In a landmark report on the state of Microsoft and Xbox, Bloomberg delves deep into the impact of its Game Pass subscription service. It’s not everyone’s cup of tea, and it’s received mixed reviews from developers over the years, but one surprising statistic from Bloomberg’s article shows just how invested Microsoft is in the platform.
The tech giant reportedly spends $1 billion a year adding third-party games to Game Pass, often spending millions more just to sign and finalize contracts.
‘Promise of Exposure’
A massive report by Bloomberg’s Dina Bayes and Cecilia D’Anastasio explores everything from the recent spat between Microsoft and the CMA to the potential of a handheld Xbox device.
At one point, the conversation centered primarily on Sarah Bond’s Xbox presidency, but then shifted to Game Pass, offering a glimpse into what a subscription service could have been like before it emerged as a massive endeavor with a modest library and low prices that put a huge strain on Microsoft’s coffers.
It was a paradigm shift for Microsoft, where instead of relying on one big launch to generate significant revenue, they built something that would see value grow over time. That’s what Sarah Bond was talking about when she talked about changing the operating model.
Managing network effects is different from maximizing the value of a single game.
Bloomberg notes that Microsoft is spending a whopping $1 billion a year to bring third-party games into its Game Pass ecosystem, which it recently modeled as a “play anywhere” system that goes beyond simple home consoles.
Game Pass has also been a big adjustment for publishers: To sweeten the deal, Microsoft now spends $1 billion a year buying third-party games from its subscription service.
This generous measure was enough to attract smaller publishers, who offered them a flat fee of several million dollars up front to include their titles and receive a share of the subscription revenue. The promise of exposure you wouldn’t otherwise expect.
Inflation has caused Game Pass to rise in price recently, and the games that dominate its library have changed, but its power as a subscription-based product is unquestionable. And that concept looks set to improve. Next month, the first Call of Duty game will grace the service in the form of Black Ops 6.
We already offer a wide range of services to gamers around the world by integrating titles from Ubisoft Connect and EA Play services, and we continue to improve.
With Sarah Bond and others at Xbox so confident in the product and their willingness to move away from console gaming, it’s only a matter of time before a seamlessly connected Game Pass experience becomes a top focus for the company.
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