Microsoft’s claim regarding Xbox Game Pass being profitable doesn’t include costs associated with first-party games, according to a new report.
Update: Christopher Dring has offered an update on his original information. According to sources familiar with the matter, Xbox Game Pass is profitable, even when lost sales for its first-party teams are factored in.
Original Story: Christopher Dring, editor-in-chief and co-founder of The Game Business, took to Twitter/X to respond to a conversation on whether Xbox Game Pass is profitable with some interesting findings. According to what he has learned directly from Microsoft, costs associated with the company’s game subscription business is fees paid to third-parties, marketing, service costs. By that measure, it is indeed profitable.
However, Dring mentioned that Microsoft doesn’t count the lost revenue that Xbox first-party studios are seeing as a result of Game Pass. He believes that if first-party studios received similar compensation, it may not be correct to say that the subscription service is profitable. Upon seeking clarification in this regard from Microsoft, he was told that no first-party costs are included in the assessment of Xbox Game Pass’ profitability. Some would argue that this metric is a questionable way to indicate profitability, especially given how the company recently laid off many Xbox employees and cancelled multiple projects.
Last year, Skill Up associate Edmond Tran had the opportunity to interview a series of anonymous game developers, and the overall takeaway regarding Xbox was that Game Pass has resulted in a behavioral shift that has led to very few sales on the platform. The general sentiment among developers is that the existence of Xbox Game Pass has created a vicious cycle. One such developer released an award-winning title on Xbox more than two years ago after initially releasing on other platforms. They mentioned that their game’s sales on Xbox have been the weakest. “It’s a bit like trying to sell a DVD to someone who uses Netflix. Sure, people still do that from time to time but you’re not targeting the right audience”, they said.
