- Microsoft's Game Pass service has become a significant revenue generator for the company, earning around $231.5 million in April 2022.
- The numbers for the Game Pass can only have grown since as the Game Pass has since become more expensive and popular.
- It remains to be seen if Microsoft will become more open to revealing the numbers for the Game Pass in the future.
Microsoft is a major player in the gaming industry, known for the Xbox and online services like the now-defunct Xbox Live Gold. However, in recent years, the company's Game Pass subscription service has become a revenue generator. Data from the FTC v Microsoft federal case confirms some of the details about this revenue.
As per the released information, Xbox Game Pass on console made $2.9 billion in revenue in 2021. In the month of April 2022 alone, it reportedly generated around $231.5 million in revenue. This calculation is based on the subscription price of the Game Pass costing an average of $9.26 per user, which aligns closely with the original subscription cost of $9.99/month.
With approximately 25 million subscribers by January 2022, this indicates significant revenue for Xbox Game Studios - Microsoft's gaming division.
The newly revealed numbers give us insight into the demographics of the subscribers. A meaty chunk of the Game Pass subscribers are on the Xbox One and Xbox Series S/X with 21.9 million of the 33.6 million console subscribers as of April 2022 using Game Pass. PC subscribers accounted for around 3.1 million of the total Game Pass users. This distribution is further supported by the fact that the majority of Xbox Game Pass subscribers are paying the full price for their subscriptions.
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.
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.