In the wake of the Microsoft layoffs that occurred last week, consumers are growing increasingly wary of potential massive changes that might come to the gaming landscape. This environment has reignited discussions about Xbox Game Pass and whether the low-cost service offered to Xbox gamers is actually profitable and sustainable, both for gamers and publishers. The conversation has been brought up time and time again when Xbox Game Pass is in the spotlight, but now, subscribers and critics may finally have answers to their questions.
Journalist Christopher Dring, the editor-in-chief of The Game Business, clarified the profitability of Xbox Game Pass while citing sources Dring was familiar with.
One contention Dring sought to address was the fact that Xbox may not include first-party costs when assessing the profitability of its service, meaning its previous assertions of profitability might not be completely accurate.
“I asked for clarification on the ‘Game Pass is profitable’ claim, and was told no first-party costs are included,” Dring wrote in a July 6th X post.
In the new July 8th thread, Dring argued, based on sources, that even when factoring in the revenue loss first-party teams experience by missing out on unit sales and other purchases, the service is profitable overall.
“But regardless to all that. sources have reached out to tell me that even when you include lost revenue associated with first-party party games (not just unit sales, but microtransactions), Game Pass is still profitable. So… that’s great,” wrote Dring.
Dring also addressed questions of first-party development costs, stating while they are not factored into assessing Xbox Game Pass profitability, they are recouped through other means, such as microtransactions and DLC.
Xbox Game Pass has been the target of recent criticism as the gaming landscape transitions into more service-based gaming experiences and models while seemingly undergoing a period of difficulty. Raphael Conlantonio, Founder of Arkane Studios (Dishonored) and President & Creative Director of Wolfeye Studios, jumpstarted a discussion around Xbox Game Pass on July 5 with an X post calling out the negative consequences of the service.
“Why is no-one talking about the elephant in the room? Cough cough (Gamepass),” wrote Conlantonio on X.
In follow-up posts, Colantonio expressed his contention that Xbox Game Pass was an “unsustainable model” that had been “increasingly damaging the industry for a decade.” He saw the service as being sustained instead by Microsoft’s “infinite money,” which Colantonio believed was responsible for killing the competition and harming the gaming space.
Xbox Game Pass skeptics have long been suspicious of the service’s purported profitability, citing the fact that many of its financial details have been kept private from the public. In 2022, Microsoft Gaming CEO Phil Spencer declared that Xbox Game Pass was “profitable for us” and that it generated 10-15% of the company’s content and services revenue. However, Spencer did not provide many details about how that profitability was accounted for, which skeptics might have hoped for.
Back in 2020, Microsoft’s Aaron Greenberg stated during a podcast that the service was “not a big profit play” in the short term but hoped things would improve in the long term. As gaming enthusiasts and consumers seek to identify the causes of recent difficulties in the space, it appears that the discussion surrounding services like Xbox Game Pass will be crucial to understanding what the future holds as the industry undergoes a significant shift.
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