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Microsoft explored reducing its Xbox store cut to shake up console gaming

Microsoft had been planning to cut its Xbox store cut to just 12 percent, according to confidential documents filed in the Epic Games vs. Apple case. The software maker details its store fees and changes in a document from January, where it also lists the 12 percent cut to PC games it announced this week. While most of the important parts of the document are redacted, one page reveals Microsoft also wanted to reduce its 30 percent store cut on the Xbox console side.

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theverge.com
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XiNatsuDragnel47d ago

They should do the 12% so it light fire in everyone.

Godmars29045d ago

But you as a customer wont see any benefit. Just developers and publishers.

Double_O_Revan45d ago

I won't see an immediate benefit. But more money to my favorite developers potentially means bigger budgets for future projects. So I can still get behind this. Although, this probably wouldn't happen for the greedy publishers like EA and Activision.

Godmars29045d ago

@Double_O_Revan:
That's trickle down theory. That's trickle down theory as applied to a company that's required a paid subscription to access f2p games on their console. Done other things on par with EA and Activision.

Make no mistake: this is MS attempting to make the Xbox brand more appealing to publishers to translate that into more games and more gamers vs the reality of them being behind Playstation.

_SilverHawk_45d ago (Edited 45d ago )

After the massive success and a lot of money made on Xbox 360 Microsoft made the amazing Xbox one with a lot of critically acclaimed exclusive games./s

Sunny_D45d ago

Extra money to the publishers and devs isn’t guaranteed it will go towards the development of more games lol. For all we know, it could go towards a bigger bonus for the higher ups.

Concertoine45d ago (Edited 45d ago )

@Godmars

But they won't sit on that money forever, it will go towards more development, more studios, pay raises and bonuses. Besides, that's just for big studios, it is evident that indie studios in particular will benefit from this more than anyone.

In the 360 days, it flopped in Japan, but the console has a large amount of Japanese exclusives from small studios. Mostly shmups and visual novels. The reason business was sustainable and even attractive on a small platform was that Microsoft charged a rate substantially lower than the competition in that region.

Mr Logic45d ago

No, but theoretically we could. For this example I'm going to assume games cost $60, but the principle still applies at $70.

When a game is $60 at 70/30, then the publisher is getting $42. At 88/12, they could reduce the price to $50 and still make $44 per copy. But we all know any publisher would instead just keep it at $60 and pocket the extra dough.

+ Show (4) more repliesLast reply 45d ago
TheRealTedCruz45d ago

Get ready to pay more for the hardware/subscriptions/online if so. That cut is factored into bringing the console to market.

You're either spending more on hardware, or seeing weaker consoles to mitigate costs and make it viable.

1Victor45d ago

I read article headline and though
Wow the end of the world is near repent.

All jokes aside it goes to show you how badly Microsoft was hurt last gen to consider 🤯 loosing 60% of the developers feed money 😱🤯.

kneon45d ago

It's not so simple. If they cut too much such that they are operating at or near a loss then they could be in trouble with the anti-trust people again. It could be seen as them using their other businesses as supporting this division while it deliberately runs unprofitably in order to force competitors to do the same.

45d ago
Teflon0244d ago

MS would be dumb to do it. That would work against the Gamepass strategy.
If they take a 18% smaller cut. They lose about 66% of game sales rev. That's $180 000 loss per million. Also a company otherwise is making an extra million per 6 million made. The prices MS would have to pay to get games on gamepass would be about 15%ish to 20% higher despite them losing 66% of profits making external companies make approx an extra 30%+ profit in game sales and Gamepass situations vs MS who loses 66% of game sales revenue.

The more games will be on xbox thing is a nahh generally. Exclusives will always be required a payout in 90% of cases just because Nintendo and Sony have most of the industry wrapped around their fingers. It would backfire hard

+ Show (3) more repliesLast reply 44d ago
Atom66647d ago

This is probably one of my favorite clickbait headlines of all time. Well done!

Aquafiniac46d ago

Idk it seems straight forward but also click bait at the same time.
A lot of journalists been doing this more recently. First with Sony now MS. It’s really annoying.

Like really, of course MS wants to make more money. They are a company. More money for them, better games and service for me.

Atom66646d ago

Yep, factually accurate but spins the facts in just the right way. Masterful.

BlackIceJoe46d ago

I hope Microsoft will reconsider and change the percentage from 30% to 12%.

If Microsoft is to do this you'd see many companies that decide against bringing their games to the Xbox brand and many independent developers flock to bringing their games to Xbox too.

Plus it would allow developers to experiment more with what games they bring out, because with a bigger percentage they don't have to worry as much about if this will be successful for the general public or just with a few.

One last thing if Microsoft would bring the percentage down that they take, it makes it easier for game developers to survive and grow, because unfortunately with how the industry is, with one bad selling game, the game studio's doors can close.

So this would be a great benefit to game studios and gamers alike.

Destiny108046d ago (Edited 46d ago )

i think there's a middle ground, no money taken until full production costs are recovered

the console business is different in many ways, sony are essentially selling the PS5 at a loss, there's advertising costs, research and development, ongoing updates / features for the PS5 and for the development Tools

there a long way from a trillion dollar monopoly

BlackIceJoe46d ago

That would be a great compromise, because for many of these indie developers they'd like to bring their games to consoles, but unfortunately with such a high cost console makers get, it isn't worth it for them, to port their games to consoles.

jznrpg45d ago

Xbox isn’t a trillion dollar division either

kneon45d ago

That is how the movie theatre business used to work. Initially most of the ticket revenue went to the distributor, but the longer the movie stayed in theatres the more of the revenue shifted towards the theatre. But that was back when movies stayed in theatres longer so it may not work that way anymore.

And this is also the reason why 25 cents worth of popcorn costs you $5.

TheRealTedCruz45d ago (Edited 45d ago )

I don't know. There's not much incentive there. There's very few companies that don't aim for their game on Xbox, outside of more niche titles; and they're even doing better with Eastern devs. Partly due to Gamepass.

Console makers nowadays take that cut of games sales in mind when it comes to the cost of putting the console on the market.
They're not the sales leader in terms of console sales, so there's just very little incentive there, as a business.

45d ago
Christopher45d ago (Edited 45d ago )

This is nonsensical for the level of support that MS and Sony provide. We're talking about cutting their software revenues by 60%. Not profits, revenues. But, the labor, production, and overhead costs would remain the same. So you would have to expand game sales by almost 200% just to get to the same revenue levels, which would require more costs to achieve, which means at that level your profits aren't the same. And you have to achieve this while the game prices are the same as they are now. Just because Microsoft is taking less doesn't mean games or the MTX get cheaper as those prices are dictated by how much the companies find people are willing to pay for those games/services.

Epic does this solely off the back of Fortnite to drive more people to use Epic so they don't lose that 30% to PSN or XBL. That is the *only* reason they do it. Not to build their own storefront that's better for Steam, but to not have to lose that 30% to someone else. And it's why they are battling Apple right now because they don't want to pay them that amount either.

+ Show (1) more replyLast reply 45d ago
ApocalypseShadow46d ago

I would make it tier based. Lower the barrier possibly. But, if your game becomes a hit on said platform, the royalty percentage goes up based on sales threshold goals.

If your game doesn't sell, the platform doesn't take much from you. You hit the first goal, royalty goes up a few points. Hit another milestone and another, goes up just a bit more. Developer makes their money, platform makes money as well as it was their platform the game became a hit on.

No matter what, a platform deserves compensation for hosting. If a developer wants 100%, there's always the open platform of PC excluding Epic, Steam, GOG, etc. But then, the developer may not reach the community they strive to make profits on.

When you make money off of someone else, don't expect the deal to be in your favor unless that platform is looking to gain something in return. In this instance, Microsoft would have been looking for more games and good PR on their platform over other platforms on console. Not because they're being "nice." Instead, they decided to continue profiting at current levels on console unless swayed by market changes. But on PC, it's to grow their platform over other PC offerings like Epic and Steam.

Orchard45d ago (Edited 45d ago )

How does going from 30% to 30% equate to 'making more money'? Interesting clickbait title.

It should be 12% though, 30% is huge.

TheRealTedCruz45d ago

You're buying visibility, and paying for hosting. You can make the best game ever made, but if you host it purely on your own website, far fewer people will know it exists, outside of amazing marketing, and luck.
That percentage taken also has a lot to do with the fact you get consoles for as cheap as you do.
If they took their cut to less than half of what it is, expect paying a few hundred more every gen, or weaker hardware.

CYALTR45d ago

That is all true, but MS is looking at market and subscriber growth. There is a cost for both of those. That is built into this play as well. It will be interesting to watch though.

I'm an Xbox guy, but anyone who thinks that MS is doing this out of the kindness of their hearts is just being a delusional fanboy. It's all about the money all the time with these corporations. That is literally their job, to make money. There are lots of different ways to achieve that, and this is just part of the MS strategy. Or at least it was considered, and apparently rejected.

Christopher45d ago

The platforms would shutter and close down if that were the case. Everything would just move to PC. Not enough profit to hold up the hardware and platform if that was the case. Lowering these percentages wouldn't bring in more high-quality games nor would it lower the price of games for consumers or reduce the cost of MTX. It would just drive more profit to developers who utilize the same platform to make their money. But, once you reduce the profits of the platform to that level, it's no longer a good investment for the business and they'll prioritize elsewhere, similar to how Sony got rid of divisions years ago to focus on their more profitable ones, like PlayStation.

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