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Game Pass is not profitable yet - Tom Warren
- Thread starter Rolla
- Start date
No, Microsoft reports the monthly active subscribers, not the total users that have signed up throughout the lifetime. Suggesting otherwise is pretty conspiratorial.
As Warren mentions, it's still in growth mode. I don't know why people are so hung up on it being profitable at the moment. If Microsoft wants to keep pumping in value to drive growth, that just benefits me. I'm riding that gravy train for the next 4+ years.
They still have huge revenue from the service and it will only continue to grow.
As Warren mentions, it's still in growth mode. I don't know why people are so hung up on it being profitable at the moment. If Microsoft wants to keep pumping in value to drive growth, that just benefits me. I'm riding that gravy train for the next 4+ years.
They still have huge revenue from the service and it will only continue to grow.
I think people are hung up on profits because if there is no return eventually the mothership will pull the plug.
kyussman
Member
How many subs do they need to make profits from this anyway.....they keep putting fresh third party games on there,and now they have a load of first party studios making games for it(and making games these days is expensive).....like,they must be spending so much money filling this service up with content.
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DeepEnigma
Gold Member
Arun1910
Member
I also wonder this.
I don't understand how this can be profitable... ever.
If someone could explain then that would be nice.
I just don't see how MS can pay so much money for games to be on there yet charge a small fee to gamers. Where is the investment return?
Mattyp
Gold Member
Is this guy high? All they do is provide revenue to share holders for gaming. Does he want it broken down even further with just gamepass revenue? He has access to Microsoft contracts to what they pay developers? Because if egs is anything to go by which is outright ownership of games it’s a lot less then we think.
You don’t know nothing Tom Warren, it’s fine lad. Just don’t get upset on Twitter about it.
You don’t know nothing Tom Warren, it’s fine lad. Just don’t get upset on Twitter about it.
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Punished Miku
Gold Member
It could be profitable, as that's a lot of money. But I guess they're still focused on heavy investing and shooting for profitability at higher sub counts, which is the right call honestly. Most things at this kind of scale take heavy losses for a while.
Honestly, it's lack of profitability kind of highlights how this may be one area of gaming that MS is uniquely suited for compared to its competitors. I doubt Sony or Nintendo would be fine operating like that, but MS can. We'll see if it pays off down the road. If they manage to get some good exclusives coming out a few times a year, they already have good services and a good system.
Honestly, it's lack of profitability kind of highlights how this may be one area of gaming that MS is uniquely suited for compared to its competitors. I doubt Sony or Nintendo would be fine operating like that, but MS can. We'll see if it pays off down the road. If they manage to get some good exclusives coming out a few times a year, they already have good services and a good system.
Punished Miku
Gold Member
What is $15 x 23 million? That's your budget monthly from just Gamepass, with zero deficit spending, and without counting any other revenue streams. The more the sub count goes up, the more money they get. Their sub count could easily double by the end of the gen if they manage some big exclusives.
Men_in_Boxes
Snake Oil Salesman
I was told GamePass actually increases game sales by knowledgeable people on NeoGAF.
Outrunner
Member
That's not net profit, they have to pay third parties to put their games in there, they have to invest in creating games to put there, they have costs with maintaining the infrastructure of the service. They need to get a lot more users than 25M to make profit out of it.
TheDreadLord
Member
A lot of tech companies stay unprofitable for many years. No surprise here but it seems that people can’t figure that out.
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Punished Miku
Gold Member
Yes, I know. I'm just saying, systems are still supply constrained for the most part. The sub count will go up, and probably significantly go up once Bethesda and other studios start dropping major games on day one on the service.
reinking
Gold Member
I gu
I believe there is a bigger question here than if Game Pass subs are profitable. MS recently put out numbers that indicated Game Pass users spend 20% more on games and content. Maybe Game Pass remains a loss leader if they can generate more income and interest on the backend.
Nope. How many people are paying $15 per month?
I believe there is a bigger question here than if Game Pass subs are profitable. MS recently put out numbers that indicated Game Pass users spend 20% more on games and content. Maybe Game Pass remains a loss leader if they can generate more income and interest on the backend.
Rossco EZ
Member
yeah i don’t think that’s how it works you are forgetting about funding for developing there first party games and deals they do with 3rd party’s. just because you say $15 x 23million it isn’t profit, i can see it making a profit one day but i feel like they have to be at least 2x-3x the subs they have now
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OverHeat
« generous god »
Why do it matter to me as a user if it’s profitable or notI already hear the defenders coming.
Rolla
Banned
Given the estimated 70 Million console sales disparity between XBOX and Sony I imagine that when XBOX approaches a publisher, they need to negotiate the potential loss of sales on PS. I mean, publishers have their own projected sales and targets, right?
nowhat
Member
Yes, but only by knowledgeable people on NeoGAF, and there really aren't that many.
Dabaus
Banned
I was thinking last night, once PS5 and to a lesser extent Switch 4k or whatever cross a certain threshold of sales, say 20-25 million, all this gamepass talk is going to disappear real quick. Whenever we get public data about game company financials its usually at least 50 percent of revenue comes from playstation alone and profits are at record levels for most of these companies. Theyre not going to ruin a good thing and bite the hand that feeds them. They may take their chump change gamepass offering for now but once the market leader is established, and we all know who its going to be, its going to be business as usual barring some unforeseen catastrophe. In my opinion.
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Punished Miku
Gold Member
Did you notice that I never used the word profit in my post? Weird!
Rossco EZ
Member
so you agree it’s a loss, thanks.
I'm not sure that makes sense? They would want to cover the potential loss of sales on the Xbox side. Your assumption is that a user has both an Xbox and a PlayStation and because of Game Pass they play it on Xbox, instead of buying on PS, no? But that's no different than if they just had an Xbox.
However, if the game is Cloud enabled then yes that may muddy the waters if the user only plays via Cloud instead of via a 60 or 70 dollar copy. I figure that comes into play and why some games aren't on Cloud.
StreetsofBeige
Gold Member
NF makes profit since 2003 when they were even spending money shipping DVDs by mail. And right now, NF has somewhere between 5000 and 10000 TV shows and movies depending on which site you believe and NF even does their own content.
It's all about critical mass of revenue vs costs. GP has only been around since June 2017. Hasnt even reached 4 years yet. They are in growth and promotion mode.
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Javthusiast
Banned
Disney+ is also not profitable yet. Like many other Services. Hell isn't google constantly saying yt is barely or not at all profitable?
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Currently it may be. But in 3 years if Game Pass hits 60 million subscribers that's a presumed $600M+ a month in revenue. The speculated 343i Halo Infinite budget is $500M (which I think is a little inflated, but I digress). In theory, MS would have made that cost from the past 7 years back in a month and have $100M left to throw around. With enough first party studios, they can release games on a regular cadence to keep people subscribed and rely less on 3rd party deals.
But, they can get those 3rd party deals just fine with the revenue coming in. With the hypothetical 60M subscribers that's $7.2B in revenue per year from Game Pass alone. In addition to all those fortnite skins and other sales like COD and FIFA. That's why it's in the growth stage. Eventually, it'll be bringing in a ton of money and that's what Microsoft is betting on.
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Men_in_Boxes
Snake Oil Salesman
The majority of revenue/profits come from microtransactions, not game sales.
That trend is only going to continue widening going forward.
Markio128
Member
Game pass numbers will shoot up when more MS exclusives are added, such as Halo and Bethesda games, etc,. However, I feel like the service will then be cannibalising their own sales of games. Fortunately, MS have mountains of money, so it won’t matter. I think it’s fair to say that this business strategy only suits those that can take the losses. Ninty and Sony would probably be out of business by now if they were selling their exclusives for a minimal monthly fee.
Punished Miku
Gold Member
Yes?
kingpotato
Ask me about my Stream Deck
One service model is designed around reaching critical mass with a loyal steady subscriber base and then raising rates. I'm guessing they don't trust all these people who subbed with discounts for multiple years to do that yet.
rickybooby87
Member
The XBOX division is in a state of transformation at the moment. Clearly, they've never made any money on hardware, and GamePass isn't profitable (Licensing agreements with IP holders, infrastructure costs, etc). The more GamePass grows, the more infrastructure you gotta sling at it (Money).
If they didn't take a 30% cut of sales, XBOX wouldn't be profitable. There was talks of going to an 88/12 model, but I guess that would probably put them squarely in the red.
Eventually, Microsoft is only going to offer titles that MS publishes on GP, and hopefully, offer that service everywhere. We're witnessing the transformation to being a publisher, and I don't think anyone should be surprised or defensive about that.
If they didn't take a 30% cut of sales, XBOX wouldn't be profitable. There was talks of going to an 88/12 model, but I guess that would probably put them squarely in the red.
Eventually, Microsoft is only going to offer titles that MS publishes on GP, and hopefully, offer that service everywhere. We're witnessing the transformation to being a publisher, and I don't think anyone should be surprised or defensive about that.
Zoro7
Banned
Same reason why Sony’s agreement with Epic matters.Why do it matter to me as a user if it’s profitable or not
levyjl1988
Banned
These companies are just going to stay on course. Like Amazon and Netflix nothing was built over night. Eventually there will be a dramatic increase. No one really can enter the gaming landscape and dominate, its pretty much known as fact that you have to be either Nintendo, Sony, and Microsoft to dominate the gaming landscape. It is too late for google, amazon, walmart, apple to try anything, if anything they can just be stores for mobile games, but mobile games will never be considered AAA because of the monetization and exploitative tactics. It is unfortunate that we still get that in consoles.
SlimySnake
Flashless at the Golden Globes
Netflix wasnt profitable for more than a decade. these things are an investment.
prinz_valium
Member
Github is profitable, yet they don't share revenue and profit figures with shareholders.
Skifi28
Member
I've always been wondering about that. This statement in itself doesn't say much. Is gamepass making people spend more money than they normally would, or is it that the hardcore (for lack of a better word) users that were already spending more money are those most likely to also invest on a monthly subscription?
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