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.
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.
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.
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.
@DarkBorn; You couldn’t be further from the truth.
Did they not say it's not sustainable? That means it doesn't make profit.
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
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
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)
@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
“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.
@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.
@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.
@Darkborn Lies and deceit.
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.
@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.
@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.
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.
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).
… and yet their Xbox division has earned its biggest profits ever this year already and we’re only 8 months in…. Bleeding money…. 😭
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.
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.
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.
@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.
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.
It's scares me the disagrees you got.
Smh. I had a comment, but....
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.
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.
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.
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).
@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.
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%
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.
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.
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.
Ding, ding, ding. It’s easy to get tunnel vision, but you pretty much got it. Microsoft is competing with other tech giants.
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.
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.
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?
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.
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.
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.
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.
How is it a "great value" when, as is, its little more than a non-sustainable lure?
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.
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.
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.
So GTA5 and RDR2 are not frontline titles? No, they are saying upon first release it doesn't make sense. Once the sales start drying up it makes sense to have people use gamepass so they can make money from Microsoft and Microtransactions. GTA5 was removed from Gamepass so players will pay for GTA5 re-release on Xbox Series.
Take 2 the company who releases yearly shovelware sports titles and 1 main line game every 10 years. Your opinion doesn’t matter
I feel like if gaming consumption habits start to change where more people are utilizing Game Pass, it could be incredibly risky to not put your game on Game Pass. Because if one publisher does, and one publisher doesn't then a lot of gamers will just play the games of the publisher who does and ignore the games of the one who doesn't. Even w/ things like Netflix or HBO Max, a lot of subscribers just opt to watch what's on there, rather than go to the movies or buy physical copies.
It wouldn’t make sense for take2 seeing as it takes them 10 years to release games.
Which is why it doesn't make sense to sign-up for it. If you're doing a subscription, you need to jump in with both feet like MS did, otherwise what are people paying for?
I find it funny how all of a sudden Rockstar and its opinion don't hold weight all because they badmouthed gamepass. They are correct gamepass only makes sense for indies and older aaa games
Does GTA make more money from sales or from in-game purchases and shark cards? Spoiler, it's not the game sales. Subscription services absolutely makes sense for AAA. They make sense for almost any business really, it's why investors love them. They provide predictable and projectable growth and revenue. Companies can build budgets around those, mitigating risk and maximizing profit.
False. You're trying to minimize actual sales of games. It's *because* of game sales that Take Two is able to sell those shark cards. If you don't have enough consumers to sell to, micro transactions mean nothing. Less console sales means less software sales means less micro transactions. How does Sony sell so much software? By having enough consoles out there to sell the games. Same with Microsoft. In order for game pass to be a success, they need enough systems and gamers out there capable of accessing the content. The more subscribers paying, the more profitable it can potentially be. If Take Two only sold 1 million GTA units, they wouldn't be making as much bank compared to potentially, 150 million gamers to sell to. Sure. They can potentially make more money in shark cards. But, you can't get to those profits you're talking about without the sales. So, those game sales mattered. Take Two is correct in that it's not profitable for them to dump their game on a subscription day one. That's a FACT. And, Microsoft isn't going to spend millions to Take Two to have their games on there day one. It would have happened already with Capcom, Ubisoft, Activision, etc. You don't see them jumping to be on there day one. Not without a huge check.
@ApocalypseShadow You made my point for me and still missed it. Yes, more people having the game means more DLC and add-ons sold, which is why sales don't matter, active users do. That's what subscription models do lower the barrier to entry and get the game in more gamers hands
Not to mention the cost savings of physical production and logistics, oh and eliminating Gamestop profiting off of 2nd hand sales or physical game rentals.
Rockstar makes a lot of money from GAT Online & RDR2 Online microtransactions. Don't you guy hate microtransactions from your guts? Since both GTA5 & RDR2 have been published way before the current gen console, who know what will happen with their next new games.
@phoenixwing -Sony Fan*
I own a pc not a ps5.
I'd rather have the physical copy I just like collecting games the moment games stop having physical copies to collect I am done with gaming. I'll just go retro I honestly don't like a streaming service myself I rarely use Gamepass and I rarely use streaming services like Netflix.
I wonder why ppl are so disagreeing with Take-Two statement? It's basic marketing science that if you have a product that tons of ppl are willing to pay 70$ then why would you let it go for 10$ The same apply in the movie industry, Do you see big movies studio release big AAA hype movie day 1 on streaming service at no extra charge when they can have them released in theater or having you pay a premium price to see them? And the opposite is also true that by having games that are more niche or less established (see Yakuza series) you are actually increasing the game awareness of the games and thus increase potential sales for the game. Another example would be Virtua Fighter 5 on PS+
But just like most said, easy for a company to say that which owns the library that they do. Easy for a person with money to tell a homeless person to get a job and their sh*t together. We are talking about every other game out there which is enjoyable but would not get played by millions if the only option was purchasing it. Even a game which sells millions would reach out to tens of millions if that game was available to a service which has tens of millions of subscribers. I would never pay a dollar for games like Outriders and The Ascent, but I have enjoyed them greatly and the companies have benefited from me having Game Pass, since they would have had one less player if I had to buy the games which would have resulted in less money for the companies as not as many players would have played it. I think it becomes a matter of taking a gamble where the companies need to ask themselves, do we have a gem of a game where we can make a lot by selling it, or should we release it on a service to reach out to more players as the sales might be bleak?
Gamepass is just for gamepass filler games that's a fact. The only silver lining is all xbox first party games will come to the service day one I've no idea how long they stay there though. So if you subscribe your basically just playing games curated it's not a list of all the games you want
Gamepass filler games really? Let's not talk about well-received games like Streets of Rage 4, The Medium, The ascend, Cris Tales, MLB the show... that got released day 1 on the service. Or games like the yakuza series, Octopath, Jedi Fallen order No instead let's focus on Xbox primary offering and the list of old 360 games offered to explain that the service aside from Bethesda and probably Forza is full of filler.
Most old games
Like any market power play, Like MS/Sony losing money on hardware on launch, its about tying you in.... The difference here, the hardware is already there, through servers, or hardware you already owned.,... (Like Netflix... who care what TV.. right) .. But this is gaming.... Lets hope there will be competition to keep MS in line when it comes to gaming....... But when the loss is outweighed by the outcome, just like exclusivity, unlike a multiple console generation, it'll be in fact steam that hopefully will save us from a all , MS , price hiked fate.
I’m inclined to say that GamePass should only be a tool used to offset the cost of game price increases. Most analysts have already broken down its limits in sustainability which the model doesn’t currently support AAA title budgets due to the flat out user base limitations. Their model is obviously to break beyond consoles to see if its possible to get to a Netflix user base, but it’s doubtful and an insane hurdle to get over. A hurdle that only a trillion dollar company can easily fund limiting competition. It’s sad to see how people just see the peripheral benefits of GamePass to customers rather the destructive nature it’s going to have on AAA and competition. TD;DR: Microsoft is YET AGAIN basically killing the gaming industry in pursuit of their agendas and customers dont realize it… again
If Game Pass was a standalone, independent company, then, yes, their finances would have run out faster than they could find new investors. But Microsoft owns it all, and Microsoft is doing very well! So if you have deprartments turning a profit, and if you have one deparment losing money, as long as the company is turning a profit you can afford the losses. This is exactly like Sony and Playstation, but people do not like to talk about it as this would give evidence that Microsoft are going in the right direction. When PS4 came out and for years after that, Sony was bleeding money on their TVs, Xperia Phones, and other electronics, but the Playstation departement, SIE, was making money like crazy thanks to the PS4. It was making Sony turn a profit mostly thanks to the PS4, thus, it was feasible for them to keep the TV and Xperia departments, even if they were losing money by keeping them. A big company who have diverse products which turns a profit can do such a gamble. Harder for a small or start-up company.