Xbox Game Pass Is Profitable, But Its Console Growth Is Slowing Down

Phil is seeing what happens when you can’t meet release dates and go a year without hardly any first party support.

What would probably help overall growth would be to finally start telling people outside of gaming sites and twitter that the Xbox and gamepass exist. It’s going to be super interesting to see how the sales of cod are should ms own the marketing rights again now…already seeing it (alongside the PlayStation brand) on busses and billboards here in the uk. It makes a difference

@Moto5 he said it makes up 15% of their total content revenue.

I think the interesting bit is that he is acknowledging that it will never be the primary revenue source. It gets so much attention that xbox haters seem to have this notion that games will only be available through the service in the future and that its terrible for the future of the industry.

@Somebody yes, but that doesn't mean it generates profit. I don't see where to listen to the whole podcast, but as it stands none of the quotes from Spencer say GamePass is profitable, just talks about revenue. As it stands the title of this article is not accurate from anything quoted. It is very possible Phil Spencer said GamePass is profitable, but this article or the Verge one do not show it

He says revenue from gamepass is 15% of the whole of the revenue of xbox, he doesn't actually say gamepass is profitable.

Also about the growth of gamepass on consoles slowing down, shouldnt that be obvious? Gamepass on consoles can only grow as much as their are new consoles being sold to new users. If console sales slow down due to stock issues then so will gamepass growth.

@UltimateOtaku91 There was a lot of confusion when revenue was talked about before. It seems PXB has just picked up on another sites headline and not done any research

@Bleachedsmiles
Totally right there, no big AAA exclusives and no advertising in the UK of Xbox.
I see Switch and PS5 adverts and their games.
My local game or two have even made their Xbox shelf space etc smaller over the past couple of months.
But let’s hope next year Xbox take all this in and start shifting up a gear in game releases and letting the public know Xbox exists.

My only issue with GP is it’s become the only talking point of the fans and company. Xbox still sells physical and Digital Media and they need to realize some fans don’t want the Xbox Brand to turn into GP or nothing. My point is the new UI experience they are planning for 2023. They gave a look at it and said they will take user feedback. My feedback would be it had GP add’s everywhere, for a gamer that don’t use or want GP, that new UI would be drowning them in it. GP is great and should be a focus of the company, but lately you can’t mention the Xbox Brand without saying GP. Nintendo and Sony aren’t in that boat with their services. In fact their services feel like a second or even 3rd option and their UI and marketing implies that.

Where exactly does it say gamepass is profitable lol

@UltimateOtaku91 the trouble with calculating this is that it's not really possible to determine how much gamepass actually costs. Do you attribute employee salaries at each studio to gamepass even though they generate more money from digital/physical sales? Do marketing budgets get attributed to gamepass just because it says available on gamepass at the end of the trailer? Are you just going to calculate the cost of 3rd party deals against sub money?

It is probably easiest (but not exact) to just say it made up 15% of revenue and assume the same for profit.

@Somebody that's a fair point, I suppose it would make sense to calculate how much they have paid up front to each developer for their games compared to how much their subscribers have paid for that year on total, but if that was all then it would definitely be a profit. But like you said what about first party development costs, marketing, wages etc that don't just effect gamepass but all Normal digital and physical sectors as well. Very complicated indeed to work out. But I still think saying gamepass is profitable is the wrong phrase to say, sustainable obviously and helps towards xbox's total profits.

@UltimateOtaku91 it's even complicated when considering the 3rd party gamepass contracts. When the 3rd party studio puts the game on gamepass it also releases a digital sale version as well but there are plenty of examples of developers skipping Xbox due to lower user number (jrpgs especially). So thise gamepass deals often lead to digital games being available that might not have been without the gp deal.

This busts two myths in one statement:
1) Yes, GamePass IS profitable.
2) No, most Xbox owners don’t just wait for games on GamePass, they buy their games. Most Xbox users don’t even subscribe to GamePass.

@UltimateOtaku91 if you go to the verge article, they do claim it’s profitable.

Spencer says he now expects Xbox Game Pass to stay at around 10–15 percent of Microsoft’s Xbox content and services revenue and that “it’s profitable for us.”

Emphasis mine, and that is a quote from Phil Spencer clearly stating it is profitable.

I'm guessing that this is where Microsoft will slowly drop the Xbox Console since Phil said about how Game Pass subscriptions on Xbox have hit a wall but PC Game Pass numbers are growing however. Maybe they'll shift to PC entirely.

@Tharsman oh wow, this site should of included that important bit lol

@Tharsman I've never heard of anyone who has Xbox but doesn't have Game Pass? Why wouldn't you have Game Pass if you have a £450 console? Xbox and Game Pass go hand in hand.

@Snake_V5 same reason too many fans obsessing over first party exclusives is meaningless.

You know how many people buy a console and literally just buy the latest installment of Madden, CoD, or Just Dance? These are the mainstream market and the drivers of actual sales. Even if these users knew about Game Pass, there is nothing in the service for them (well, at least until Xbox acquires Activision Blizzard AND the Sony marketing deal comes to an end so CoD can go into the service.)

These users rarely partake on community sections of sites like this one. I do got to admit I myself expected the console GamePass revenue to be much higher than he stated.

Honestly this goes back to why I feel sooner or later Xbox will simply only offer Game Pass Ultimate (maybe dropping the “ultimate” bit) and Game Pass Family Plan.

Another quote of interest from The Verge:

20 million people have streamed games on Xbox Cloud Gaming, up from 10 million earlier this year.

This implies that at least 20 million of the 25+ million GP subscribers have been, at least for a month, Game Pass Ultimate members, since you need GPU to stream.

I'm sure Microsoft tracks the most popular games by time spent playing, but I wonder if they track games by prioritization or abandonment, eg: which games are most likely to be first played by new users, attract existing users when they're newly-added, or be abandoned half-way through. If they're only focussing on one or two of these metrics it could lead to an eventual decline in subscriptions. I also wonder if Microsoft has considered adding unique content, eg: Doom or Skyrim mods that are only available to Game pass subscribers, or offering minor tweaks to some of their games on Game Pass to make them more appealing to certain demographics, eg: up to six-player split-screen co-op or deathmatch for the original Doom and Doom II.

@Green-Bandit the new dash in alpha skip ahead lets you choose how you want the dashboard now So chances are you won't have the dash that has been shown

Dear Phil,

Please keep improving Xcloud, make it region free and relase it to more devices like android tv.

Thanks, bye.

@Martsmall Thank you for sharing that, i didn’t know that. Thats a huge relief. The one shown was GP crazy. I wish the icons across the screen would say pinned and not moved. 1440P or 4K images on the achievements tab for the games, and cut some of the ad fat and the UI would be dare i say almost perfect.

@Green-Bandit it was released yesterday for testers , it's better for me I've got all my pins /games back on the dashboard , they show your pins then something gp then a game that's been added to dashboard then another something gp , it makes it alot better for me ....still need more room to see the wallpaper though but it's a steady improvement

@Snake_V5 I know plenty. Honestly, if I didn't have a 3-year sub locked in right now I'd probably temporarily cancel (the promise of day-1 AAA exclusives was the selling point for me, and that obviously hasn't happened for a while). I'm a multi-platform guy and most of the games I play on my Series X are games I own.

But there are also lots of reasons. When my kid was born, Gamepass just wasn't a good value prop for me so I let it lapse. It fits certain lifestyles but doesn't work for everyone. I think it does Xbox a disservice to say that enjoying it means you have to spend another $180 a year, every year, on top of the purchase of the console.

@Martsmall That sounds like a step in the right direction. I agree that they need to have less clutter on the screen so it’s cleaner and shows more of the wallpapers. I like the Switch UI for that very reason it’s clean and minimal.

@Tharsman , Fortnite can be streamed from Xcloud for free, no GPU needed, I think some of those millions are not GPU subscribers. I have tried the cloud a couple of times with succes on 5g , but prefer a big screen , but even then I use xCloud to see if ilike a game before downloading, and for reward points, there are weekly quests that require you to play some game, and more often than not if i don't have it installed, it offers you the cloud version.

Game Pass has the potential to 'grow' at a faster rate than their Console as Game Pass is available on many other devices. The console itself isn't required to play Xbox games anymore as all their games are released on PC too so I can see Consoles 'slowing' down - especially as Xbox haven't really released any 'big' AAA games this year to sell hardware. It usually gets a bump in sales around Big exclusives so maybe we will see Console growth when games like Starfield, Forza, Redfall etc are released...

I simply love the outrage Phil Spencer can generate with just a few choice words, especially from the anti-xbox crowd. It really is a sight to behold.

@Moto5 I completely agree, telling us what income it generates is pretty misleading when you don't talk about the costs.
The primary reason that the A B purchase is happening is to provide GP with 1st party releases, so how much of that 70 billion is going to be listed as a cost of game pass? It cant be all as there is some stuff there thats mobile, but surely at least half is to buy software for GP. So thats 35 billion of costs right there without even looking at anything else.
If Microsoft were to do accounts propely, theres no way GP becomes profitable for very many years. If AB have 15000 employees, at least half of that headcount is a cost to gp year on year to produce the first party content they keep telling us we will see.
GP is a loss leader to get people into the ecosystem, but its a very expensive one and only a fat wallet company like ms could do it.

Phil Spencer said that Game Pass is sustainable, not profitable. Yet.

Don’t forget…this is the time when a lot of GamePass Ultimate sub conversions for a $1 are starting coming to an end…that might see a drop off as well.

@themightyant he made a statement that is very clear. Whatever metrics they use, it is still profitable for them. They could offer all the data in the world, and cynics that don't want to accept it will continue to say the statement isn't valid because of x or y was left out or should had not been included in.

At the end of the day, profitability is not something you lie about publicly because it can cause big problems with investors and regulatory agencies.

@Stnkygrngo $1 conversions still paid for XBox Live Gold through all that time. When you convert your remaining XBLG balance to GPU, the money changes from one account to the other. Still a discount on GPU, but its not like you got "3 years of GPU for $1" and more like you got "3 years of GPU for $180.97", still a deal, but not $1.

@Tharsman Pretty much. One thing is said and it's "he didn't SPECIFICALLY SAY THAT" and then when he does it's "WELL SHOW ME THE DOCUMENTS, THE BOOKS, I NEED SPECIFIC NUMBERS! I DON'T BELIEVE HIM!" Then when something is taken out of context in a negative it'll be "well you can tell just by using logic this is what was meant." Honestly can't win either way and the fact people need to see minute details of a companies revenue/expenses every quarter shows me the gaming community is so far gone with actually playing and caring about games and more focused on the stupidest things blows my mind. I know in the 90s I wasn't thinking (how much did they spend on mario world, is it profitable?! what did nintendo make last fiscal quarter?!) It's insane my man. Utter ridiculous.

I mean, they also dropped their earning reports, anyone that wants to dig into the numbers can go do so.

@themightyant Yeah, the quote is very short, no context and worded odd. He is also getting a little hard to believe as time goes on

@J_Mo_Money I don't think anyone here is outraged , just not buying what he's selling lol

@Snake_V5 PC game pass is growing a lot most likely because the install base is still very small. I am assuming the Xbox game pass (+ ultimate) should be at least 80/90% of the subscriptions. But I actually was introduced to it by PC GP and only after it I bought my first Xbox ever.

@themightyant I like Spencer as well, he really turned Xbox around and in my eyes saved it. He is also seems to actually understand games on more than a business level. He just seems to talk out both sides of his mouth and it's a bit too easy to see

@Tharsman but Thars, you didn't take the budget multiply it by the square root of hairs on hulk hogan's head and subtract total revenue from 3rd quarter in even years lol people read WAY too much into simple statements and just run with it. They'll believe what they wanna believe, I know conspiracy theorists that do the same thing.

@themightyant
1) I buy games (and subscribe to GP), not stock, unless anyone here is buying stock, I dont know why anyone obsesses too much about GP profitability

2) If you are a stockholder, and honestly think they lied or even mislead you, just call your lawyers and start a lawsuit, because lying and misleading about profitability is fraud.

This is the most slack I can cut the whole skepticism: if they never said it before, it is possible they didn't make such a clear statement before precisely because there were ways that it could had been seen as a lie, and therefore get them in trouble with stockholders. Making this statement, especially at the same time frame they drop an earning reports, means that they are certain that even if they got audited, all math will prove their profitability is real.