Gamepass has a part to play in MSFT's strategy.... using it as a vehicle to undercut PlayStation with new releases, basically a stealth version of predatory pricing.
But the overall aim for MSFT is an assault on PlayStation as an overall platform, they want to push Sony out and make the console / AAA market a monopoly, with them owning PC operating systems and then all AAA gaming outside PC too, it would be eactly what they need to price things as they like.
Imagine what Adobe, Office and their other annual subs are like.... 100 to 200 per year or you get nothing. No way to buy outright and you are basically a slave to them if you want to game.
Nobody except Xbox super fans want that future.
Speaking of potential predatory pricing, anyone think it could be argued the steep discounts/subsidizations for Series S over the holidays can be argued as a form of that as well?
If you go back to MS's Hot Chips presentation, they explicitly mention that one of the reasons they took the dual-system approach is because they did not project cost-saving reductions to happen this generation like they did last generation or particularly the generations before that. Which is partly true. However that would IMO assume Series X and Series S would not be able to deviate too much from their MSRPs (let alone just two years into the generation cycle) or else that would indicate one of two things:
1: Stock is not moving at volumes expected, so big pricing deals are done to help boost stock (this one can be supported by many things like total Series sales versus the expected growth a system like Series S would bring to the ecosystem, mentions of GamePass growth having slowed down on console (only two years in?), Series S promotional deals kicking off in NA around summer time, in some foreign markets Series S being regularly discounted for over a year, etc.)
2: Stock IS moving at expected volumes, but MS want to push install numbers and are leveraging their financial revenue flow from other divisions to offset steep subsidization costs for a current-gen console knowing that certain market competitors cannot realistically match that price without taking heavy losses themselves.
If it's #2, then could that be argued as a form of predatory pricing? Particularly since MS would be willingly taking those losses through subsidization but otherwise be perfectly fine as a company because the lions share of their revenue & profit comes from other unrelated divisions? I'm thinking that may get tricky to define, I guess it would depend on how much that strategy cuts into their Xbox division net profits, because Sony also technically take a small loss on consoles sold and that is made up through software sales, peripherals and service subscriptions.
But, I think there's a threshold of how
MUCH money a platform holder is typically willing to lose on the hardware itself and if they reach a number where those other things aren't able to recoup sufficient net profits (assuming that company's gaming division is its only division and so they would be making fiscal decisions as if that were the case, i.e that division needing to pull its own weight), and yet they are proven to do this completely of their own intent for no other reason than to gain marketshare & intentionally potentially force competitors to bleed out trying to match them (and not for a reason like say they have way too much hardware in the system but feel they have to take bigger losses to keep up with a better-selling competitor), then I think that can be argued as predatory pricing.
Given the Series S plays all the same games as the Series X, and the Series X is obviously a competitor to PS5, even if MS also angle Series S as a "complementary device" to PS gamers, it is still also a competitor to PS5 due to the very high software & services overlap and the two basically going after a lot of similar customer types. That would really strengthen arguments of predatory pricing having already been applied on the hardware front when it comes to Series S (WRT the Microsoft-mandated pricing discounts and promotions, not those retailers did on their own to move stock).
MS has always been insanely short-sighted, which is why they scramble into panic decisions so frequently.
They’ve already trained most of their fanbase to not only stop buying games in hopes they’ll come to GamePass, they game the system to get GamePass for basically nothing. They’re pursuing subscribers without any guarantee that they’ll ever profit from them.
It was so funny reading the ResetERA thread about the GamePass $1 conversion trick because it exposes just how much a lot of people actually "value" the service if they are forced to pay more than the cheap super-discounts they currently have. The truth is, they only see value in the service because they can do all sorts of dumb tricks to get it for $1 a month, or Gold conversions to GPU for $1, or use MS Reward points.
When some of the people ITT where forced to consider paying full-price for the service, they were openly saying they weren't going to re-sub. They've been conditioned to expect the service on the cheap, or have a myriad of ways to get the service really cheap (exploit $1 a month deals) or free (MS Reward points). That's the price MS pays for trying to push GamePass the way they have, but they found themselves doing it because they didn't have the big 1P titles ready in time when they launched the new consoles!
I don't see how they are going to de-condition those people, because while they may not make up the majority of subscribers, they make up enough to have an effect. They're also the biggest proponents of it on social media, essentially free marketing, so there's the obvious risk that if they're forced to pay more, they will become more critical and talk about it less. Sony's managed to avoid those issues with PS+ and the revamp; even if they dipped a tad in total subscribers, they increased their services revenue, which was the point of Extra and Premium/Deluxe.
And at the end of the day, companies care most about a very specific type of number: the dollars. It's going to be interesting to see what happens with GamePass in 2023: between the ad-based model, the Family Plan, and the increase of game prices to $70, I wonder if MS remove some of the methods to get the service on the cheap, or reduce the valuation of Reward points so make it harder to pay off for the service with only them (that, or they could just set an arbitrary cap of "X amount of Reward Points redeemable monthly" maybe with a limit increase if you have a sub to a higher GamePass tier). I think they
CAN make the adjustments successfully, they just need to be ready for some of these people who cheerlead so hard for the service online to get a bit more quiet.
But at least then, theoretically, they won't need them anymore because they'll actually have those promised big 1P AAA games coming out. We'll see, though.
In the MS response to FTC sent a couple days ago, MS mentions they have now 25M GP subs, same number they reported back in Q1, meaning GP didn't grew during this year. This is with MS spending dozens of billions on acquisitions.
Oh that's a HUGE oof! I was wondering where people were getting this "missed growth by 10 million" figure from, I've heard it mentioned here and there for a bit, I guess this is what they were referring to.
I guess it COULD be that Microsoft were only sharing them numbers from the end of their previous fiscal year, but that would have been six months of stagnation since they gave a GP update in January. Although, if they stick with that regular cadence, why not give FTC the latest numbers? Which means if the figure they gave is the up-to-date one, the stagnation is even worst.
Would MS have had to legally provide the FTC their most recent numbers when bringing up GamePass? I'm assuming they would.
Meanwhile Sony, even if heavily supply constrained and spendling like 10 times less in acquisitions, have twice the subs and posted in the most recent Q2 report the highest revenue ever in that quarter from a game sub ever seen in a any console maker.
We also have to understand that this is in the context where all game subs together are generating around $7.5B/year (with PS Plus generating a majority of that) while the entire gaming industry generates almost $200B per year.
Meaning, the game subs are a very small portion of the market and PS Plus dominates the game subs, so Game Pass isn't something to worry about for Sony. Specially when Sony's game division is posting record revenue and profit numbers and growing basically in every single area including game subs.
Yep, more or less. The combination of GamePass & XBL Gold would put up better numbers against PS+, but Microsoft themselves are doing everything they can to depreciate XBL Gold and make it a legacy service, getting as many of those users to GamePass as possible, so it's evident where MS's growth goals are at when it comes to services.
All the more reason why IMO Microsoft should have introduced GamePass as an extension to XBL Gold, not something to completely replace it. So weird how they championed BC through the hardware but not with their own services
insider-gaming.com
