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Take-Two: Xbox Game Pass Style Services 'Don't Make Sense For Frontline Titles'

During Take-Two's latest earnings call yesterday, chairman and chief executive officer Strauss Zelnick was asked about how the company feels about subscription models from a business perspective.

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Jin_Sakai54d ago

Of course you’d say that considering GTA5 sold 150 million copies and RDR2 sold 38 million copies. Not every game has that luxury though.

Luckily Microsoft have 23 studios that can put their games on Game Pass and make deals on top of that for some big 3rd party games such as Back 4 Blood day one.

Darkborn54d ago

And they can lose money on every one of those 23 studios. They already said currently, and before this crazy few months of outriders and back 4 blood and before the Bethesda acquisition was finalized, that gamepass already bled money. Now their swimming in deficit spending. They get to fund games for millions of dollars, and spend millions of dollars on gamepass deals and then barely make anything for it.

Darkborn54d ago

I'll add this, they said they had 25 million subscribers, how many of them do you think are on pc? So they lose out almost certainly on that avenue of profit from their 30% storefront cut that epic says is outrageous. Even if 5 million of those gamepass subs are on pc, look how much they are ponying up for free. They might as well go the epic games store route and just let people login for free games.

TheHan54d ago

@DarkBorn; You couldn’t be further from the truth.

Darkborn54d ago

Did they not say it's not sustainable? That means it doesn't make profit.

gamer780454d ago

Most subscription models lose money for the first 2 years. It’s how the model works. The goal is to get enough consistent subscribers that you have a predictable revenue stream which cfo’s love. It’s not that complicated

brewin54d ago

When youre a 3 trick Pony like they are, yeah it doesnt make sense. They have GTA, NBA and Red Dead. Nobody cares about anything else from them, so it wouldnt make sense for THEM to do that with their limited catalog! He cannot speak about other companies, only that HE thinks it doesnt make sense for HIS company. And the fact that he allowed all of his companies big titles to be on GP says alot. Clearly they made some money there or they wouldnt continue to put them there. Also of note is he said its a great way to menetize catalog titles, so it clearly works in some capacity in his eyes.

MS has millions and millions of GP subs and their profit is higher than its ever been in Xbox history! How does that happen if its not working? Microsoft is not losing money, their profits were outstanding last quarter and the future only looks brighter.

Youre just a dirty troll anyway, you were just in another thread shitting on me for commenting on PS articles, and yet here you are sticking your dirty nose in MS articles. You dont even play Xbox so STFU and get off the Xbox articles trollololololo

neutralgamer199254d ago

gamer7804

Netflix made it's first profit in 2021 so it was way more than 2 years

Jin

Most big AAA games sell 5-10 million+ so GP isn't a good option for vast majority of big budget games. Even 5 million equals to $350 million. Right now Ms maybe willing to write some checks to get 3rd party games but once their studios start producing GP will become Ms 1st party service(and nothing is wrong with that since there are a lot of studios)

TheHan

Xbox game pass will not make a profit at $10 $15 $20 or $25. It will only make profit if Ms charges $29.99 with 6 months commitment. But I don't think Ms are trying to make profit with GP they just want to grow and establish Xbox brand

brewin

Calm down man it's just a opinion from another person enjoy what you like. And take two have a lot more IP's than just the 3 you mention. Mafia, max Payne, bully, bioshock to name a few

Your comment sounds like a kids comment about millions of subscribers. Those millions don't equal to profit that's a fact whether you like it or not. Xbox as a brand maybe making money but GP is bleeding money and that's what Ms themselves said(new services take a lot of early investment to establish)

Lore54d ago

@The Han

LOL. Where is your argument to counter what he is saying? The financial evidence are a clear indicator that this is 100% not sustainable and it is only a matter of when Xbox’s parent company Microsoft will stop funding the endeavor

Jin_Sakai53d ago

“And they can lose money on every one of those 23 studios.“

You don’t know that. Regardless, I’m not complaining when I’m saving $70 on those games.

Krog01153d ago

@neutral "Most big AAA games sell 5-10 million+ so GP isn't a good option for vast majority of big budget games. Even 5 million equals to $350 million."

So what you are saying is, you aren't able to comprehend that those games can still be purchased on PC, Ps and Xbox, so the VAST majority of games AAA or otherwise are not losing 5 million sales due to being on gamepass. Not to mention more people playing their games and putting money into DLC or microtransactions, plus free publicity. You guys are pretty extraordinarily blind. Just listen to what every dev says about it. Obviously Rockstar is the exception, so would be COD or other massive franchises, but that is a whole other topic, GTA has sold 150 million copies, I mean it isn't rocket science.

Lightning7753d ago

@Dark they made 2.3 billion from software and memberships. Xbox in total has made 15.7 billion in revenue. Xbox gamepass played a large part in increasing sales and revenue.

You gotta do research man.

Automatic7953d ago (Edited 53d ago )

@Darkborn

Lies and deceit.

agnosticgamer53d ago

Please disclose all the financial records that you have. You are making strong allegations for a program where virtually no financial records have been disclosed not to mention Xbox games and services have generally been an increase in revenue during their quarterly financial releases.

Sure it is probably bleeding some money I would imagine. I have no factual records saying it is bleeding money right now but the service is growing and probably has around 25+ million subscribers by now. A service like this obviously has high risk and high reward. Microsoft knows the details. You do not.

agnosticgamer53d ago (Edited 53d ago )

@Darkborn
"Did they not say it's not sustainable? That means it doesn't make profit."

Phil Spencer actually said the opposite.

“There’s no plan for us to do anything like that; we like the value that Game Pass is today, and from a business model it’s completely sustainable the way it is,” Spencer added."

https://www.kotaku.com.au/2...

I would like to note that doesn't confirm if they are making or losing money. It could mean the small amount they are making is good. Or the marginal amount of money they are losing to grow a brand is completely justified for a brighter future outlook for a Trillion dollar company.

Darkborn53d ago (Edited 53d ago )

@agnostic I can't find the article but I saw it on n4g a couple months ago where he literally said word for word "its not sustainable" but in context, he meant at this time.

https://www.google.com/amp/...

https://www.google.com/amp/...

Also it's good to know that your 2020 article was before they tried and failed to double the price of Xbox live and that I'm sure was a way to make profit.

Atom66653d ago

Agnostic just showed you what you misquoted. Just admit you were mistaken and move on..

The lack of profitability is more about the opportunity losses elsewhere. That's what they're sacrificing to build the subscription base.

But despite this, revenue numbers for their gaming division have continued to grow; Microsoft as a whole has continued to post stupidly high profits; and we've seen them willing to pay $7.5b cash and not hesitate to make those games exclusive.

They're OK if Gamepass isn't profitable for a long, long time. As a consumer, I'm not too worried about 2-trillion dollar Microsoft's financials regardless. I'm sure they appreciate your concerns, though.

glennhkboy53d ago

Sustainability & profitability are 2 different things. Sustainability means you don't get bankrupted & can stay in business. GamePass, like Netflix, Disney+ , HBO, Apple TV, are all still in business, right? So that is sustainability. From MS official earning report, gaming is making a profit as a whole. So GamePass is generate a profit (or not losing that much of money).

1nsomniac53d ago (Edited 53d ago )

… and yet their Xbox division has earned its biggest profits ever this year already and we’re only 8 months in…. Bleeding money…. 😭

DOMination-53d ago

You say that 5 million sales is $350m of revenue.. but that's completely simplistic and inaccurate. When you release a physical game, you have to pay for the production and then pay distributors and then the retailer also gets a cut.

In comparison, Game Pass is may seem like less revenue but provides more opportunity for profit. They are only paying for servers. Which are usually expensive but fortunately, Azure is a very profitable venture for Microsoft. Even Sony is a customer.

5 million sales for one game versus 25 million subscribers paying $10 or $15 per month. They may be losing money right now as the service is still growing the delusion that it is or will continue to be "bleeding money" is absurd. Because if it was.. they wouldn't do it. It doesn't matter if the company makes $15B profit every quarter, no corporation is a charity, they would never allow a service to bleed money just for the fun of it.

S2Killinit53d ago

To top it off, It will not be sustainable from consumers side either when they end up paying more if they want to play everything that they would normally want to play and some of the games aren't on Gamepass.

gravedigger53d ago (Edited 53d ago )

Quote :

'll add this, they said they had 25 million subscribers,...

They didn't. Not officially. MS didn't report GPU sub numbers for a 7 months now ( 18 mil. back in January 2021 ) They've only mentioned growth.

thesoftware73053d ago (Edited 53d ago )

@Darkborn

Yeah how long ago was that? really I don't recall. I think your use of words are hyperbole for sure "Bled money". That type of wording is most commonly used for a failed attempt and GP is definitely not a failed attempt.

MS actually posted A profitable year and in the console space had the best quarter in a long time, spin that as you may but they are definitely not "Bleeding Money". Companies do projected loss VS profit and have projected numbers, Everything they have done has been 'Projected' and they have been successful thus far.

Besides, why do you care so much about a billion dollar companies bottom line? you are on the consumer front, be happy with a spectacular service at a spectacular price as the consumer that is most important let MS run their business they have people smarter than you and I crunching billions of dollars, they are ok lol.

brewin53d ago

Do some math and it's not hard to see how much money they actually making on this. Last I read they had 30 million subscribers now 30 million * $10 a month = 300 mil x 12 mos is 3.6 billion.

PlayStation profits fiscal year 2020 we're only 3.23 billion. Here we have Microsoft making more off just Game Pass subscriptions than Sony's ps division is making across everything subscriptions, game and console sales, etc. You still think theyre not making money off this? That's completely asinine they're definitely not losing money. Not 3.6 bill doesn't even factor the money they're making off the game sales they do make console sales peripherals etc. That's strictly just Game Pass income. And it's probably even more than that because a lot of people have Game Pass ultimate which is $15 a month not 10.

Your Fanboy argument loses to the numbers every time. Game Pass is a great service Microsoft is running at the right way and giving gamers the most bang for their Buck no matter how you slice it.

EvertonFC53d ago

It's scares me the disagrees you got.

+ Show (20) more repliesLast reply 53d ago
Sayai jin54d ago

Smh. I had a comment, but....

S2Killinit53d ago

From your comment above
You maybe paying more than 70 per game if you end up buying games not on gamepass. Its not like with gameplass you would be playing more games. Unless you are someone that normally plays an enormous amount of games, you may end up paying more for your games than you normally would.

CYALTR54d ago

That all makes sense to me. I think getting AAA games for day 1 release from 3rd party publishers will continue to be a tough sell unless MS ponies up a lot of cash up front, which they are certainly able to do if they choose to. 1st party titles make much more sense, thus MS buying up a bunch of developers to increase their 1st party selection. I think MS already understands this, as it seems to reflect their model, which seems to be successful, at least to this point. Most of the 3rd party titles that are available are from indies, AA titles, or older "catalogue" titles from AAA pubs, trying to squeeze the last bit of revenue out of a game.

As far as I can see, that model is working for MS at this point, time will tell if it is successful in the long run. I think it is totally possible, and maybe even beneficial to all if their are a variety of gaming models available, rather than 3 companies trying to beat each other up seeing who can do the same thing the best.

Sciurus_vulgaris54d ago

People shouldn’t expect Gamepass to include big budget AAA 3rd party games at launch. Studios and publishers would ask MS to pay a high premium for new, big budget, day one Gamepass AAA.

glennhkboy53d ago

Why shouldn't? MLB the Show 21 is the perfect example. Does GamePass hurting the sales of MLB the show 21? No. According to Sony themselves, it double their own estimate. We will never know how much MS has paid MLB to get the GamePass Day one right. But the end result work for all 4 parties (Sony the developer get paid & double the sales, MLB the publisher got a big cheque, MS on GP subscription got boost in PR & keep the subscription number, me the subscriber got to play the game at no extra cost).

Sciurus_vulgaris53d ago (Edited 53d ago )

@glennhkboy

MLB the Show 21 on Gamepass day one was probably a promotional deal. The franchise had never been on Xbox before. Having the title featured on Gamepass probably allowed MLB 21 to reach a wider audience. I

I don’t think Microsoft paid a large sum for MLB on Gamepass. Nor, do I think MLB 21 would drive up Gamepass subscriptions. To me it seems Microsoft is aiming to make Gamepass more-and-more first-party-focused overtime.

neutralgamer199254d ago

Yes people don't realize how much it costs to get those 3rd party AAA games on GP. Games make their biggest profits within first 4-6 weeks(selling at full price) so if a publisher thinks their game will move 3 million copies on Xbox series x, and once they put it on GP it sells only 1 million than Ms will have to cover the other 2 million in sales( 2 million at $70 a copy is $140 million and by having the game on GP Ms may not be able to take their full 30%

Rude-ro54d ago

Businesses do not work like that per the subscription aspect though.
It is typically based on eyes on the product.
Will Microsoft front a bill to get a third party game on the pass? Yes… but they would not just cover what it would lose in sales.
No business goes off of hypothetical sales.
It would be fee to agree to it and then the data collected per play time.

rakentaja54d ago (Edited 54d ago )

Take Two doesn't have to worry about the console business, Sony also. That's why they're so negative about the Game Pass (less profit). Microsoft is trying to save the Xbox as a brand and they have to make such decisions, mainly because the last generation was so bad.

ReadyPlayer2254d ago

ORRRR, Microsoft sees their hated rivals at Amazon, Apple, and Google making subscription style services to mass spread gaming to small devices and they think "hmmm, we have a massive gaming brand already, let's crush them before they even begin."

You fanboys think Microsoft as company cares about Sony as a company, they don't. Xbox and Playstation are competitors. Microsoft and Sony are not.

franwex54d ago

Ding, ding, ding.

It’s easy to get tunnel vision, but you pretty much got it. Microsoft is competing with other tech giants.

Lightning7753d ago

If I remember there was heavy speculation that the main reason why MS bought out Bethesda, was To keep Amazon and Google from potentially snatching them up. Amazon is said to be struggling hard to get teams together to make a proper exclusive game. The next best thing would be to buy a highly rated studio to make games for them like a Bethesda or WB Games. Instead of building a long and expensive venture such as a studio.

glennhkboy53d ago

Actually, MS is in the gaming business even longer than Sony. MS was one of the biggest PC game publisher in the early 90's before they create the OG Xbox. MS pc games, like Flight Sim, pre-dated the PS1.

+ Show (1) more replyLast reply 53d ago
Petebloodyonion53d ago

And every time I see someone post Xbox lost the generation or suck so bad well I have to ask
How come 3rd party publishers are still releasing titles on the system?
Do you still see big games coming out on Stadia or Luna?

Deathdeliverer54d ago

I think this makes perfect sense and aligns with how I see it. Indies that think they might get overshadowed by other titles might make more and do better on gamepass. It’s a gamble for them or anyone to get on gamepass, but Dave’s garage band 2 might place its bets on gamepass instead of count on individual sales. If Dave’s garage band turns into a mega hit they’d be kicking themselves in the butt because they could have made a lot more with individual sales. Grand theft auto has no reason to gamble. They will give your subscription a few months after it’s been out years.
Even games not as big as grand theft, like Ori would be better off sold individually, but I’m sure Microsoft made it lucrative.
To court these big companies with AAA titles Microsoft has to lay down some big cash and who knows how many guarantees. Yes Microsoft as a whole has money, but in business everything is divisions. They all are responsible for the contribution ($) to the whole. You guys that seem to think “aww Microsoft has money, it’s fine” are sorely mistaken. Even your grocery store has a Produce department for example. It’s sales go to the whole, but if it’s struggling with profitability it lowers total store profitability. That extra $1,000 the Deli made from its sale doesn’t go to the bottom line, it makes up produces deficit. If produce was profitable then delis money would have been money in the bank.
Microsoft as a company, sure it’s fine. All this money spending by Microsoft game division with elusive returns all seems like one hell of a gamble to me.
It’s either going to pay off somehow down the road, or some cuts and positions will be posted.

ECHOINFINITY54d ago

As a PS5 owner I have to say gamepass makes Xbox appealing now that Microsoft actually has console exclusives coming. But other than Halo this year and Starfield next year, I won't be tempted to pick one up before holiday 2022 at the earliest.

Godmars29053d ago

Thing is, GP isn't a sustainable model for AAA budget games. For 3rd parties let alone MS.

Its either going to collapse at some point or the price will increase.

ECHOINFINITY53d ago (Edited 53d ago )

Yeah I can't imagine it being sustainable if they allow their 1st party studios to have AAA budgets for developing big games. It does bring amazing value, but I personally have limited time to game and have to pick and choose what I play. Very few heavy hitters on game pass for me compared to PS5. And next year PS5 is getting Horizon 2 and GOW Ragnorok. That'll be hard to top imo.

Godmars29052d ago

How is it a "great value" when, as is, its little more than a non-sustainable lure?

ECHOINFINITY52d ago (Edited 52d ago )

It's still great value for consumers when you get all 1st party games day 1. If Sony offered that I'd be stoked. Just because it's not sustainable for the company doesn't mean the consumers don't get a good deal, however long it ends up lasting.

Who knows, if streaming really takes off Microsoft might get enough subscriptions through the game pass app to make it more sustainable since they are working on getting it on so many different platforms. Even still, they need more heavy hitting exclusives before I'd consider buying in to that ecosystem.

Godmars29052d ago

Again, things like GP aren't sustainable. They aren't even healthy for the industry, much less a company like MS which has had to buy support which having issues with in house production.

ECHOINFINITY52d ago

Fair enough. Buying zenimax did feel like quite a weak move. After 20 years in the industry it is sad that they hadn't built quality in house studios, but instead had to resort to killing Bethesda for Playstation fans. It'll be interesting to see how gamepass plays out and how long they can take a loss for.