Microsoft Reportedly Spends $1 Billion Annually To Get Third-Party Games On Game Pass

Uncover the spending behind Xbox's Game Pass subscription. Discover how Microsoft invests a billion dollars annually in securing third-party games for the service.

[Obscure_Observer]

Good.

Now that you´re releasing games and making big money from every gaming platform, you should double that amount and give us even more day one third party games!

[Jin_Sakai]

You’re delusional beyond belief. Businesses wise it doesn’t make sense and sooner or later they’ll be raising prices again to cover that billion they’re blowing every year.

[outsider1624]

Lucky for xbox that papa microsoft is rich.

[purple101]

As someone else said earlier today, they are past the growth stage, it’s been stagnent for last 3 years, they are now in the money making stage, prepare to be goosed for as many dollars as possible for the least amount of content. It may not be bad now, (actually it is) but it will be soon (even worse) this year you got hellblade and starfirld and a load of other games that could be bought in bargain bins for about $5-30 and for that you pay them monthly

To add I honestly don’t know how you put up with the barrage of Xbox negativity (which is deserved). I put it down to:

A) you are being paid
B) you may have a problem thinking clearly
C) prefer rooting for the underdog, that’s a legit thing too. English people do it by default

[Profchaos]

Yeah Aussies also love an underdog as long as that underdog isn't Xbox as they were too of the game with the 360 then lost their minds

[Chevalier]

3 straight years of missing Gamepass targets. Some people are just blinded by their own idiocy. Will be interesting to see if COD does anything this fall

[CosmicTurtle]

He is a troll. Designed to stoke people up on here. We know this.

It’s quite funny.

[Popsicle]

Yet people still allow the troll to derail an entire topic. I don’t understand how moderation allows it.

I literally just skip the comment. This may be the best comment obscure ever made. I don’t know because I didn’t read it. I have read to many thread derailing post from this person to ever devote any time to reading another.

I wish everyone would ignore the trolls so we can have a genuine discussion. Stop feeding it and it will go away. Even just hitting the disagree button feeds it. Thats what it wants. This is the last post I will ever post about obscure because I am feeding them now.

Legit question to Mods. After such a long history of being a troll, how has this poster not been banned?

[Profchaos]

Is he though or does he just blindly love Xbox in the same way Sega fans loved the Dreamcast even though it was clearly dead they thought it could be redeemed

Ok yeah he's saracstic and does troll but I enjoy seeing what he comes out with it would be boring here if we never had conflicting opinions

[Sonic1881]

Are you insane? You want them to double the amount when the Xbox is already struggling and losing money 🤔

[Hofstaderman]

Correction....XBOX is already dead.

[Obscure_Observer]

"Are you insane? You want them to double the amount when the Xbox is already struggling and losing money"

As long we get the games I couldn´t care less about a trillion dollar company losing money. That´s their business to worry about. I only care about the games.

And "struggling and losing money"? Really?

"Microsoft reports Xbox’s revenue is up 61% in Q4 FY24 thanks to Activision"

https://venturebeat.com/gam...

61% more revenue and BO6 is not even out yet.

MS will make a sh!t ton of money with that game alone in all platforms. So 2 Billion yearly invested in their *core* business is nothing!

So yeah, I want them to double the investments on Gamepass. Period.

[Sonic1881]

"So yeah, I want them to double the investments on Gamepass. Period."

That ain't going to happen. Just because you want it 😂

[fr0sty]

They'll do that, after creating 4 more higher-priced tiers and making the one that currently includes everything only contain games that have been on the market for 4 years.

"Gamepass Ultra to the MAX: Now only $299 per year!"

[MrNinosan]

Already $240/year, so we're there within a year, without new tiers.

[jznrpg]

It will be 29.99$ a month eventually 360 a year

[Profchaos]

They are trying to get a return on abk and Bethesda they won't double day one we're lucky we are still getting them now that day one has been removed from base tiers

They want to make money not give it away

[MetroidFREAK21]

Shut up

[OlderGamer17]

Sorry O_O, I tought you where loosing it, but i now come to the conclusion that you realy lost it.
The coping from you is not on a stellarr level....

[Flakegriffin]

Homie got 77 dislike and his brain rot will still help him think that he’s right.

[MrDead]

I like how they twist cannibalising game sales into "invests".

No lifetime sales with MS, they'll F-up gaming the same as streaming services have done to the movie industry and it's workforce.

[Fishy Fingers]

Out of interest do you think those 3rd parties signing the deal are unhappy with the severence and have a gun to their head?

Bro probably has a PS+ sub and has library full of Epic launcher free games.

[TheNamelessOne]

lol

Pretty much. There's a lot of hate on this site for Gamepass, but put games on the different tiers of the PS subscription, and whenever they get that free day one release, it's an entirely different tune. No talk about how this choice is killing devs.

[DarXyde]

Do we think they're unhappy?

Umm...YES...?

They literally need to be paid up front to put games on the service. It's become a way to gain a foothold on the platform.

Do you think Atlus would launch on Game Pass otherwise?

[MrDead]

"Out of interest do you think those 3rd parties signing the deal are unhappy with the severence and have a gun to their head?"

I think you mean severance... and I've noticed you don't know what it means either, MS aren't firing the third-parties they're purchasing from.

"Bro probably has a PS+ sub and has library full of Epic launcher free games."

I'm not a console gamer, but yes I do have Epic with a library full of free games... but guess what Epic rotating free games every week doesn't do. It doesn't destroy lifetime sales and cut workers out of residuals. Then you bring up PS+ a service that also doesn't destroy lifetime sales as their model allows for new releases to earn.

[BlackTar187]

Talk about projection the nameless one

[DivineHand125]

There are pros and cons to everything. Streaming services like Netflix is no different than cable tv except it is on demand. Services like Netflix has made it so that more studios can get a share in the profit where they can reach more consumers worldwide compared to the old days where the masses will only watch a few new titles per month.

The only negative about streaming services is that it no longer makes any sense to sell DVDs and Blu-rays though it can be argued that those persons may have moved on to building digital libraries for the sake of convenience.

The reason Xbox is doing so poorly is because they are not doing enough to be competitive. Their output of AA and AAA exclusive titles are extremely low compared to the competition and they haven't had a game of the year nominee in years.

Releasing their games the same date on PC is also hurting their console and it would have been more strategic for them to delay those releases by a year similar to what Sony does to maximize profits.

Gamepass alone is not to blame for Xbox's current position because it can be argued that if the service didn't exist and they had the same gaming output as they have now, they would be in an even worst spot.

[MrDead]

"Streaming services like Netflix is no different than cable tv except it is on demand."

It's nothing like cable. My comment isn't a guess lifetime sale of films has shrunk to a point it's almost gone and so has the revenue it generated, that is money from competing TV networks, cable/satellite and physical media sales.

Lack of revenue transparency with streaming has meant workers job security and pay has massively diminished, earnings from residuals is almost gone for example the writer for Squid Games because of streaming gets no royalties despite series earning $900 million for Netflix, before streaming he would have royalties form lifetime sales.
Or another example Willow the series was pulled and is no longer watchable here's why: “Willow” was one of nearly 50 titles that Disney+ pulled from its streaming library in May. Other titles included the series “The Mysterious Benedict Society” and the feature film “The One and Only Ivan.” Disney CFO Christine McCarthy explained that Disney was expecting to take a write-down in the June quarter of $1.5 billion-$1.8 billion by removing content from its streaming platforms. By writing down the value of the content assets, Disney can remove that from its balance sheet and reduce its tax bill." Also when you pull a show you no longer need to pay residuals to the workers.

Have you also noticed the drop in quality on sfx or thought some older films look so much better then they do now? This is because the industry now relies on cheap labour for sfx outsourcing abroad, more green screen instead of location shooting and a lot less real extras bring life to a scene.

Streaming in gaming is going to be far worse as we've seen with MS consolidating a massive part of the industry to try and make the service sustainable, lifetime sales being cannibalised by gamespass and a work force that has no unions like SAG is already paying the price.

All streaming does is remove income transparency, cuts the workers from the money and sets flat rates and removes consumer ownership... but CEO's and shareholders will still be ok as they benefit from the industry consolidation.

[Huey_My_D_Long]

MrDead is absolutely on fire with the post.

Nothing else I have to add other than that.

[DivineHand125]

@MrDead like I said pros and cons. Some of those issues can alleviated with alleviated with regulatory intervention to give more transparency to the industry but unlikely anytime soon with all the lobbying going on.

The issue with the squid game's writer can be attributed to the terms and conditions he agreed to. It happens often in business as no one really knows how popular something will be until you catch that lightning in a bottle. I remember reading about how Nintendo hardly made anything off Pokemon Go dispite Niantic making Billions.

I don't blame streaming services for studios finding was to reduce the cost of making films. That stuff would have happened regardless because of the greed of these corporations. We see that same cost reduction happening in every industry from food to Aerospace.

[CrimsonGuardVII]

@badz148 its not, it just straight lied.

[gold_drake]

we know this, we have known this since last year.

this is not new or news.

[343_Guilty_Spark]

Better use of resources than Concord.

[jznrpg]

MS had spent over 100 billion$ and now have to look to PS and Nintendo for money,
Sony isn’t perfect but they don’t have anywhere near the amount of f’ ups that MS has. Xbox will be full third party in the near future. Every company makes mistakes but MS has been doing it for over a decade straight

[CrashMania]

Considering the lack of significant growth in stagnant subs and console sales flat, that's actually debatable lol

[GamingSinceForever]

Sounds like a complete waste, but hey it’s not my money. 🤷🏾‍♂️

[Scissorman]

not to mention the cost to develop first party games which also end up on the service. it's no surprise why MS is pursuing a multiplatform strategy, it needs sales from other consoles to subsidize Game Pass.

[DivineHand125]

I tried doing the math on this. If they spend approximately $1B per year on just securing titles for game pass and assuming each subscriber spends $15 per month on gamepass, they will need to have 5.5M recurring subscribers each month to cover that cost.

The latest figure revealed their subscriber count is 34M as of February 2024. It is not clear if that number has declined with the cost increase of the service since then but it is possible that the Xbox is profitable in that department. They could be doing a lot better if the Series consoles were doing better and Xbox isn't doing anything to increase it's market share.

[porkChop]

We already heard last year that between 70%-80% of subscribers are on the Ultimate tier. So with 30M+ subscribers, and with Ultimate costing $20/month, Microsoft are literally pulling in $7B-$8B annually in revenue from Game Pass alone. Spending $1B annually on securing content is a lot, but that doesn't change the fact that it's clearly profitable to do so.

[Falloutxii]

So why do they keep raising prices?

[andy85]

How many of those are paying full price though? My 3 year with the gold upgrade trick cost me 100 total

[Outside_ofthe_Box]

"So why do they keep raising prices?"

Microsoft's own 1st party games cost money too. $1B is 3rd party only.

[DarXyde]

See, I really don't understand the Xbox fans cheering for this.

Let's assume these resources come from Microsoft proper's investment to prop up Game Pass. You cannot be surprised then when the higher up suits at Microsoft make decisions for the platform you don't like. That is very likely to result in studios getting clipped where Xbox has no power in that decision making process as games get made for other platforms and Xbox becomes irrelevant as a platform beyond cheap games (which, again, you don't need an Xbox for).

But if it IS Xbox actually putting its own resources into that without Microsoft proper's intervention, it sounds like a house of cards. Pay money to developers who I guess make money here, but then people don't retain their memberships...? It's very odd and cavalier.

[RhinoGamer88]

More great leadership by Phil and his Executive tech bros. #failup

[Deathdeliverer]

You know what’s crazy to me? People on PlayStation are raising hell about the PS5 Pro and not having a disc drive being ONE of the reasons they don’t want it. They want to own their physical games.
Meanwhile on Xbox, the series S is the best selling “next gen” Xbox, has no disc drive, and nobody even mentions it being all digital. Fully adopted to the “not owning anything” mentality. Crazy how different a consoles community can be with their pain points.

[cthulhucultist]

I believe that part of the plan would be to reduce this recurring cost now that they have acquired numerous studios.

This way they can fill game pass with first party titles and add value to the service without having the need to secure many high profile AAA third party games.

When they purchased Bethesda, they advertised 20 games coming to Gamepass. Activision's back catalogue is also huge and could help make the service more appealing.

Still the changes in pricing, tiers and lack of first party exclusives, reduces the value of xbox brand and game pass by extension.

Perhaps in the neat future when they transition to third party publisher, they will offer game pass to all consoles

[Sephiroushin]

Nintendo wont allow it, Sony neither… Xbox gamepass wont be coming to those console even if MS give them a huge cut for the simple reason that it would cannibalize their software sales as it did to the xbox consoles, they aren't stupid.

[hiawa23]

Well, they are worth a $trillion give or take, so some how not surprised. Putting the games on other Platforms like PlayStation PC and Switch and adding the service to any device with a screen and internet connection should earn them more revenue.

[kindi_boy]

and ponies say it's not sustainable...

[kindi_boy]

So M$ pays to get their games on game pass and leave it open for developers to port their games to any platform is bad for business, yet when Sony lock games on their platform and release their own games on other platforms is good for business. What kind of a clown world do you people live in!

[Flewid638]

And its always the dumbest games like Tractor Truck Simulator or some stupid shit. lol.

[thesoftware730]

But wasn't it reported that GP makes 3 billion annually? I would suspect that it's making a little bit more now with the price hike, and even a few more adopters.

So the make 3bill and spend 1bill on content...sounds like profit to me.

[Outside_ofthe_Box]

1st party games costs money too...
Sounds like profit but let's raise prices...

[thesoftware730]

Yeah, I get that aspect of it, but GP is hardly the only revenue stream, game development is being offset by many other revenues lanes...they don't only make money from GP.

See my above post to the butt guy

Also, raising prices is not an indication of a failing service or product...Sony raised PS+ price and they have tons of systems and subs...Sony raised the price of the base PS5 even tho they are selling like hotcakes, Sony raised the price of their controller even tho it's selling well...I'm not dissing Sony, only making the point that price hikes doesn't always equate bad service, or bad sales. It could also be that more servers, and general operations cost has gone up because of increase in service, maintenance and so fourth.

But if GP itself brings in 3bill, and they spend 1 bill for 3rd party, the service itself doesn't cost the remaining 2bill to run...so in effect whatever is left over, even if less than 2 bill after operations is considered profit.

[Outside_ofthe_Box]

They raised the price while stripping away day one games from standard tier... Read between the lines.

Just like they have other revenue streams they have other expenses too... Point is 1st party games are officially a cost (development and marketing) in regards to gamepass because they are no longer making the full potential of individual sales and any console sales boost that use to come from releasing games without a subscription alongside it. They are hoping that subscribers increase to make up for that loss in sales. So while the 3 billion they make might not go directly to dev cost, it doesn't matter if you make $2B over here if to get that amount you lose $2B over there. (I'm not saying that they are losing $2B due to first party/console sales, we don't know the amount, just pointing out how just because the money you make specifically from one aspect of business doesn't matter. It's the collective)

[thesoftware730]

I partly agree, but.....

"They are hoping that subscribers increase to make up for that loss in sales."

Absolutely they would like an increase in GP sub, but the offset of dev cost for GP day one 1st party games is selling them on PC, and now on PlayStation, Nintendo.and anything with a screen..so they have effectively opened up a stream of revenue that makes sense all around and was not there before Nintendo and Sony (new stream).

It's not dissimilar to what Sony has done with opening a new revenue stream to support dev cost by bringing 1st party games to PC, after console release, and in some cases(Gaas) day and date, and even one to the Switch now...Sony saw that even individual game sales at $60-$70 were not enough to sustain dev cost, just look to insomniac memos and pressure applied to Bungie. So all companies have a lane and are finding way to sustain and maximize profit.

"just pointing out how just because the money you make specifically from one aspect of business doesn't matter. It's the collective)"

Agreed to a small degree, but that is not 100% true...the game division is the game division...so money made off of games sales and subs has a direct effect of the games and services division, including development of new games. I do know what you mean tho, but above speculation from 'Butt' lumped all sorts of departments needed to be funded from GP alone, so if he can speculate and you can speculate, then....well you know.

[SPEAKxTHExTRUTH]

Nothing wrong with buying 3rd party content right guys? Right guys?

[P_Bomb]

I wonder what the average is? Like, does Sega get a bigger cut cuz they have more games on there?