By Sagar V. Mankar Microsoft’s Game Pass subscription service, which offers gamers access to hundreds of titles for a monthly fee, reportedly costs the tech giant a staggering $1 billion annually to secure third-party games. This figure, revealed in a Bloomberg, highlights the company’s significant investment in maintaining its position in the gaming industry.
Game Pass was introduced in June 2017 with the promise of delivering a vast library of games at an affordable price. Since its inception, Microsoft has partnered with major publishers like Ubisoft, Sega, and EA. Notably, the EA Play library is bundled with Xbox Game Pass Ultimate and PC Game Pass, adding further value to the subscription. Additionally, the platform often features indie games launching on the service on their release day, making it attractive to a broad audience.
However, the Game Pass model has sparked debates within the gaming industry. Critics argue that it may reduce traditional game sales, a claim Microsoft has consistently refuted. According to the company, Game Pass subscribers tend to spend 50% more on games compared to non-subscribers. Despite concerns, the model appears beneficial for indie developers, as Bloomberg’s report notes. Microsoft’s upfront payments—millions of dollars in some cases—combined with a share of subscription revenue, provide smaller publishers with financial stability and exposure that might otherwise be unattainable.
The service’s sustainability has also been questioned, given the $1 billion annual expenditure. Yet, Game Pass has demonstrated steady growth, reaching over 34 million subscribers as of February. This marks a significant increase from 22 million subscribers in January 2022. However, the figures include Xbox Game Pass Core members (previously Xbox Live Gold), reflecting Microsoft’s effort to integrate its services more cohesively.
To boost revenue, Microsoft has introduced strategic changes, including raising subscription prices and launching a new $14.99/month Xbox Game Pass Standard tier. This tier excludes day-one access to new first-party titles, potentially catering to a different segment of gamers. Furthermore, partnerships with Samsung and Amazon have extended Xbox Cloud Gaming to TVs, broadening accessibility.
Despite these efforts, Microsoft’s gaming division faces challenges. The company’s $68 billion acquisition of Activision Blizzard and layoffs affecting over 2,600 employees this year have drawn scrutiny. Bloomberg’s report notes that the Xbox business operates under demanding revenue and profit expectations, reflecting the high stakes in maintaining its competitive edge.