One of the biggest selling points of Xbox Game Pass is Microsoft's first-party input, but the team also puts lots of time, energy and ultimately money, into bringing valuable third-party content to the service. Some of Game Pass's day one coups are fantastic, and as it turns out, those coups cost quite a bit of money for Microsoft to secure.
Speaking with Windows Central recently, Xbox's Phil Spencer discussed Xbox Game Pass both from a first-party perspective and in regards to bringing other team's titles to the library. In that exchange, Phil threw out an eye-watering figure for how much Microsoft spends on third-party Game Pass content:
"We've put a lot of money into the market, over a billion dollars a year supporting third-party games coming into Game Pass."
While a billion dollars a year sounds like an awful lot of money to be spending on getting stuff for Game Pass, Phil again insists that the subscription service "is financially viable" and that it "makes money" - despite questions about the amount of investment Microsoft is putting into it vs. the money it generates.
It's been quite the year for day one Game Pass launches too, so we can definitely believe that sort of figure for 2023. This year, we've seen third-party titles like Monster Hunter Rise, Atomic Heart, Wo Long: Fallen Dynasty, Amnesia: The Bunker, Exoprimal, The Texas Chain Saw Massacre, Sea of Stars, Lies of P and many more arrive on day one. It's been a hell of a lineup!
What do you think to this sort of money being spent on Xbox Game Pass? Tell us your thoughts below.
[source windowscentral.com]
Comments 36
Considering they own the best part of the games on gamepass they probably need to do this hopefully more is spent next year aswell more day one games please
After the cost to third party plus the outgoings for first party costs wages, etc, I bet Xbox still makes billion on game pass.
Game Pass has 30M subscribers as of last summer, since then with the launch of Starfield and Forza, as well as people buying Xbox consoles for the holidays id imagine that they're probably north of 40M by now. Also, with the conversion of Xbox Live into Game Pass Core I'd image Game Pass is likely nearing 70M or so monthly subscriptions. That's a lot of cash rolling in every month.
over a billion dollars a year supporting third-party games coming into Game Pass
Holy cr@p that's a lot of greens. I love my Indies/AA gems but they sure don't come on the cheap.
All the acquisitions Microsoft made in the last few years makes perfect sense, you want to own/make as much as possible the content going to Gamepass.
So assuming $10 a month. That's 8.3m subscribers needed to cover that cost. Pretty do-able.
What we don't see is how much everything else costs and also the lifetime spending of a gamepass user (as they also get other perks/discounts)
Even if 10 million subscribers were only paying $10/mo for a basic Game Pass subscription for a year, that still comes to 1.2 billion annually from Game Pass alone.
Didn't Microsoft say it had about 20 - 25 million Game Pass subscribers before Core replaced Games with Gold?
apparently they make $2.9 billion a year out of gamepass and spend $1 billion of that on third party content
Let’s do the whole budget in 2024 on GTA 6 game pass day one.
@GamingSince84 Not sure where you are getting your figures from for "probably north of 40M by now". The last official announcement was 25 million in Jan 2022.
The big Xbox leak contained emails that said subs were saturated on Xbox and they were trying to increase subs on PC. Then we had a LinkedIn Profile from Xbox Senior platform & Brand Marketer say 30 million in Sept this year. Odds are it's a little over 30 million now.
@trev666 A bit of napkin maths would suggest their 15,000 - 20,000 Xbox studios staff would cost them more than $2+ billion a year. Plus third party support studio costs, plus marketing, plus infrastructure etc. on top of the 'over a $1 billion' for 3rd party games.
Of course they make money from other avenues too like game sales, DLC, MTX etc. and Game Pass is a good driver for the platform, it builds the brand. But it's hard to see on it's OWN how it's profitable if they only make $2.9 million from it without some creative accounting.
EDIT: that $2.9bn figure was from 2021. When they had less subscribers, more loopholes to get it cheaper and before the price hike. It's likely more than that now. But ABK and Zenimax just added at least $1.5+bn to the annual expenditure since then.
@themightyant Starfield would have increased that fairly significantly, as well as purchased Xbox consoles since. Maybe not 40M, but close. Once Christmas hits I'm sure many of the new Xbox owners, or gaming PC owners, will likely sign up for the service and then there was the conversion of XBL into GPC. It wouldn't be silly to think that Game Pass has 60-70M total subscriptions across it's multiple tiers. The XBL conversion would've bumped it significantly.
He said over a billion, could be much further north for all we know. And companies are greedy, we all know the 3rd parties will keep asking for more.
@GamingSince84 I think those numbers are VERY optimistic. Subscriber growth starts to tail off after a while and new owners are FAR less likely to want to subscribe than early adopters.
Logically if you think someone is only just getting an Xbox 3 years into a generation then most of them are not as engaged and more likely to just want to buy the occasional game than be locked into a subscription service, they just don't play enough games to justify it. Of course some will want still game pass, but it will be an ever diminishing percentage the further you go into a generation, especially once saturated.
As for Starfield, I am sure there was a sizeable uptick in subscribers at release, but whether people stay subscribed in great numbers after is far more dubious. Again some will, but getting people to stay subscribed becomes harder and harder. This is the gist of the internal emails we saw that showed Xbox subscriber growth had ground to a halt, instead there is just a constant churn of subscribers, people joining, but people leaving. (It's the same story on PS+, Switch Online etc. which are all quite static, or even shrinking. It's wrong to assume it's always expanding)
Lastly re: total subscribers: The last Xbox Live Gold announcement was 11.7 million in April 2022. I think they would be lucky to have 45-50 million MAX overall, which is still super impressive, but way short of your 60-70 million. If they had hit any of these larger landmarks do you not think they would have publicised it?
Gamepass is wild. It is a win-win-win scenario. Xbox profits, publishers/devs profit, subscribers get an insane value.
I've been in ultimate for a long time now. I love having that entire library on my pc, rog ally, and both series consoles.
And I appreciate that. Best deal in gaming and I'll continue to stay subscribed. Keep it up, Phil!
I've got a suspicion that Microsoft's long-term plan for Game Pass is for Microsoft and its subsidaries to be the sole provider of AAA games on the service — hence part of the reason they're acquiring so many AAA developers — with indie games making up the rest of the library. If they're looking to reduce how much they spend on Game Pass directly while maintaining the same draw, that's one way to do it anyhow.
It's insane how much Xbox is spending just to keep us gamers happy! Xbox indeed is the ultimate place to be as a gamer.
Gotta love Game Pass. I for one have no doubt the service is profitable at this point and the great thing about sub services like this, is that any additional new members at this point is basically all profit, unless they decide to spend more as time goes on.
Deals like ABK and Bethesda make so much sense when looked at through Game Pass glasses. You want as much content as possible on the service to be owned in house since 3rd party deals are so expensive. That’s why Netflix started making their own shows and movies, as the cost of leasing content was skyrocketing.
And given how many studios MS owns now, they are well on their way to having a steady stream of first party content. They spent a pretty penny on Bethesda and ABK, but it’s absolutely worth it given what MS is trying to do. These companies should be very profitable for MS right from the get go.
@themightyant
“new owners are FAR less likely to want to subscribe than early adopters.”
I’m curious how you’re coming up with that? I don’t see it that way at all. In fact, I know 3 people personally that finally bought a Series X this Black Friday and the first thing all 3 did was sign up. In fact, Game Pass was a large reason why they purchased the console in the first place. There is just as much reason for someone just buying the console today to sub as someone who bought a console on day 1. There are no early adopter perks for Game Pass.
I have never seen any evidence presented that shows that people that buy into consoles after what’s considered the early adoption phase are less likely to be interested in subscription services, let alone FAR less likely, or that there is any correlation at all to when one buys a console and one’s overall interest in sub services. regardless of wether it’s Sony or Xbox.
On a different note, Eurogamer posted the same article and boy, the comments section contains more acidic vitriol than a Xenomorph's open wound🤣🤣. People really hate GamePass there.
It's funny to see some people rage over gamepass. It's good value and profitable get over it!
Napkin math suggests that if they reached the goal of 40 million users, they'll net 7.2 buh-buh-billion buckaroos from game pass alone!
Definitely throw one of those billions back into the machine! Heck, throw a couple.
I got Gamepass when I bought the S and never looked back… just swamped with new games
@GamingFan4Lyf It was leaked via LinkedIn that there were over 30 million subscribers in August. In September they beat a new subscriptions record thanks to Starfield and that's really impressive because they had removed the £€$1 offer. Then you have to add the Game Pass Core/Gold subscribers and you get the numbers that @GamingSince84 posted. All of that before the ABK games!
@OldGamer999 or just crate 10 studios with that money and make 20 games
@TakeItEasy
But it’s far more kudos getting GTA 6 GP day one.
@OldGamer999 what the benefit for xbox??? Paying rockstar??? Most poeple will still buy the game on ps5 or pc or even xbox as its a game that poeple will play +200h same as with starfield that sold very well despite being on gamepass!!
@Banjo- @Gamingfan4lyf : That's essentially how I put together the number I estimated. It's totally possible to be a little more, or a little less, but it's likely within that neighborhood.
@GamingSince84 Yeah, a little more or less but it's about that.
@TakeItEasy You are right. Paying a huge fortune for offering GTA VI on Game Pass for 6-12 months doesn't make any sense. It would make more sense financially to acquire the company, but that's not what Microsoft would do now, because they're going to put the other heavy hitter, Call of Duty, as soon as possible on Game Pass. That's why they acquired a huge publisher.
They should put there only their own games in the "day one" mode, while third-party games with a delay, e.g. 6 months. I guess players don't need access the games immediately and the official games pass ultimate price could be more affordable.
@Ssoltek I am happy to play third-party games later on Game Pass. I have saved a lot of money like that and it's not that we don't have anything to play in the meantime! I have played games that I didn't know if I'd like them and I loved them with zero risk.
@themightyant But as you said, DLC, microtransactions, and other additional subscriptions.
I keep telling people, stop hoping, WoW will continue to charge its monthly fee as usual, even when fully integrated under Microsoft, same way as Elder Scrolls Online and Fallout 76 still charge for their premium MMO modes.
They will also make a ton of money from CoD on microtransactions alone, not to mention the mobile games.
At the end of the day, MS is not in this for charity, I am sure they are more than breaking even.
RIghteousNixon wrote:
Several ways. Firstly Microsoft's leaked emails stated subscribers have slowed to a crawl. Same on PS+ where it is actually staying about the same or even losing a few subscribers, so much so that Sony's investor documents actually stopped showing PS+ subscribers for the first time in years - they're fine btw at a relatively static 47 million.
Second, it's the same with ALL subscriber services not just gaming, Netflix, Disney, Prime, Spotify etc. you see rampant growth at the start that then tails off, THIS is the model, it gets harder and harder to convince late adopters to subscribe and early adopters to STAY subscribed. There is constant churn and they can't sustain the consistent subscriber growth they are after. What you usually see instead to sustain that growth is price increases. Which Game Pass, PS+, Netflix, Prime, Disney, etc have ALL done recently, and will do again in a few years if profit growth can't be sustained through other means.
Lastly, logic. Early adopters who are entrenched and engaged with the product, willing and able to buy day 1, are more likely to invest both time and money into a platform than those coming later. This has always been the case.
I have no doubt that some users, including your 3 friends got an Xbox because of Game Pass, but they aren't representative of the larger whole. The churn rate - players unsubscribing v players subscribing - is about neutral, and most data shows growth has slowed or stalled.
Tharsman wrote:
As a whole we KNOW Xbox are doing "more than breaking even", they are turning a very healthy profit, we can see this in their financials.
But whether Game Pass is profitable on it's own is far more dubious, which is what we were discussing on the side. But it's a long term strategy. Just as Netflix, Prime, Spotify etc. made loss after loss aiming for big gains in the future, Game Pass was likely the same.
While it's hard to separate what constitutes Game Pass profit, as it drives other sales by bringing players to the platform, it doesn't operate in a vacuum, most napkin maths makes it very hard to balance the numbers.
EDIT: We KNOW the previous model, selling Games, DLC, MTX separately is very profitable, and I have no doubt Game Pass can also be profitable, but crucially I don't think it can be AS profitable without huge numbers of subscribers. I agree with you that companies aren't charities and are looking to turn a profit, but this is exactly the point. If they can't make the same money from Game Pass that they would otherwise, then they will look at other ways of making that profit, including price increases, day 1 / -5 editions, DLC, MTX etc. which is exactly what we ARE seeing and will continue to see more of, further monetisation.
TLDR: If Microsoft can't tap into that "2 billion players" they talk about and keep increasing subscriber numbers the only alternative is things like price increases, which as a Game Pass fan I don't want. That is why stalling subscriber numbers should be a concern.
@AlwaysPlaying Same here mate. I've had my Series S just over a year now with GamePass and have absolutely loved it. I haven't purchased a single game, all played from GamePass. I am thinking of upgrading to the Series X next year though.
Presumably that will come down over the next few years as they fill the service with first party content and the amount needed to pay for third party games decreases.
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