Analyst: It's Not Financially Sound for Microsoft to Make Activision Blizzard Games Exclusives

According to MIDiA Research senior analyst Karol Severin, it wouldn't be financially sound for Microsoft to make Activision Blizzard games true exclusives, and they might opt for a softer approach instead.

Severin also believes Sony would do well to respond with a big acquisition, even though that will be tough to accomplish.

[Magog]

Game Pass isn't financially sound except as a method to gain market share. Doesn't keep them from offering every lapsed sub $1/month deals. They have money to spend and they are spending it to create a loyal fan base.

[darthv72]

gotta spend $$ to make $$$$

[Elda]

Most of the time that's true. Words to live by.

[RedDevils]

no you don't.

[Name Last Name]

People really trying to tell MS how to make money 🤣

[TallDarknWavy]

At least 2 Call of Duty games are in development for PS5 and will continue development but after that, how much innovation can you really say is left in this already stagnant franchise?
CoD is stale and woke, Fallout 76 is only an indicator that Bethesdas engine is aging very poorly and will never see an overhaul, it's been the same engine for decades because the devs are autistic dorks who can't handle any change.

The only thing I'm sad about is Doom, although less sad only because their star composer is gone.

[TallDarknWavy]

How on earth does Bobby Kotick think he can make the same money for Activision on one console? This makes no financial sense whatsoever.

[UltimateRacer]

Shhhhh 🤫🤫 your not allowed to talk sense around these parts.

[-Hermit-]

Magog talk sense?........🤣

[babadivad]

You're*

[jlove4life]

^@talk he already getting his with 68 billion question you mean is how Microsoft gonna make the money not Bobby

[TheGreatGazoo30]

People never seem to understand SaaS and subscription models. GamePass is financially sound model. At $10/month and 25 million GamePass accounts currently, that's $250 million per month ($4 billion per year). That doesn't count revenue from those GamePass subscribers purchases of expansions or in-game purchases, which we know are significant.

Regarding it not making sense to sell game on Sony, that's completely wrong. MS would rather have a $10-$15 monthly subscription than a 1-time $70 purchase from a gamer. Their goal is to build a big enough library that people don't cancel. It's already easily there for many and acquisitions like this will continue to build the subscriber base.

[camel_toad]

Yeh I agree. I originally signed up for gamepass on PC because of the $1 rate at the time and a single game I would have rather paid $1 to play than to own for 60 bucks. Since then I've stayed with it because they steadily have multiple games Im interested in to play for 15 bucks. I definitely get my money's worth.

I'm certain A LOT of people have done the exact same thing. It's a good deal. Plain and simple.

I totally understand that it's not appealing to people that want physical copies of the games they play but for me it's about the experience as opposed to being able to hold something in my hand.

I used to marvel at my own collection of games and consoles so I know that feeling of prude. The desire for that just passed with time.

[MrBeatdown]

"People never seem to understand SaaS and subscription models."

And yet there is so much wrong here.

First, those 25 million didn't all pay $10 a month. I upgraded three years of Gold for $1. So put me down for about two or three cents a month.

Second, you ignore that Microsoft has to pay for the games on the service. If you're replying to someone about the financial aspect of Game Pass, you might want to acknowledge profitabilty. Kinda important.

Third, you say a game purchase is a one time payment versus $10 - $15 a month. Not in any way an accurate comparison considering a customer can buy multiple $70 games at any frequency, while Game Pass is capped at $15 a month.

Fourth, you talk up DLC for Game Pass games, but don't acknowledge that those making the "one time purchase" are also buying DLC.

[MrNinosan]

Since when did 250 times 12 become 4000?
You obviously meant 3 billion per year, which is great.
With that playerbase, it would take 23 years to reach the 69 billion dollar spent on Zenimax and ActiBlizz. But that doesn't coud the number of people who need salary, the development costs of games etc.

GamePass must reach way higher number to be beneficial, even in the long run.

[343_Guilty_Spark]

@camel_toad

You act like MSFT isn't aware of the loopholes to get stupidly cheap GP. I'm sure in time those will be closed.

[Exvalos]

I'm sorry man but you have litteraly no idea what you are talking about. In example for a service subscription 10 subs paying 10 a month does not equal you making 100 a month. I wont go over all the math as you are very capable of figuring it out for yourself if you remove the fanboy glasses and add some common sense.

[andy85]

Sorry this is nowhere near right. Many got 3 years for $1. Here in the UK even a couple of months ago you could buy 12 months gold for £25 then turn it into a gamepass sub. Then there's game development (some which they actually pay for). Paying companies to actually have their game on Gamepass. Other outgoings. I'd be surprised I'd it's even a tenth of that 4 billion a year. Didn't Phil say Gamepass is sustainable recently? That's not a word you use for highly profitable.

[OptimusDK]

The main point is here that you sell a game on SONY platform you have to give SONY 30 pct. not so on your own platform and PC. So you are getting rid of the middleman and keeping it all. Also marketing is a totally different thing with people on GamePass. You save a lot here - how may Netflix comercials are you seeing.

[moparful99]

Except most of those 25 million subs signed up using $1 upgrade which is stackable up to 3 years or the $3 new user deal. I've also seen a lot of people using Microsoft rewards and discount sites to get Gamepass. Aka MS isn't making $250 million a month from Gamepass. Lastly you're not factoring how much MS has to pay 3rd party developers to host their games or how much it cost to develop first party titles. You and I both know that Gamepass has probably gutted their already low game sales.

[Joe913]

This is all true but keeps in mind it can also backfire. As a Sony fan, this is interesting and smart all MS has to do is get the subs up. I feel at some point MS will stop making consoles then they aren't directly competing with Sony and we may at one point see GP on a Sony platform.

[TheTony316]

How many of those 25 million are actually paying $10 a month tho? There are tons of people who got it for $1

[DigitallyAfflicted]

Yes. They are going for Netflix like gaming services and with enough good titles they will be successful, and it makes perfect sense to make those games exclusive, but it's even more sense to make them available for free on a monthly subscription and at this same time to sell it at $70 to everyone else... Lots of money.....

[Golfcoachh]

I love how absolutely everyone who bashes Gamepass bought a 30 year subscription for a penny, blah blah, almost everyone I know did the 1 dollar and then just kept it paying the either monthly or yearly subscription. Of course most of my friends are gamers from back in the day.

[MrBaskerville]

You can't just convert the subscription fee to profit, there's probably a lot of extra costs maintaining the service and obviously you need to cover the cost of decelopment and publishing.

[TheGreatGazoo30]

Ok @MrNinosan, yes, typo. Good catch!

Yes, people can get it cheap for bit, not forever. The $3 billion per year was meant as a projection and viability of a subscription model, jot what they made last month.

@Exvalos "10 subs paying 10 a month does not equal you making 100 a month".... It does. That's how math works. I didn't say their net revenue or profit was $250 million per month.

There is a reason almost everything has been going or tries to switch to a subscription model and yet people here act like it's insanity and not viable. They're highly profitable and deliver consistent porjectable MOM Revenue.

[TheGreatGazoo30]

@MrBeatdown

Profiability isn't important when building a subscription service. MAU and Revenue are the driving factors.

Yes, people that pay $70 for a game can also buy add-ons and DLC. We know GamePass users play more games, more types of games, and spend more on DLC than non-gamepass users from MS own data reports. DLC and add-ons are lower risk with higher profit margins than the main game.

[shaenoide]

All Activision game will not be on gamepass as Microsoft said.

[glennhkboy]

By questioning whether Game Pass is financially sound, the next question will be: is subscription-based business financially sound for Microsoft Inc. as a whole? Afterall, MS now provide ALL of their software thru subscription, Office, Team, Outlook, SQL database, etc. The answer is vey clear. MS becomes the 2nd (or the 1st depend on the share price on that day) richest economic entity of the world BECAUSE of subscription-based business model.

[Godmars290]

How are you creating a "loyal" fan by undercutting potential profits. At some point they've got to raise prices, maybe make tiers of access, and all that loyalty built through cheap access is going to go out the window.

[porkChop]

They already have a higher tier with Game Pass Ultimate.

[MrBeatdown]

People seem to forget, Microsoft tried to DOUBLE the price of Xbox Live Gold just one year ago.

[darthv72]

@beatdown... its easy to forget seeing as it didnt happen. It almost did but then it didnt. So no need to keep bringing it up.

[MrBeatdown]

Microsoft doesn't get a pass just because gamers pushed back.

Microsoft wanted it to happen. It's because of gamers that it didn't.

And it illustrates perfectly the degree to which Microsoft will hike the price of a service. Sweeping that under the rug doesn't do anyone any favors.

[darthv72]

^^sounds like you are holding a grudge over potentiality and not actuality. Which means you will continue to hold that grudge until something happens which then you will use as some sort of "told you so" moment.

There are lots who hold that same petty way of thinking. And it is petty, but hey... you do you.

[343_Guilty_Spark]

If it's a compelling product people will stay. I don't see NFLX suffering from rising prices.

[MrBeatdown]

@darth

If you gotta call it a grudge to justify being an apologist, go right ahead.

[darthv72]

@beat, Id call myself a realist. Because that's how it is. That's the reality. You can argue intent all you want but its real actions that should be argued, not the [what-could-have-been]. If you don't want to discuss the here & now, there's way more "what if" stories we could argue if that's your thing.

[RauLeCreuset]

@darthv72

"You can argue intent all you want but its real actions that should be argued, not the [what-could-have-been]. If you don't want to discuss the here & now, there's way more "what if" stories we could argue if that's your thing."

Real actions: Xbox removed the option to purchase 12-month Gold subscriptions and publicly announced price hikes that, dependent on the option, cost double or more what the 12-month sub did for the same amount of months. Reversing course does not relegate those actions, which include the statement of their intentions, to The Land of Make Believe.

Also, you're singing a different tune than when you thought you could use a rumor to get a rise out of me 29 days ago, but I suppose you'll pivot to crying "grudge" to avoid addressing the hypocrisy.

You 29 days ago:

"@Raul... im not bashing ps, im just telling it like it is. Sorry if it hurts your feelings. PS Now (as brought up by lex) is predominantly older games and GP is predominantly newer games.

"Dont worry though, PS is rumored to be adopting their own GP so all will be right with the world."

https://n4g.com/comments/re...

[fr0sty]

The fanboys can downvote all they want, even the analysts and Spencer himself agree with me when I say that they will not be making these franchises exclusive. You can pipe dream all you want about them taking on billions upon billions of dollars in losses in order to build an install base of hardware that they have not made a cent off of in 4 generations (only their services and software has been profitable for the xbox brand), but their shareholders, who control their decisions, are only in it for the money, not "we're first place in the console wars" bragging rights. Many of those shareholders aren't even gamers. All they care about is money, and they hold the purse strings at Microsoft. PlayStation platforms account for 6 out of every 10 copies of COD sold. There's no way in hell those shareholders are going to give that up for the POSSIBILITY that it could propel them to being first place in the console race (which it won't)... because even if Xbox Series X went on to sell 120 million units like PS4 has, there's still 120 million PS4s and what will likely be a similar number of PS5's out there they are not making money off of by the time this generation is over, which will be billions upon billions of dollars lost for nothing more than bragging rights. They're not stupid, they're not fanboys endlessly after a worthless "victory". They want that money and nothing else. This is also why it is more likely than not that GamePass will end up on other consoles as well... and eventually MS will exit the hardware race entirely and focus on what they are good at, Software. It's in their name, after all.

It makes far more sense to focus on making games than dumping billions into research and development of new hardware every few years. If they let other companies take on that expense, they can come in and make billions off of those systems without having to spend a single R&D and hardware marketing dollar.

[fr0sty]

This is especially true with hardware getting more expensive to develop and ship due to the pandemic and the Trump tariffs against Chinese manufacturers. There's simply more money in software, vs. trying to compete in an already crowded console market that has been dominated by the same Japanese companies for generations.

[SonyStyled]

Couldn’t have said it better myself. But I can see MS making a Stadia like box next gen for streaming and digital only before leaving the console market entirely.

A lot of conversation too is that it starts Nintendo and Sony with acquiring the big Japanese publishers, and years from now there’s few publishers left and far less creativity and unforseeable consequences of an industry like that

[WelkinCole]

You make some really good points regarding the financial aspect. Consdering that this is not just a 16B purchase but a 60b plus purchase its very hard for MS to justify not being on the current console leader plaform.

It would make sense as well for gamepass to be on as many platforms as possible if the goal is to become the nextflix of games which is what they are going for. However I think a lot will depend on Sony and the finacial deal they can both agree too.

In the end you are right. Its about money and not bragging rights of who sold the most consoles. The only reason why consoles sold is important to them is because of the money they could make off it selling software.

Think everyone can see where the industry is heading which put less emphisis on hardware instead the cloud.

There are no resudiual benefit in other parts of the business as well being the leading console seller.

I mean Sony led so many generations and that distinction has not helped them in their other business ventures like TV etc. Think MS sees this as well. Infact Gamepass would actuall let them sell Azure more which is one of their cash cow right now. Proving that they can run high end games via Azure on andorid or Apple is a big advertisment for Azure

[fr0sty]

And there goes our confirmation, Microsoft's SEC filing states outright that they will not be taking games away from the PlayStation platform, or any other platform. They are officially a third party developer.

[ThatsGaming]

GP is five years old. You don't keep doing something that is not financially sound after five years.

In business, you typically wait up to 2-3 years. If it isn't making money you shut it down.

[Chevalier]

You do realize they have a ton of money to soak up losses to eventually make money right? Seriously Netflix only turned a profit last year! After what 15 years or so?! They have 200 million subscribers and don't discount their services like Gamepass does. $2 billion a MONTH and they just profited last year. Let that sink in for a bit. A bunch of people opted in to those $1 deals and some people I know only used points from work to get gamepass FREE.

The idea is to get as many people subbed and to eventually profit. No way it is profitable right now. Plus spending $70 billion already means 'value' which has to be paid off. They would have to be making a billion a month for 6 years just to break even. $10 sub means they would have to have 100 million paying monthly to pull in $1 billion.

[Seraphim]

It took 14 years for Amazon to become profitable. Food for thought.

[ThatsGaming]

@Chevalier and @Seraphim
Both Amazon and Netflix were very clear to investors that they could turn a profit but chose to take the money and instead invest in their company and services. Profit does not equal a financially sound business. Businesses make capital investments into themselves all the time which eats their profits to stay on top of their market. A viable financial business is much different then a profitable one.

Point I am making is that MS knows GP is a viable financial business. They are making investments into it because they know that. If after a few years they didn't see it as viable they would've dropped it, but because they continually double-down on it, they see that it is completely viable.

[DeusFever]

This is what this all about. Microsoft wants the one the method of delivery.

[anubusgold]

Tell that to netflix you need your own content you cant wait for disney to get a bug up their ass and take all their content off your platform.

[Kran]

I'm genuinely curious what makes you think its not financially sound?

Gamepass has 25 million subscribers last I checked. £11 a month for the average user. Let's say 20 million are regular subscribers paying that £11 a month (and 5 million maybe on free trials or £1 trials).

That's £220,000,000 A MONTH (or $300,000,000 a month). That's £2.6 Billion ($3,6 Billion) a year. That's just from GamesPass. Obviously they'll need to remove how much it costs to function and how much it costs to buy games for the service (which we don't know the ins and outs, we can only assume). But if GamesPass wasn't financially sound, we'd probably wouldn't be seeing these investments being made...

[sparky77]

Are we really doing this again after Bethesda like seriously. MS are a trillion dollar company.

If you want to play COD get an Xbox/PC.

[purple101]

Il get the next cod which is confirmed to come on PS4 & PS5 (unless they renege on that).

Them never again, thanks.

[darthv72]

...and MS thanks you for your support.

[itsmebryan]

@purple
You said if "the next COD doesn't come to PS4/5 you will never buy again"?
Well you won't have that option if not on PS4/5. Because it won't be there for you to buy anyway. So, are you saying you won't buy what you can't buy?
Please explain. I'm confused 🤔.

[DarkZane]

I am almost certain they will keep COD on PS4/PS5. COD makes more money on playstation than all other platforms combined. Stop putting it there, you literally lost more than 50% of your revenue from it. I am pretty sure not many people will buy a Xbox just for COD.

Also, this won't change anything. PS5 is still going to outsell Xbox.

[TheGreatGazoo30]

@Purple101

Micdosoft won't even own them until the middle of 2023. So yes, the 2022 COD and likely the 2023 will still be on PS. After that, highly unlikely. Warzone obviously will be.

[Livingthedream]

Lol you’re the minority

[darthv72]

@zane... the 360 did okay for itself when it had the marketing deal with CoD. XBO lost it and PS4 got it and people switched as a result. Are you saying the same people who left 360 for PS4 wouldnt go back to XB? Even if it was cheaper point of entry with Series S and Gamepass?

[edwardmde]

@itsmebryan

It is clear he means that he will not purchase an Xbox in order to buy COD.

Playing stupid isn’t cool.

[--Onilink--]

Even trillion dollar companies are expected to turn profits, especially a publicly traded one.

Also, I would imagine that one acquisition being 10x as expensive as the other one might merit a different approach when it comes to making sure its a sound businessman decision.

That said, its why MS pays their analysts and management to figure out which option is best. I just dont see how we could judge what they do with this one based on what they do with ZeniMax’s.

I own all 3 consoles and dont care about console war nonsense anyway, so whatever they decide is fine by me

[darthv72]

in most of the pieces i have been reading (outside of N4G) they all say pretty much the same thing. MS will continue to provide CoD titles to other platforms but not at the same exact level of development. Meaning that while PS may continue to get CoD releases, they wont nearly be on par with XB versions. XB (and PC) would likely get cosmetics and other stuff that would be specific to those platforms while PS would get the basics. Enough to keep fans happy and buying but the definitive editions would be on XB/PC.

Not a bad trade off really, it could be worse and that would be the total removal of subsequent releases. But MS likes $$ and (like minecraft) CoD prints $$ so it would be dumb to not keep PS fans happy. I said before, they will be looking over the catalog carefully and releasing games they feel fit with multiplat fans and ones that fit with specific platform fans. Maybe giving a break to CoD support teams and letting them pick their own games to work on. Lord knows there is a ton of IP's just sitting there waiting to be reborn.

[Petebloodyonion]

@Darth
I doubt that they will try to gimp the playstation version on the contrary I'm sure they will leave it as the same version of Xbox.
PPL love to make a fuzz about MS not sharing or gimping but are forgetting that MS is currently sharing their game on Steam and it's the same experience as a Windows store purchase.

I could also mention that MS is giving the same exact love to Minecraft on Switch and Playstation compared to Xbox.
So why would they act differently?
Just put the game on Gamepass for Xbox and you have your incentive to go buy an Xbox versus paying 70$

[--Onilink--]

@darth
For me, putting aside that the deal doesnt go through until mid 2023, by then I dont really expect the shortage situation to be fully resolved, neither console will have that big of an install base to really think that MS would take CoD right away, even weighing in the (minimal) profit for each console sold + the profit of gamepass and the store, I dont think it would come close to the amount of revenue CoD makes on PS at the moment.

That said, once more Xboxes are sold and if you assume gamepass subscriptions start increasing even more, I do see a turning point where MS is comfortable making the decision to turn CoD exclusive (but not Warzone), ideally coupled with deciding not to release every year to give devs more time and free some of those studios from the CoD Machine

[northpaws]

They are a trillion dollars company because they cares about making money, not winning a console war so a fan boy feels better.

[S2Killinit]

MS is now possibly in the red when it comes to their gaming endeavor over 3 generations. Which means that they have actually lost money after entering the gaming industry. Im sure no matter how much money daddy MS has, they are still desperate to generate profit.

The other thing is that IF MS does something stupid like make COD exclusive, it will quickly be overshadowed by the next blockbuster that is more readily available to all users.

[kneon]

That's the problem right there, Microsoft is huge, Xbox isn't. Using the profits from everything else to prop up xbox is a monopolist move and can get them in trouble with the DOJ, yet again.

Push it too far and they will deemed to be abusing monopoly power to illegally disadvantage competitors and could be forced to spin off Xbox, then it will have to stand on it's own or die.

[Christopher]

***monopolist***

Anti-competitive, for which laws exist to prevent such actions. Not monopolistic.

[Knightofelemia]

It depends on the title COD makes money across all platforms you want to keep something like that multiplatform. Sypro and Crash also have a fan base and they do generate numbers but not like COD. I would mention Diablo but I know nothing about the game I have never played it. Spyro or Crash could go either way multiplatform and make more money or keep them as exclusives. A newer title depending what it is could also go either way put it across different platforms or again keep it as an exclusive. Microsoft takes control in summer 2023 with Activision so it's to early to predict how things will go. Once Microsoft starts taking games off the Playstation store and when they say this title will not be heading to Playstation that's when we will know what their game plans it. I would also include the Nintendo store but Microsoft and Nintendo are sharing the same bed and seem to be playing nice with each other.