Xbox Game Pass Business Model Doesn’t Seem to Work While NSO Does, Says DFC Intelligence

According to DFC Intelligence, Microsoft’s Xbox Game Pass doesn’t appear to be a sustainable long-term business model.

[crazyCoconuts]

What? You mean you can't keep forking over tens of billions of dollars over to buy more product just to turn around and give it away to your customers without raising prices? Satya, you really should have taken a few finance classes...

[S2Killinit]

Soon they will raise them and raise them good. Although, if you look at first party day one offerings, there really isnt much there for all the years the service has been touting it as the best thing since toast.

[DaCajun]

Everyone uses this model, look at how streaming services like Hulu, Netflix, Disney+, and literally every other streaming service initially introduced their pricing.

They get you with free streaming with commercials or low a very low cost at first then slowly raising the prices over the years until the install base is huge then they start charging ridiculous prices even making us pay with intrusive commercials. Nothing new, it's just how businesses work.

No "For Profit" company is a charity and anyone who believes they care about any of us are idiots or suckers. One is born every minute they say, are you one?

[S2Killinit]

Exactly correct.

Not sure why you say it like we disagree. Everything you said is right.

[crazyCoconuts]

To add to the Netflix analogy, there's also this trap with businesses focusing on the increase in revenue as new subs come flooding in as opposed to the profit per sub. Then invariably when the market is saturated the revenue growth stops and investors realize there's still no profit. Im guessing that's the point MS is at right about now. Buying Activision would only make their situation worse

[XiNatsuDragnel]

This is definitely true imo because you buy these 3rd party content then charge a Dollar you know this isn't good business.

[bigfish]

Yes very strange whats going on. Almost like MS have a adopted a charities business model. Procuring content and giving away almost free in gamepass.

[Hofstaderman]

They WANT to collapse the industry and then pick up the pieces to their liking. Classic Microsoft.

[Hypertension140]

I lost count how many times Microsoft has offered me gamepass ultimate for a dollar, they really want to keep me as a customer.

[sparky77]

Well it works for me MS is pretty much funding all my gaming which is awesome. I've been playing more games and spending next to nothing to do so.

MS being last and a trillion dollar company is great if you are on Xbox.

[Obscure_Observer]

"Well it works for me MS is pretty much funding all my gaming which is awesome."

Hell yeah!

We been hearing this Gamepass is not viable blah blah blah nonsense since 2017 and here we are. XD

[KwietStorm_BLM]

You say that like 2017 was 60 years ago. Making the statement that something is not sustainable is taking into account all the numbers, including profit margins and returns, on a persistent basis for years into the future. Doesn't matter how much money a company has. Giving product away and/or hemorrhaging money in any one aspect is not good business long-term. It's the reason why companies kill off entire divisions before they start to drag their bottom line. You can hype up all these games you're playing all you want, but the fact is the service in it's current state will not remain the same moving forward.

[shinoff2183]

Sounds like ms said it themselves obscure. Yall just didn't wanna believe it cause it benefitted you guys. Hell me to

[Godmars290]

"Microsoft´s lawyers"

How doesn't that make it worse?

Are the lawyers *lying* to the court, saying GP is doing poorly when its actually doing great, when such a lie would not only hurt MS's case but ruin the lawyer's careers?

[Flawlessmic]

It's great for now.

But you all don't see the big gameplan, Microsoft will buy up whatever they can and keep eating the costs until the value is sooo good that literally everyone will change eco system if Ms keep buying everyone up and then offer gp at this price.

Long term play is put Sony out of business following the above, which they have the pockets to do, once Sonyis crippled or force to exit the scene, this great value and competition we currently enjoy will be dead and gone and Ms will go back to its draconian roots.

Iv always said a Ms that stays in 2nd or 3rd place is fantastic for gaming and gamers as they have the pockets to keep giving value while trying to catch up with no risk of going bust unlike sony or nintendo, if they were to ever become market leader or dominate the scene, bad times are afoot.

[Obscure_Observer]

@Flawlessmic

You showed great insight in your post, man. Congrats.

[Sonic1881]

You must be uneducated 🤔 you don't know how business works

[notachance]

you XB fanboys didn’t even get angry with 2 straight generations of mediocre offering, of course you’re happy… your standard is so goddamn low and somehow you remain loyal.

If Playstation or Nintendo offered shitty libraries for 2 generations they’d be nearing bankruptcy right now if not straight up closing their business.

[Godmars290]

And at some point its either going to collapse, or become something both expensive and inconvenient.

@Obscure_Observer:
Only MS has as much as admitted it.

[Obscure_Observer]

"Only MS has as much as admitted it."

Microsoft´s lawyers "admitted it". There, corrected for you.

If you fell for that fabricated bs, then there´s a chance for delusional regulators to let Activision/Blizzard´s deal pass through. XD

[FPS_D3TH]

Oof observer thinks the marketing PR team is the one who speaks honestly and not the lawyer trying to tell them the obvious mistake we all saw coming. Talk about copium.

The fact some fanboys here don’t consider the implications this has for any and all the studios under Microsoft’s umbrella truly shows how out of touch and deep microsoft may be up some individuals rear ends.

[Obscure_Observer]

"Are the lawyers *lying* to the court, saying GP is doing poorly when its actually doing great, when such a lie would not only hurt MS's case but ruin the lawyer's careers?"

Apparently they don´t care. CMA´s investigation latest report confirms that Microsoft dominated about 60-70% of Monthly Active Users (MAU) worldwide in 2022.

[Snookies12]

I mean sure, it may collapse. I've believed that for quite a while, that the bubble will burst at some point for Game Pass. Right now though. It's an amazing deal. Anyone disagreeing are lying to themselves. I've frequently stated that Xbox typically has an amazing first few years when new consoles launch. Then die off completely in the later years. So, I'm kind of expecting the same thing here with Series S/X. As for this moment in time, it's been one of the best gaming experiences I've had in a long time.

Plus, all you technically need is to pay for one month. Rewards points (if you keep up with them which is pretty easy) make it completely free beyond that. I haven't paid a single dollar in 7-8 months of having Game Pass Ultimate for PC and Xbox.

[Lifexline]

Lol agree only people complaining are PlayStation fans. Xbox owners are content who cares if a trillion dollar company is losing money.

[shinoff2183]

You'll care when the games stop coming or ms just calls it a day

[Lifexline]

Right shinoff because in the history of gaming multiple studios and publishers have closed and even console makers have failed yet the gaming industry has only grown and flourished it’s the biggest entertainment industry out there.

Yeah… I think they will be fine who cares if they lose money means more money in my pocket. Like I said only PlayStation fans are crying about it. I don’t care about a trillion dollar company just my entertainment. They don’t think for one second of charging you more so why should I care. People have no common sense here at all.

[saint_seya]

I own an Xbox Series X, and i do care. Why? simple, because if something doesnt work, it gets removed, or changed (in this case, price) so, in my case as an Xbox owner i care, and others Xbox owners should too.
Its like expending more money than you make, you may not care at the beggining, but you will care eventually.

[EvertonFC]

You're balls will drop one day and you'll learn something in life.

[Petebloodyonion]

I stop reading when they mentioned that Nintendo Switch online brings good value to consumers.
And I wonder how they feel about Epic Games but hey I guess these ppl must always be right unlike the ppl from Webush
https://www.wedbush.com/ana...
or VGchartz
https://www.vgchartz.com/

[giovonni]

I stopped there too. it’s just another opinion piece that’s supported with little to no facts. Wasn’t Netflix apart of the same baseless opinionated speech as well as Apple Music? Whats annoying is everyone seems to be an expert on the subject, and pass along their bias rhetoric you know the vibes “ oooooooo it’s not good for us gamers/consumers/musicians” 🙄

[Petebloodyonion]

sight!
I Remember when Napster/LimeWire was the rage and could hear the same type of ppl saying that it would be idiotic to sale 1$ songs on the Internet because they would lose so much money since they would not buy the complete CD.
Or I remember when Piratebay was around and again Netflix was destined to fail
Heck is it me or Free to play game was destined to fail also...
But I have yet to see a game developer/publisher complains about how they lost so much money with putting games on Epic Games, Gamepass or PS+
Quick question: If it's so bad then why Sony is paying blocking fees? surely you don't need an incentive to make you not drink poison.

[giovonni]

@_steakdeck_ thank you for proving my point

[Knushwood Butt]

Not sustainable?
Oh, you do surprise me.

MS gaming division is screwed if this Activision deal doesn't go through. Bleeding money. Nadella is responsible for that loss, that's why he's getting vocal about it.

[rlow1]

They use the word “appears” to be losing money. So that’s not a definitive statement. Obviously nobody but MS truly know. But after letting 10 thousand people go, they could be onto something.

[giovonni]

Right, but people will read it for reaction purposes, not to comprehend.

[Justo909]

BAHAHAHAHA! defend xboys! defend! XD

[Petebloodyonion]

I'll humor you just for the sake of it :)

Have you read the DFC article?
https://www.dfcint.com/micr...

So please go to that part
"The hope is that they will buy it through a Microsoft Xbox channel but the reality is they are likely to choose another distributor."

And continue reading to see how they have used way better metrics than vgchartz to make that conclusion
"Persona 4 Golden is a free title on Game Pass, but in the DFC office several people choose the Switch version for $20. The thinking was that this title works well on the portable Switch and $20 is nothing to pay for 40+ hours of entertainment."

The DFC office!!!!

Seriously this article is based on lots of assumptions and lol the ppl of the DFC office.

[neutralgamer1992]

Xbox is the only brand that has changed it's business model every generation and that's why there is much brand loyalty or recognition

OG Xbox their original vision of what they want out of gaming to compete with PS2

Xbox 360 their goals were let's launch early and get market share and they started to get serious about needing big impactful exclusives and started the real trend of indies, xblive and dlc

Xbox one was their all in one console but their success from Xbox 360 got to their heads

And now XSX they are trying to create a better image and 4th generation in they finally realized they need better 1st party games

Gamepass as is can't survive and it wouldn't surprise me if there is a higher tier that gets you the games day one and another notch below gets those same games 30-60 days later

[rlow1]

True on what you said, but look at how many innovations they brought to gaming. Sony has adopted all of them. Like, hard drive, broadband, chat, your music while you play, your gamer score, ect.

While you’re right on them trying to find the right mix. At least they’re trying.

[headshotfrosty]

I mean…pretty obvious. A better model might be paying a monthly subscription and then buying games at a steep discount. Say $9.99 per game with a $14 per month fee with still an assortment of free AA to AAA games

[MIDGETonSTILTS17]

It only works if you get enough subs to pay off the content being offered.

And, as subs increase, M$ has to hope that devs don’t ask for more money in order to compensate for the related increase in cannibalization of standard game sales that GP releases inevitably cause.

Until their stable kicks into gear, M$ has to lose money to buy content all the time. And even then, they’ll need alotta subs to support their huge stable at $15/month per sub.

I bet they hope to always have ghost drops like HiFi Rush to keep people from unsubbing in btw planned AAA releases.

Good luck maintaining that pace of quality output on $15/month, but I also guess M$ plans to bleed; because it is necessary to reach the necessary subs count, and because they can afford it.

[jznrpg]

Subs aren’t increasing anywhere close to where they need them. Either the price is going to go way up or they are going to change Gamepass a lot . They want have it be a money sink forever .

[ChiefofLoliPolice]

I've said it before and I will say it again. Gamepass is simply unsustainable over time without a significant price increase ar minimum. True MS has very deep pockets but even they won't be able to sustain this without bringing up prices big time.

[FPS_D3TH]

Enjoy it while lasts Xbox fans. You’re about to get price gouged and everyone saw it coming. Despite the fact I still buy almost all my games from steam, as soon as the prices increase I’m back to solely buying games I know for a fact I’ll enjoy and most games I won’t even bother. Better shape up now devs. Half these day one game pass games wouldn’t be worth my time if it weren’t for game pass being the price it is now.

[pitythefool]

Anybody that thinks MS will pump limitless resources into gaming forever without decent profits is a bit of a simpleton.

Trillion dollar companies don’t become trillion dollar companies by losing money.

[FPS_D3TH]

100% They looked at this as investment initially. At what point do they seriously think they will break even and start making profit? Their next step will be thinking upping the price will do just that. Eventually reality will set in and they’ll cut their losses.

[Destiny1080]

phil went all in with his craig chip

[anast]

They will absorb the losses for now. This is about controlling the gaming space. Once they get control, they will rent all of their products instead to selling, which will make them more money down the road.

[VariantAEC]

Too bad Xbox's content is garbage.
If Nintendo started doing this (and they kind of already are with NSO Virtual Console or VC titles) requiring subs to keep playing games would Nintendo fans reject it?
Would PS fans reject it if they did this? Sounds like PS fans won't do it and Nintendo Switch Online is not doing well either (raw numbers of subs last I checked). Problem is Nintendo is really locking games out. MS and PS aren't doing this. GP for as bad as it is if people buy in there are options for those who don't want to be a GP sub same on PlayStation, but Nintendo forces you to buy a sub for NSO to play VC titles.

Of course there is a difference with Nintendo's approach, unlike MS Nintendo is locking legacy games behind a value-added service to also pedal Nintendo Network subs.

Of course PS is likely also locking GT7 behind PS+ (I haven't let my sub expire so I don't know if GT7 works at all without PlayStation Plus) and if it is, there is no other way to play that game. Even though currently this is the only PS game locked behind such a service it's one of PS' biggest and it's possible PS will do this for more games in the future.

All of the big three are doing subscription-based stuff following Xbox's lead, but it's PS and Nintendo that can actually accelerate the problem because their playerbase sees value in their content as opposed to Xbox. If Xbox had compelling content their subscription numbers would be great like PS' (I don't know how Nintendo is doing) and if these companies can make it worthwhile to do this they will continue. Nintendo's way is pretty dangerous because their legacy SW is legion... seeing the GB/C/A VC content made me think about buying a Switch, it's why I bought a New 3DSXL! Worse still there's zero incentive to make those 1MB-2GB roms accessible via a one-time payment and all they need to do is make them work on Switch (or future HW) to keep pushing subscriptions and rake in the cash. BC on Nintendo could be a rent only affair! And PS, Xbox will likely follow suit (PS is already trying with some PS1 and PSP titles - you need PS+ to play them unless you paid for them on PSN during the PS3 era).

[anast]

Yes, this is the goal for everyone. This is why MS is desperate to get the jump.

Legacy games via GoG would be my only source of gaming if everything went all "Netflix". I can't let sparkly things turn me into a sucker and more than I have to be.

I am already forced to use subscriptions for things like MS office. I am forced because I need to these for work, but I am not forced to play video games.

[TheCaptainKuchiki]

I don't see how MS is going to make Gamepass profitable tbh.
They seem to be focusing on growing the subscriber base and for that they're ready to spend a lot of money.
The problem is that even with 50 million paying customers, it still wouldn't be profitable.
The more people play games on Gamepass, the less games get sold on Xbox. The whole cannibalization problem.
I didn't do the math but where is the tipping point? The moment where Gamepass profits (and not revenue, which is irrelevant) overtake the profits generated through the sale of full price games?

Because THAT will be the moment Gamepass is profitable. For the successful part, that can only happen IF the service allows MS to take customers away from Sony. Because even if Gamepass becomes profitable, there's no point if Sony still manages to prosper and increase their sales with a traditional model (which is undoubtedly more profitable).
People need to realize that Gamepass was launched in 2017, it's been 6 YEARS. It's not new anymore. It's a long long time to turn a business profitable, especially for a company like MS.
That's my opinion on MS. From the big publishers' POV, Gamepass will never be the best option because they know they can make more money on Playstation, even if MS compensates them. Remember that many PS exclusives have sold over 20 million on PS. So they know they can still achieve big numbers with one platform.
That's the reason MS is trying to purchase big studios and developers, because they're aware Gamepass isn't enticing enough as it is. To put it simply, even with a big check from MS, Activision would never agree to put COD on Gamepass day one.

In the end, the Gamepass model can only be succesful if publishers don't have the choice at all.
That either means that they've all been purchased by MS (unlikely) or that Sony launched a replica of Gamepass.
Not a PS+ type of service but a real replica and decided to kill their traditional model for good.
Once the publishers see that the majority of players are playing their games on MS and Sony's Gamepass services, then this will be the moment we can kiss goodbye to the traditional model.
As long as Sony refuses to launch a true Gamepass service or that Gamepass remains the minority model (vs traditional sales) on the market, it simply cannot be successful.

[VariantAEC]

"In the end, the Gamepass model can only be succesful if publishers don't have the choice at all."
Wrong! Game Pass and the overarching business model cannot be successful and make the games you want because it would REQUIRE that everyone buys in and even so the output will be a trickle like we're seeing on Xbox and in the F2P games market (like on iOS/Android).

Too little income from subs too much to make a game and it will take too long to make new games so people will buy less and devs will turn everything into always online GAAS shovelware.

[TheCaptainKuchiki]

Imagine a world where publishers don't have a choice because no one accepts paying $70 for a game because Nintendo, Sony and Microsoft offer subscriptions. Then publishers will adapt their own business models and find a way to stay profitable. Are we gonna see more questionable practices that aim to squeeze every last penny out of us ? YES. Because that would be the only way for publishers to keep making money when their AAA games are available day one on a subscription service. Also the monthly price of those services is gonna increase ($20/month at least).

That is the music streaming industry right now.

BUT, Microsoft cannot make that world a reality by themselves, it would require Sony and Nintendo to join in.
But both Sony and Nintendo know that $70 games on which they get 30% is way more profitable, therefore they won't do it.
Microsoft decided to do it because they've been in third place for 20 years now and they despereately need something to differentiate themselves.

[VariantAEC]

I can imagine that world... only Nintendo and mobile games would exist plus PC trashware.

That's how that would work. Games aren't like music, TV shows and movies, they cost tens to hundreds of millions of USD to make these days.

Nintendo could still do fine with Nintendo's roster of IP so long as their core stay as fervent as ever. It's PS and Xbox that would suffer catastrophically. Games could not advance as a medium and we'd be stuck with arcade style games that Nintendo's core fanbase and Phone gamers are fine with, but many PC and nearly all PS & even Xbox gamers would be left wanting.

Subs would easily skyrocket in price over $70 more than they are now per year (but in all honesty they could jump to over $100/month).

It's by no accident that Xbox's "value added" service is the most expensive, it has to support new games development and free releases. Meanehile Nintendo's services are still the cheapest, but they also are the least functional and have the biggest lures (offering a couple hundred classic Nintendo games on NES-N64, GB-GBA and Sega games from various devices from Genesis and Game Gear). PS really is offering the best options as far as subscription-based models are concerned with hundreds more classics from PS through PS3 and fully rounded out modern services and it has the most subscribers (because gamers are apparently not that stupid).

Even so we both clearly understand that the upfront cost model for games is the more profitable one. Nintendo is also charging more because they feel their games are worth it and time will tell if TLoZ:ToTK is worth $70, but I doubt Nintendo will be feeling any pushback from their core.

It really is only Xbox that is pushing this boneheaded move, if the rest of the industry followed in ernest, a lot of publishers would go bust. In the end Microsoft couldn't make this a reality at all because it's not possible unless everyone just decides to shell out $100s per month in the hopes that they get something of worth at some point. Microsoft with all the money in the world already proved over 5 years that Game Pass is valueless.

[SullysCigar]

Mind....BLOWN! /S

[ChasterMies]

We are in the early days of these game subscription services when it’s all about market share. Lose money now so you can take over the industry and make money later.