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News How Xbox outgrew the console: inside Phil Spencer’s multi-billion dollar gamble

reksveks

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90% of GAF will say this is the most important metric.
personally think it's total revenue; obviously console sales is a cause of that but theoretically you could have no consoles (even hardware afaik) and still make the most revenue like the biggest gaming company in the world; Tencent i think
 

Sosokrates

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Is there any data to show that the Xbox GamePass subscriber growth isn't largely driven by Xbox console owners?

Have they released any data to show the numbers of GP users on PC or mobile via xCloud?

Assuming they haven't, it seems a little premature to conclude that console sales aren't important at all.

No one is saying console sales are not important, they absolutely are. But console sales alone do not determine total install base, and total install base is what's important.
 
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DaGwaphics

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Yeah, Xbox hardware doesn't make profits, its a loss leader. The profits (probably small) are all coming from the software and services associated to the console and now PC/Mobile.

And we should all be grateful to MS (and Sony too) for that. If they weren't subsidizing our asses, just think about what the PS5/XSX MSRP could be in this market.
 

ParaSeoul

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He sounds like a great guy. I want him inside me.
Big Eyes Wow GIF by TV4
 

Bernd Lauert

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Still amazes me that Phil's held in such high regard despite the fact that Xbox is still in a worse position than they were a decade ago.
Dude came on just after the utter debacle called Xbox One. He basically had a WiiU situation on his hands. And now he's turned it around. Although I'd say the article ommitts the involvement of Satya Nadella in this. He was a huge driver in all of this.
 

Hezekiah

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Great read, I like that Phil + xbox team are striving for innovation and evolving the industry.

At the end GQ mentioned that PS5 has sold more then series consoles, in isolation its a useless metric when judging a platforms success, "Xbox" is not just console now. Starfield is going to have more players and make more money then any PS5 exclusive that exists.
We've gone from sales aren't Microsoft's priority, to sales are a useless metric. Soon it'll be the less sales the better for Microsoft 😄.

And now Starfield is going to make more money than exclusives on other platforms, despite the fact that a good chunk of Xbox players will be paying for a cheap GamePass sub to play it, and the vast majority of PC players will play on Steam where 30% of the money goes to Valve 😄.
 
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kingfey

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Yes, that's exactly what the link to Axios above says :

"Xbox Game Pass subscriptions miss Microsoft’s target

Subscriber growth for Microsoft’s signature gaming service, Xbox Game Pass, was slower than the company hoped for in the past year,
according to a new financial filing."

Reading is hard.
It missed the target the executive wanted on. Its still reached higher numbers.
 

Papacheeks

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Dude came on just after the utter debacle called Xbox One. He basically had a WiiU situation on his hands. And now he's turned it around. Although I'd say the article ommitts the involvement of Satya Nadella in this. He was a huge driver in all of this.

But a lot of Software output and overseeing was under him as well. And though his hands were tied to money being spent. Projects/Studios underhim did not perform well regardless of the issues with the platform.

Wi U had issues with how it was being presented/sold, first party output was not an issue it had. Can't say the same for XBox which software and studio wise Phil oversaw for many years that predated XBox one era.
 

Sosokrates

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Whatever the metric you choose, Gamepass isn't setting the world on fire right now.

They just missed their subscribers growth target :

https://www.axios.com/xbox-microsoft-subscription-gaming-d047cf43-e9b4-4a33-bd25-1ab2c0ad9346.html

It doesn't mean it will ultimately fail, but it seems a bit early to claim this guy reinvented gaming.

If gamepass has 20million subs and each paying an average of $10/month
Thats a revenue of $2.4 billion/year that more revenue then the PS4 made from exclusives in its best year.
So the business model does work.
 

Chukhopops

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We've gone from sales aren't Microsoft's priority, to sales are a useless metric. Soon it'll be the less sales the better for Microsoft 😄.

And now Starfield is going to make more money than exclusives on other platforms, despite the fact that a good chunk of Xbox players will be paying for a cheap GamePass sub to play it, and the vast majority of PC players will play on Steam where 30% of the money goes to Valve 😄.
Skyrim also sold mostly on Steam and I assure you it made a lot of money despite only 70% of it going to Bethesda.

I don't know how people struggle so much with the idea that a strategy that focuses on several platforms (Xbox, PC, Cloud) would put less emphasis on console sales and more on total revenue, compared to a strategy that focuses only on one. It seems so obvious that I always question the abilities of people who don't get it.

Edit: Right now 4 out of 10 Steam top sellers are MS games (Forza, AoE 4, Halo and Elder scrolls anniversary). You think that's not a shitton of money just because Valve takes a cut?

 
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kingfey

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We've gone from sales aren't Microsoft's priority, to sales are a useless metric. Soon it'll be the less sales the better for Microsoft 😄.

And now Starfield is going to make more money than exclusives on other platforms, despite the fact that a good chunk of Xbox players will be paying for a cheap GamePass sub to play it, and the vast majority of PC players will play on Steam where 30% of the money goes to Valve 😄.
That is more platform than the other guy. While Sony 1st party is confined to ps5 numbers, X Series games will get steam sales. So in a sense, they make more money.

Sales dont mean nothing, when you dont have enough audience. You can have 100m, and only 20m will play it. Putting it on a service, which pays 10$ at minimum guarantees longer revenue.

For your math, If 1m from 20m gamepass users pay 10$ every month to play the game for 2 year, that is $240m from gamepass alone. Not counting Steam, xbox or anyone that buys the game.

This is reason why sales means jackshit. A game has 4-5 years life. For a service like gamepass, It can generate more money in the longer run. Because you are getting new subs every year. And these people will pay the sub to play these games.
 
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Bernd Lauert

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We've gone from sales aren't Microsoft's priority, to sales are a useless metric. Soon it'll be the less sales the better for Microsoft 😄.

And now Starfield is going to make more money than exclusives on other platforms, despite the fact that a good chunk of Xbox players will be paying for a cheap GamePass sub to play it, and the vast majority of PC players will play on Steam where 30% of the money goes to Valve 😄.
Oh no, not the 30%.

Oh No Eating GIF by Declan McKenna
 

Sosokrates

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We've gone from sales aren't Microsoft's priority, to sales are a useless metric. Soon it'll be the less sales the better for Microsoft 😄.

And now Starfield is going to make more money than exclusives on other platforms, despite the fact that a good chunk of Xbox players will be paying for a cheap GamePass sub to play it, and the vast majority of PC players will play on Steam where 30% of the money goes to Valve 😄.

Lol, no never said sales were a useless metric. Pretty pathetic u have resorted to making shit up now. Just because you dont like the reality of the industry.

Yeah, starfield will make more money then any PS5 exclusive that exists. I dont think sony even have a 1st party ps5 exclusive next year.
 

Rivet

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If gamepass has 20million subs and each paying an average of $10/month
Thats a revenue of $2.4 billion/year that more revenue then the PS4 made from exclusives in its best year.
So the business model does work.

That's not exactly the way it works though. Most people paid 1 dollar per month here to turn their Live Gold sub in GP ultimate. There's hardly any surprise they reached around 20 millions subscribers basically giving subs for free. Who would refuse that gift? The money MS makes from Xbox Live subs, they already had it before, it's like PS+ money.

They definitely aren't making profit on GP right now since most of the GP subs were basically free, which is totally normal in a loss leader strategy like that.

We'll see if the business model is ok in a few years, when people actually pay more.

There are tons of MS studios now, daily costs are huge. Nobody knows if it will work or not. Let's hope so. Competition is good for prices.
 
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kingfey

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Still amazes me that Phil's held in such high regard despite the fact that Xbox is still in a worse position than they were a decade ago. He seems like a good guy, and he's done great things for the userbase. However those gains have been made at immense cost in terms of investment, and like all investments their value can only be determined by dividends yielded over time.

Also, any discussion about Cloud gaming that omits Playstation Now despite it approaching its 9th year in operation is clearly pushing a very pro-MS narrative. Has this service been a resounding success? No, but it has accompanied a console business that has consistently been one over the same timespan.

Same deal applies to the tub-thumping over having "the world's most powerful console". Ok, that's a win when taken at face value, but in the real world is it catapulting sales to new heights? Is it providing drastically better performance and user experience on the same titles when compared to Sony's less powerful, likely cheaper to manufacture offering?

Sorry, hang Phil the gongs for his good works when gains are more than hypothetical. When they can brag about P/L as well as cash-flow, when there's evidence of competitive advantage in the marketplace over the direct competition. Because at the end of the day its not all about what you are doing, but what your competitors are doing when you are both vying for the same audience and the same income.

This is a work-in-progress situation, the auguries seem promising but claiming victory is a long way off.
Compare xbox one to xbox series console game list. Its day and night.

Things take time. But he gave xbox 1st party games, and focused on bringing games, which would have avoided xbox (Yakuza games).
 
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Sosokrates

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That's not exactly the way it works though. Most people paid 1 dollar per month here to turn their Live Gold sub in GP ultimate. There's hardly any surprise they reached around 20 millions subscribers basically giving subs for free. Who would refuse that gift?

The money MS makes from Xbox Live subs, they already had it before, it's like PS+ money.

They definitely aren't making profit on GP right now since most of the GP subs were basically free, which is totally normal in a loss leader strategy like that.

We'll see if the business model is ok in a few years, when people actually pay a lot more.

There are tons of MS studios now, daily costs are huge. Nobody knows if it will work or not. Let's hope so. Competition is good for prices.
Most people? Wheres your source for this information.
That $1 XBLG trick can only be done once, once an account has redeemed it you cant do it again and not everyone knows about it.
 
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ShirAhava

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Game Pass/XCloud is what makes the most sense for the era that we currently live in

Ten years ago I was very anti-streaming future but now that the quality of games has gone down overall I do not really mind it

Modern games are mostly microwavable cash grabs you don't want leftovers and you wont want to save the packaging it came in

"You will own nothing and be happy" - NewWorldOrder™

Not to sound like a console 'combatant' (I have no dog in that fight..I'm mostly a retro gamer at this point) but anything would be better than paying $70 for Super PS4 Pro cinematic games with very little replay value when the hype/shortages die down I'm not quite sure how well that business model will hold up I predict a "monkey see monkey do" moment where the laughable PS Now is revamped into a "PS PASS"
 

Bernd Lauert

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Most people? Wheres your source for this information.
That $1 XBLG trick can only be done once, once an account has redeemed it you cant do it again and not everyone knows about it.
People here vastly overestimate how many people use such "tricks". The front load (150+ dollars) or so is too much for many, many people. The great thing about subscription services is that you have to pay only 10-15 dollars at a time. That's how the vast majority of people use them.
 

Papacheeks

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Game Pass/XCloud is what makes the most sense for the era that we currently live in

Ten years ago I was very anti-streaming future but now that the quality of games has gone down overall I do not really mind it

Modern games are mostly microwavable cash grabs you don't want leftovers and you wont want to save the packaging it came in

"You will own nothing and be happy" - NewWorldOrder™

Not to sound like a console 'combatant' (I have no dog in that fight..I'm mostly a retro gamer at this point) but anything would be better than paying $70 for Super PS4 Pro cinematic games with very little replay value when the hype/shortages die down I'm not quite sure how well that business model will hold up I predict a "monkey see monkey do" moment where the laughable PS Now is revamped into a "PS PASS"

Here's the thing though, games get discounted within a couple months. Earlier this year you could get Demons souls and Returnal for less than $50. I saw ratchet on sale for $40 at bestbuy?

So I think the $70 pertains to early adapters.
 
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kingfey

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That's not exactly the way it works though. Most people paid 1 dollar per month here to turn their Live Gold sub in GP ultimate. There's hardly any surprise they reached around 20 millions subscribers basically giving subs for free. Who would refuse that gift? The money MS makes from Xbox Live subs, they already had it before, it's like PS+ money.

They definitely aren't making profit on GP right now since most of the GP subs were basically free, which is totally normal in a loss leader strategy like that.

We'll see if the business model is ok in a few years, when people actually pay more.

There are tons of MS studios now, daily costs are huge. Nobody knows if it will work or not. Let's hope so. Competition is good for prices.
The fk? when did the 1$ trick become just 1$? Are you telling me, people who paid 180$ for xbox live, paid 1$ to get it, And not that 180$ upfront?

Please stop spouting nonsense. The business model works. Netflix, hulu, disney+. As long as there are tons of people willing to pay 10$/15$ monthly, The service would be viable.
 

ShirAhava

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Here's the thing though, games get discounted within a couple months. Earlier this year you could get Demons souls and Returnal for less than $50. I saw ratchet on sale for $40 at bestbuy?

So I think the $70 pertains to early adapters.

Fair point I just hope they never go all digital because those sales rarely hit sonys online store
 

Sosokrates

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The fk? when did the 1$ trick become just 1$? Are you telling me, people who paid 180$ for xbox live, paid 1$ to get it, And not that 180$ upfront?

Please stop spouting nonsense. The business model works. Netflix, hulu, disney+. As long as there are tons of people willing to pay 10$/15$ monthly, The service would be viable.


And not everyone would of gone for 3yrs, $180 is a lot for most people to spend on a sub service in one go, i just did it for 1 year, which i regret.
 
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kingfey

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And not everyone would of gone for 3yrs, $180 is a lot of most people to spend on a sub service in one go, i just did it for 1 year, which i regret.
I regret spending 100$ upfront for gamepass. I could have used that money, since the 15$ a month would mean nothing, due to the paycheck, and I can stop buying 3x meal for 3 weeks, to make up that money.

180$ is alot of money to waste, for people who get 2k a month. That is gas and electricity money.
 

Genx3

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What?

Both PS Now and EA Access predate gamepass.

What's the author smoking?

That's very similar to people saying that Apple invented the Smart phone.

Blackberry and Palm had smart phones first but Apple's Smart Phones were so much better that Apple was given the credit.
Apple's quality made them popular.

Same thing with Game Pass.
They weren't the first but they are by far the best and so the popularity of gaming subs has gone way up with the introduction of Game Pass.
 
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MacReady13

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Great read, I like that Phil + xbox team are striving for innovation and evolving the industry.

At the end GQ mentioned that PS5 has sold more then series consoles, in isolation its a useless metric when judging a platforms success, "Xbox" is not just console now. Starfield is going to have more players and make more money then any PS5 exclusive that exists.
I remember the days when innovation and evolving the industry was ALL about making better and more creative games. Now it’s about how many people can play games on devices that people ALREADY play games on…
 

Boss Mog

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I fear Gamepass is going to pull a Netflix. Seems like a great deal at first to get people to sign up then they'll jack the price a buck or two per month every year or two til you realize you're paying more than double what you started paying when you signed up. If the price stays at $12.99/ month for Ultimate for the duration of this gen, I'll be really surprised.
 
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Hezekiah

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Skyrim also sold mostly on Steam and I assure you it made a lot of money despite only 70% of it going to Bethesda.

I don't know how people struggle so much with the idea that a strategy that focuses on several platforms (Xbox, PC, Cloud) would put less emphasis on console sales and more on total revenue, compared to a strategy that focuses only on one. It seems so obvious that I always question the abilities of people who don't get it.

Edit: Right now 4 out of 10 Steam top sellers are MS games (Forza, AoE 4, Halo and Elder scrolls anniversary). You think that's not a shitton of money just because Valve takes a cut?

30% is a lot to be giving up. More importantly though you're missing the point in your eagerness to respond - the point made is that it would make more money than any PS5 exclusive. Where did I say these games weren't making money..?
Oh no, not the 30%.

Oh No Eating GIF by Declan McKenna
"Sales arent important".
Also "Returnal bomba", "Demon Souls bomba" on every Playstation thread 😅😅
Lol, no never said sales were a useless metric. Pretty pathetic u have resorted to making shit up now. Just because you dont like the reality of the industry.

Yeah, starfield will make more money then any PS5 exclusive that exists. I dont think sony even have a 1st party ps5 exclusive next year.
Yes you only said you it not the only metric for success (which makes me wonder why things aren't more transparent then).

The great thing about saying nonsense like Starfield will make more money than any PS5 exclusive is that you don't even have to back it up. MS doesn't announce sales figures, barely mention GamePass subs either. So you can just make up any old crap and say it was true lol.
 
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IDKFA

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Subscription and streaming combined will reinvent gaming, and it's all thanks to St Phil and Xbox spearheading this revolution.

However, if they really want to completely change the gaming landscape forever and own it, they need to make more radical changes.

There's no point saying how subscription and streaming are the future when all Xbox games are available to purchase on the Xbox store and on Steam. Absolutely fucking nonsense business there. Make all Microsoft games Gamepass exclusives.

Want to play the next Fable? Only possible with a GP sub. How about the next Halo? No GP sub then you're not playing. To keep people subbed, they also need to lock existing libraries to Gamepass subscriptions, which would force people to pay every month.

Do that, and eventually it'll kill off the physical and digital download market and everyone will be sub+stream only. That's being brave. That's reinventing gaming.
 
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Dr Bass

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If gamepass has 20million subs and each paying an average of $10/month
Thats a revenue of $2.4 billion/year that more revenue then the PS4 made from exclusives in its best year.
So the business model does work.
Except people aren’t all paying that obviously. And that revenue is theoretically supposed to support those “23 studios” people love to quote. Sony revenue from exclusives covers JUST the cost of making those games. In conclusion, you have no idea about actual numbers, P&Ls, or “business models.”
 

SenjutsuSage

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What?

Both PS Now and EA Access predate gamepass.

What's the author smoking?

None of them are doing anything close to what Game Pass is. Both of those were half measures by comparison to what Game Pass is. I can't get full unrestricted access to EA's and Sony's biggest new games day one.

Netflix doesn't just say "here, watch for 5 or 10 hours" then it shuts off and you have to buy the rest. It doesn't even work in a fashion where you initially need to buy the Series right now for full price or wait till it comes about a year or so down the road. Game Pass is the first true Netflix equivalent in gaming.
 

TheBomb

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MS has proven it DOESNT need to sell those consoles, they dont make profit. they have so much money, this shit is just free moolah for them. Things like office, windows and other services is what gives them money. they can afford to spend on xbox and tyr out new things. they dont need to sell consoles to make money, just their services.
Dude, consoles are still a thing. Microsft is not giving up. They are not investing so much money for games for Gamepass to ignore those buying their consoles. They may not make money, but as you say. It's the subscriptions that make money.
 

DaGwaphics

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Except people aren’t all paying that obviously. And that revenue is theoretically supposed to support those “23 studios” people love to quote. Sony revenue from exclusives covers JUST the cost of making those games. In conclusion, you have no idea about actual numbers, P&Ls, or “business models.”

Does it really matter where XGS generates their revenue? XGS has JUST the cost of making their games to think about as well. The real question is does XGS fare better or worse with the dual pronged approach of subscription + traditional sales vs. traditional sales alone? Obviously we don't have access to the data, as you said, but looking at MS's revenue growth over the last couple years it does look like a winning combination for them. It sounds like the powers that be at MS also view things in the same light.
 
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