Microsoft acknowledges that Xbox Game Pass 'cannibalizes' game sales

In the past, the CEOs of Xbox and Take-Two Interactive have argued that subscription-based services don't hurt game sales.

'One step forward, two steps back' seems to be the current company motto at Microsoft. Since last year, the tech conglomerate has been engaged in a never-ending battle with Sony and the UK Competition and Markets Authority over its impending acquisition of Activision Blizzard.

In the CMA's most recent preliminary report on the controversial deal, Microsoft admitted that adding games to its subscription service, Xbox Game Pass, results in a decrease in sales of those games.

Here is a section of the 277-page report:

Microsoft also submitted that its internal analysis shows a [redacted]% decline in base game sales twelve months following their addition on Game Pass.

According to the UK CMA, Microsoft's admission possesses significant consequences for Activision. The addition of the latter's games to Microsoft's subscription services could lead to a decrease in regular game sales, which are currently a major source of revenue for the game developer. Furthermore, the report establishes that Activision has long opposed the addition of its titles to any subscription service, as doing so would "severely cannibalise B2P [buy-to-play] sales, particularly in the case of newer releases."

Microsoft Acknowledges That Xbox Game Pass 'cannibalizes' Game Sales

On the other hand, the UK CMA believes that multi-game subscription (MGS) services like Xbox Game Pass will likely remain a smaller part of console gaming offerings when compared to B2P games. Take-Two Interactive CEO Strauss Zelnick has also shared the same opinion in the past, saying:

That's because of the way people consume it, and the price point for owning a title, which is very reasonable and very low, actually, on a per-hour basis. So I think it's unlikely that subscriptions supplant frontline videogame sales as the primary business model.

In 2018, Phil Spencer, the CEO of Xbox, rubbished claims that Game Pass affected the sales of games, stating:

When you put a game like Forza Horizon 4 on Game Pass, you instantly have more players of the game, which is actually leading to more sales of the game. You say, 'Well isn't everyone just going to subscribe for $10 and go play this thing?' But no, gamers find things to play based on what everybody else is playing. Some people have questioned that, but when State of Decay 2 launched, you saw if you looked in the US at the NPD you saw this game selling really well the month it launched on Game Pass.

The greatest concern with Xbox's subscription-based service is the inclusion of the Call of Duty franchise on Game Pass. With the franchise being one of the best-selling video game franchises of all time, adding future titles to Game Pass could hurt Activision's sales. The UK regulator has already suggested that the franchise be excluded from the deal.

Call of Duty is the fourth best-selling video game franchise of all time.

All we can do is wait until April when the UK CMA is expected to conclude its findings and release its final report on the proposed $69 billion acquisition.

Speaking of Call of Duty, multiple insiders have disclosed that Sledgehammer Games is in charge of developing the next Call of Duty game that Activision is currently working on. According to reports, the game will be released this year.

Caleb Sama

I'm just your average Joe Schmo with a love for films and a knack for writing. I can tell you all about the latest blockbusters and indie flicks, but I'll also sneak in some obscure references and dad jokes that will make you groan and roll your eyes. My reviews are like a box of chocolates - you never know what you're gonna get, but you'll probably want more. Link up with Caleb on Steam.
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