration 5M customers across upgrades and monthly game pass. There could be significantly more subscribers, making even more money. There are millions of people who pay $60 for Live and don't use Game Pass, that $843M doesn't even include those people.

Some people do the trial and cancel, or people pay $10 when a good game comes out and cancel, that's still income they might not be getting otherwise. I think a majority of people will continue to keep Game Pass if the good games are there.

I prefer buying games, but to each their own.

[sprinterboy]

Same buddy, I prefer buying physical or digital this gen but have recently tried ea access and psnow which all gave me great value in trying games I was on the fence about mudrunner, farm sim etc.
But agree also on the revenue these services can possibly generate.
Its so much easier as a example for mum and dad to just buy the child/teenager a subscription package for the year every Xmas holidays or there birthday etc.
Imagine growing up and having a library of games all for £50 for the year? I would have loved that 30 years ago as a kid.
Its where its heading for sure and personally I don't mind change aslong as nobody messes with my AAA 1st party single player games.
If all this means gaas model games or battle royal or always online or these games are best played with friends and mic etc then sadly gaming will no longer be a hobby for me as I don't like just those games/experiences. (certainly not everyday anyway)
All gaming is now is kids and adults all wetting themselves with excitement waiting to get home to chat on the headset and play fortnite, destiny, division2 etc style games.
If your a hate the mic kinda person then gaming sadly is gonna drift away for me and others as everything game wise requires chatting to fully experience the game? I don't mind the chat but not every day.

[timotim]

How can you say that without even understanding what their business model is? Without any knowledge, all you're doing is speculating.

[ThinkThink]

At the $1 deal, MS is losing, I believe that's why it's only for 2 months. When they introduced Gamepass Phil Spencer mentioned using the funds from gamepass to fund future games. So hypothetically if 5 million people subscribe to game pass for a year at 10 dollars a month, that's 50 million dollars a month that Microsoft can feed into the development of its own games as well as procuring 3rd party games for the service. If the users hit 10 million, that's 1.2 billion dollars a year that MS has to play with. As long as they keep the value up, that's plenty of $$ to go around.

[rainslacker]

If you look at the numbers of what they're making on Game Pass, even if you look at normal priced subs the numbers look good, but put it in perspective.

Lets take Gears 5.

Lets say it sells 5 million at around $60. This means the net revenue for the game coming into MS as the publisher would be right around 200 million. To make that much from the subs, you would need 1.25 million subs for four months. The actual profit though is diluted because the money from Game Pass is used to fund additional content from 3rd party, so, not only is MS funding 50-100 million dollar developments, but paying publishers for additional content, so in effect, that raises the operating costs to the point where they aren't making as much.

Overall, they aren't likely to lose money, but releasing their games day one means losing sales on the game. Obviously it'll still sell, so if a game sells half as much, the numbers change, but I wanted to keep it simple.

The model looks less profitable the more high production games they end up releasing. MS is promising all these games, which some are assuming to eventually make them on par with Sony's outings. If they achieve that, then they will need a huge number of subscribers to really make it work for the long term. High quality content can make this happen, but it seems that the actual model is less profitable overall.

On the other hand, and probably more important to investors, is that it provides a relatively steady revenue stream where individual quarters or years aren't as affected by things like slower software output, or failures of games, because once people are locked in, they're likely to not just drop a service like this due to a drought.

[rainslacker]

Without any objective data on subscribers, revenue, developer/publisher thoughts, etc, how can the impact of Game pass truly be measured. About all I've seen that isn't so generalized to be useless, is that there are a lot of users who are getting to play a lot of games super cheap because they stacked subs for 2-3 years at $1 a year...or some other such promotional buy in.

Doesn't take a genius to figure out that a person with access to a couple hundred games for a few bucks is likely not going to be spending as much time buying games, because history doesn't support that rentals ever increased sales. Hell, the industry spent years saying it was detrimental to sales, taking rental places to court, until they could just charge more for rental copies of the games.

[rainslacker]

The metric for success is, and always was how much money the game made, and how much over the return on investment it made. That hasn't changed. It's just that now, the idea of engagement means that there is a higher possibility of return, and more so, long term engagement, coupled with MT, means more money, with less work.

I agree there are more ways to consume media now, but the traditional selling scenario that you put forth hasn't disappeared, nor has it decreased. All of gaming has increased through all channels, and game streaming, or things like game pass, are just new outlets to consume games. Whether they take hold, or take over remains to be seen. The idea of game pass right now seems great, because MS is doing what it has to to get people interested. But, it's unrealistic to expect them to deliver what they are for the long term, at a low price, with the same kind level of content unless there are much bigger subscriber numbers.

Engagement, or MAU's are an important aspect of those subscriber numbers obviously, but it's a balancing act of price vs users, and finding the point where they can keep the content appealing enough to keep people engaged, while still making a profit.

It's pointless right now to ask how much Sony and Nintendo have grown in comparison to MS. Compare like aspects, because it doesn't matter if MS tying everything together grows MS as a whole, only if Xbox is growing at the same rate as Sony or Nintendo. Plus, these things ebb and flow, and Sony and Nintendo made mistakes along the way. MS has seen downturns as well. But as of now, there is no metric to show that growth of revenue is tied to the Xbox. Actual reports say it's either even, or drops, with the occassional burst in growth. All that can be said is that gaming as a whole has grown significantly in the past 10-15 years, and MS was a part of that, but certainly not because of their current actions. Significant growth doesn't even mean long term success. Look at the Wii, hugely popular, yet saw a sharp drop off as the novelty wore off.

A lot can happen with the streaming market, or with Game Pass type services, and right now, it's too early to form a conclusion on how it'll end up. The same thing happened when people kept saying mobile was the future, and that console gaming days were numbered, yet here we are in the most successful, profitable, and high growth generations to date.

[rainslacker]

Sure they do. My point was that the rise of mobile didn't kill the consoles, and game streaming or things like game pass aren't likely to kill the traditional market. At least not anytime soon.

[Fraggle1987]

Microsoft must be losing money hand over fist with game pass.All the first party games they have given away for basically for free all to get players into the xbox ecosystem. not to mention the semi recent 3rd party games.

Subscription services are very hard to make a profit on, they rely on sheer numbers at small margins to see profitibility. Gamepass certainly doesnt have the numbers to do that yet. Still, its good value for the consumer and may get some people to stay with xbox through next gen.

From a business standpoint PSnow is the way to go. Sell the game as normal make all the money then when is older put it on the service after its made its money. Add to the fact PS now has a good amount more subscribers and you can see that sub model turning a healthy profit.

[SocialDanny123]

Sony's focus on profit first will reduce growth in the service. 700K user base of PS Now is a consequence of that. If you want aggressive growth you need to sacrifice profit to do that, if you want profit you need to sacrifice growth.

Game Pass is likely at around 10 Million Subs, exactly because Microsoft is willing to sacrifice profit for growth in the user base.

[Fraggle1987]

10 million game pass subs. Where did u get that number from?

[AK91]

Impact?

[battlegrog]

It works for movies,It works for music and it will work for gaming. People are coming out with the same bullshit rants that everyone did about movie and music. It will take some time to get to that point. It took netflix years and now other big companies are pushing it hard and investing money first for the long run.

[Vasto]

I have said it many times and I will say it again, Game Pass is the best thing to happen this generation. I would say its the best thing to happen in gaming but I have to wait for launch day of Scarlett before I make that claim but I am 99.9% sure its coming.

And before you say quality over quantity here you go.

https://twitter.com/Open_Cr...

Xbox earning over $10 Billion annual for the first time in history doing better now than its ever done! Only Microsoft could have made a turn around like they have done coming from where Xbox was back in 2013. They said Xbox was dead, it should be sold, they will not make another console but look at us now!

Now back to my game of the year Outer Worlds that I am playing on Xbox One X and PC through Xbox Game Pass!

[SixEye]

I dnt see nothing wrong with a service you pay monthly that also includes online and offers the customer a whole lot of library if games to play and this are most new games or couple months old, best part is that it also includes day one exclusive, I really dnt see how and why this would be a bad thing for the consumer, if xbox keep game pass running till this day then it must be doing good for them and the developers of this games to include them in game pass imo.

[Tres21]

Question so I bought year sub for game pass never used it till a game I wanted came out. I go to redeem says it's been used showed MS transaction info they can see the acct it was redeemed on but can only say go use it on that acct then if you want to use it and continue to hang up on me cause they dont feel the need to repeat themselves. What should my next course of action be?