Microsoft makes hundreds of millions every month from Game Pass

The changing dynamics of the Xbox ecosystem was also highlighted in the disclosed documents. The Xbox Live Gold service is being phased out, spelling trouble to its 11.7 million subscribers. Microsoft plans to shift these subscribers to a new Game Pass tier, however, which could potentially bring the total number of the service's users closer to 40 million if not even 50 million.

Keep in mind that plenty has gone right for Microsoft in the time that has passed since. While Redfall was a huge miss, Microsoft has enjoyed several must-play games since, including first-party titles like Hi-Fi Rush, Ghostwire: Tokyo, and Starfield, to other must-player games that were available on the Game Pass at launch like Exoprimal.

From an investor perspective, growth is often a more significant metric than profit. Microsoft's continuous push and its expansion of the Game Pass service highlight their focus on growth, even if it might operate at a loss. The rationale is that the rising market value of a service like Game Pass can outweigh the operational losses. Thus, by converting cash flow into asset value, Microsoft is increasing its asset worth even if the immediate cash flow is negative.

However, while Game Pass currently offers undeniable value to subscribers, concerns about its long-term impact on the industry are emerging. The shift from owning physical copies of games to digital-only access has already begun. Game Pass, while currently beneficial, could lead to future scenarios where access to games becomes more restricted and, in worse cases, monopolized, potentially resulting in increased subscription costs, mirroring trends seen in other digital subscription models like Netflix.

While Microsoft's commitment to inclusivity and affordability in gaming is commendable, the industry's future under a dominant subscription model remains uncertain. The potential for increased prices and reduced game availability could pose challenges. As seen with Netflix's price hike after establishing its market dominance, Game Pass could potentially follow a similar trajectory.

With the new Xbox Series S/X models and the next Xbox console all part of this massive plan, it's clear that Microsoft is still getting started with the Game Pass.

Ultimately, the Game Pass' growth and market dominance are undeniable, but its future implications for the video game industry is a cause for concern. As the digital transition continues, the balance between consumer benefits and corporate profit will be essential to watch.