Xbox spends over 1 billion dollars on supporting third party games coming to Gamepass annually

[Bryank75]

"We have no plans to bring Xbox Game Pass to PlayStation or Nintendo." Xbox CEO Phil Spencer on console hardware, the future of Activision-Blizzard, and much more

In our exclusive interview with Microsoft Gaming CEO Phil Spencer, we got a glimpse of the future of Xbox, and Microsoft's evolving strategy going forward.

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It goes back to some of our language on Game Pass in the very beginning. We have a service that is financially viable, meaning it makes money, in Game Pass. We've put a lot of money into the market, over a billion dollars a year supporting third-party games coming into Game Pass. What we see in Game Pass is a service that supports all kinds of games, from the biggest games, to the unknown indie games that you didn't know you would love until you played it. If you're an individual publisher, you really have to think about 'how do you get everybody playing my game.' I think a lot of the publishers are naturally drawn to making games that are big hit games, as big as possible. We want to do that as well, of course. But because we have a platform, and we have a subscription service, having people play more and stay engaged on the platform, frankly, regardless of the types of games they're playing, is a very viable part of our strategy.

 

[Cool hand luke]

We have a service that is financially viable, meaning it makes money

Revenue maybe, profit unlikely, and far far less than what they would earn by selling their first party games at retail.

I've never understood the corporate obsession with streaming services - it's not the same as a software or generic service subscription. The amount of investment just to sustain a subscriber base in entertainment always exceeds the revenue those subscribers bring in, and the profit is always lower than other models. We saw it in music and film already.

 

[Gods&Monsters]

You could say the same thing about PS+, Epic Store, Amazon Prime or any subscriptions service really.

I don't know why Phil wants credit for "supporting devs" that way. Everybody does the same

 

[KiryuRealty]

You could say the same thing about PS+, Epic Store, Amazon Prime or any subscriptions service really.

I don't know why Phil wants credit for "supporting devs" that way. Everybody does the same

He is so desperate for a W that he will take it however he can get it.

 

[Shmunter]

How much revenue out of it?

 

[Johnic]

How much revenue out of it?

EDIT: Meant 0 profit, regardless of revenue.

0

 

[ToTTenTranz]

It's $1B just on third parties.
So if we take out average 20% tax, the revenue from 10 million subscribers who pay full price (if there even is such a thing?) is used solely to buy those 3rd parties into the service. That's obviously not counting on how much they need to spend on their own studios getting lower sales because of their day 1 policy.


It's completely impossible that gamepass is sustainable by itself.

I've never understood the corporate obsession with streaming services - it's not the same as a software or generic service subscription.

It's a very predictable source of income and partially imune to bad releases. For example, one Redfall means a massive loss on game sales, but it won't make that much difference on a service already being paid.
Investors love predictability.

Considering Xbox's track record of quality game releases since Phil Spencer took over, this might be their only chance at pretending to be successful.

 

[JAHGamer]

This doesn't even take into account the cost of developing their own games which are also on GamePass. I know their games tend to be trash, but running 34 studios and 20,000+ employees can't be cheap.

 

[DForce]

Starting in 2024, their big games are going to start hitting more frequently on Game Pass, so they're expecting a lot of growth within the next 3 years.


It's really hard to see their single-player games generating a lot of growth on the service or making their investment back if their games fail to make any money from retail sales.

 

[SLB1904]

Starting in 2024, their big games are going to start hitting more frequently on Game Pass, so they're expecting a lot of growth within the next 3 years.


It's really hard to see their single-player games generating a lot of growth on the service or making their investment back if their games fail to make any money from retail sales.

It was supposed to start this year

 

[ToTTenTranz]

Starting in 2024, their big games are going to start hitting more frequently on Game Pass, so they're expecting a lot of growth within the next 3 years.

Haven't they been on a 25 million subscribers plateau since early 2022 though?

If they already promised not to put anything from ABK on Gamepass for the next year, how are they ever going to grow a lot?


Is there even any major game coming out of Xbox Studios in 2024? Honest question, because if there was, by now we should have heard about Doom, Wolfenstein, Quake, Gears, etc.
I don't think Hellblade counts as a major game (at the very least from the first game it's not very mainstream(-able)), and Avowed isn't looking that great IMO, though I could be wrong on both accounts.

 

[Remember_Spinal]

Starting in 2024, their big games are going to start hitting more frequently on Game Pass

 

[Alabtrosmyster]

Revenue maybe, profit unlikely, and far far less than what they would earn by selling their first party games at retail.

I've never understood the corporate obsession with streaming services - it's not the same as a software or generic service subscription. The amount of investment just to sustain a subscriber base in entertainment always exceeds the revenue those subscribers bring in, and the profit is always lower than other models. We saw it in music and film already.

Recurring income and customer lock-ins are pretty big incentives. MS had articles back in the early 2000s about how they wanted to make Office some sort of subscription instead of chasing upgrade sales every few years.

Same where I work, they're pushing all clients to the SaaS instances of the software as fast as they can because this enable squeezing more revenues out of our dear clients instead of us trying to sell new versions with new features we add features that are billed separately. This is what every executives see in every software companies.

It does not mean that it makes sense for gaming, the files are very big and the money they make on units sold are too high for it to make sense as a rental service.

 

[flaccidsnake]

I don't want a GamePass relationship with games. Baldur's Gate dominated my gaming hours this year. Even if PC Gamepass had all the features of Steam (lol), I don't want a subscription mediating my access to that game. It cost me $60, and that is an incredible bargain considering how many hours I've put into it. My saves will live on forever, and I could easily see playing the game 2-3 more times all the way through.

There's just no contest between the value proposition of a retail AAA game I'm actually going to play vs $20/mo.

The fun in Gamepass is pure novelty. It's the sample/buffet experience. If I start playing a game on GP and really enjoy it, I have to stop playing rather than replay the beginning again on an actually purchased version. This is a stunted experience, not worth paying for.

 

[Darth Vader]

I don't want a GamePass relationship with games. Baldur's Gate dominated my gaming hours this year. Even if PC Gamepass had all the features of Steam (lol), I don't want a subscription mediating my access to that game. It cost me $60, and that is an incredible bargain considering how many hours I've put into it. My saves will live on forever, and I could easily see playing the game 2-3 more times all the way through.

There's just no contest between the value proposition of a retail AAA game I'm actually going to play vs $20/mo.

The fun in Gamepass is pure novelty. It's the sample/buffet experience. If I start playing a game on GP and really enjoy it, I have to stop playing rather than replay the beginning again on an actually purchased version. This is a stunted experience, not worth paying for.

The value proposition of Gamepass is allowing people to play Microsoft's subpar games at a discount. I paid 20 quid total (2 months) to play starfield, and ended up playing Hi-Fi Rush again as well. They lost money with me, and would have lost even more if Forza Motorsport wasn't such a piece of trash game that it didn't recognise my pad.

 

[Yurinka]

It was supposed to start this year

You don't get it, the next year will be the year of Xbox. They have been saying for almost a decade.

Meaning, last year they said that 2023 was going to be the year. Now the year of Xbox starting to deliver is supposed to be 2024. In 2024 they'll say that the first big year of great exclusives will be 2025. In 2025 they'll say it's the next one. Always is "the next year".

 

[Alabtrosmyster]

The value proposition of Gamepass is allowing people to play Microsoft's subpar games at a discount. I paid 20 quid total (2 months) to play starfield, and ended up playing Hi-Fi Rush again as well. They lost money with me, and would have lost even more if Forza Motorsport wasn't such a piece of trash game that it didn't recognise my pad.

This is not a discount if you actually play and enjoy games... by the end of the year you have spent more than most people spend on game purchases anyway.

 

[flaccidsnake]

This is not a discount if you actually play and enjoy games... by the end of the year you have spent more than most people spend on game purchases anyway.

yep. I think most adults are more limited in their free time to play games than their money to buy games. that being the case, it's way more important/appealing to play the games you're excited about rather than the games MS happens to make a deal on.

and I doubt many people are diligently subbing/unsubbing as they go. so if you bought BG3 in august and you're still playing it, did you waste $80 on gamepass, barely using it? i'm sure this happens to a lot of people. it happened for most of the year I subbed to GP.

 

[Alabtrosmyster]

yep. I think most adults are more limited in their free time to play games than their money to buy games. that being the case, it's way more important/appealing to play the games you're excited about rather than the games MS happens to make a deal on.

and I doubt many people are diligently subbing/unsubbing as they go. so if you bought BG3 in august and you're still playing it, did you waste $80 on gamepass, barely using it? i'm sure this happens to a lot of people. it happened for most of the year I subbed to GP.

I think the whole sub/unsub all the time is a marketing technique to get people to sign on to the service. If I was to do this, why even bother with GP, I have a playstation and a PC (where I can get free games both legit or pirate any day of the week).

So why are people putting so much focus on what is arguably the worst service of its kind?

 

[Darth Vader]

This is not a discount if you actually play and enjoy games... by the end of the year you have spent more than most people spend on game purchases anyway.

If I'd purchased starflop I'd have spent over 2 times that amount. Since MS releases a half decent game a couple times a gen, it's much cheaper to just subscribe, play, and cancel.