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Xbox Game Pass is “completely sustainable” at its current price, says Phil Spencer

Xbox boss Phil Spencer has stated that the Xbox Game Pass subscription service is “completely sustainable” at its current price.

Whilst chatting to the hosts of the Dropped Frames podcast, Phile Spencer chatted a little bit about the future of Xbox Game Pass, after some developers have apparently questioned the long-term feasibility of Microsoft’s subscription service.

“I’ll be honest, there are developers that have some concerns [about Game Pass], and my inbox is there, and I have conversations with a lot of those developers asking what are our real long-term goals?” Spencer said on the podcast.

“You know we get questions about ‘hey, is this just some kind of go secure a bunch of players and then rack the price up to a new level?’”

Spencer goes on to negate consumers’ fears by reiterating that Xbox Games Pass is “completely sustainable” at its current price.

“I say there’s no plan for us to do anything like that [increase the price]. We like the value that Game Pass is today and from a business model it’s completely sustainable the way it is and I mean that.”

Some consumers have been wondering about the price of the service since Xbox announced that it acquired Bethesda back in September. With more studios bringing their games to the service, some players thought that meant a price hike was inevitable. It’s nice to see Spencer pour water on that theory.

“The upside [of Xbox Game Pass] is, we can take more creative chances than a pure retail model allows,” Spencer explained later in the podcast. “We can go and greenlight games because we know we’ll get millions of Game Pass players to engage and play the game.”

It was recently revealed that Xbox Game pass has attracted 15 million subscribers, and between convincing EA to come on board from November 10 and adding cloud streaming at no additional charge, we expect that number to rise again.

We could even be getting game streaming on PC via the service soon, too.

Xbox Game Pass is “completely sustainable" at its current price, says Phil Spencer

Xbox boss Phil Spencer has stated that the Xbox Game Pass subscription service is “completely sustainable” at its curre…

www.vg247.com

 

[ZywyPL]

Makes sense, low price attracts more users, more users generate mor revenue, while the expenses are constant, for example, if a game costs 100M to make t's way easier to get that money back from 10$ x 10M users, than setting up the price at 100$ and praying to get even 1M users on the service. Make no mistake, the price will eventually go up, not within 5 years, but inflation is a real thing and they'll have to counter it sooner or late.

 

[Tschumi]

The subscription fee may stay stable for a few years, but as I've said before I'll not be surprised if the thing is stuffed full of micro-transactions

 

[TBiddy]

The subscription fee may stay stable for a few years, but as I've said before I'll not be surprised if the thing is stuffed full of micro-transactions

How do you assume that would work with 3rd party games? Or rather, how do you mean when you say "the thing is stuffed full"?

 

[Jemm]

Also, it's not like the Game Pass is the only source of income to support development. The games are being sold normally in other channels, too. (Microsoft Store, Steam etc..)

 

[isual]

loss leaser strategy works. sony has alot to catch up to

 

[michaelius]

Well they didn't increase price on pc - they removed discount

 

[Arachnid]

For now. Wait until it's more established later in the console cycle and most of the XSX and XSS units of the gen are sold.

 

[WelshBluebird]

I'm sure that is probably what Netflix said at some point too - and now look how many price rises they have done in the last few years!

 

[turtlepowa]

I'm sure that is probably what Netflix said at some point too - and now look how many price rises they have done in the last few years!

Just buy Turkish gift cards and enjoy Netflix for under 4 bucks

 

[Strider Highwind]

I feel like he wanted to say "Its microsoft..were rich, f*ck we look like?"...but that wouldnt be politically correct.

 

[PuppetMaster]

Bookmarking this thread for the inevitable price increase.

 

[FF:Enhanced_Reality]

I can't see the dream lasting very long. Even with 10 million subscribers per month at the current price is not going to cover all the costs and Microsoft can't eat that up forever. They either change the product or raise the price.

 

[farmerboy]

Maybe sustainable for MS, but what about the developers? If a game is on gamepass, how does the developer get paid?

 

[DaleinCalgary]

Nope, I don't think this is true.

 

[Gaelyon]

Each game added to Gamepass reduce the share each game can earn from it, it must be compensated by an always higher amount of subscription. So it's "substainable" as long it can grow proportionally...

 

[Jemm]

Maybe sustainable for MS, but what about the developers? If a game is on gamepass, how does the developer get paid?

AFAIK, Microsoft pays an upfront payment to have the game in the Game Pass for X amount of months.

What's interesting, they game gets increased sales (on all the other platforms, too), when the game is in the Game Pass.

"If I take the month before we went into Game Pass, and compared it to sales of the game last week, we're now selling around five times as many units each week as pre-Game Pass, on a weekly basis," he said.

"Since we went into Game Pass, our total Xbox sales have tripled."

Rose speculated that these sales are due to users who don't have Game Pass seeing friends playing the title, and then purchasing it for themselves. He also said that Descenders' sales "greatly increased" as soon as it was on Game Pass, and they have spiked every time it is featured on the dashboard.

Descenders' weekly sales increased five times thanks to Xbox Game Pass | GamesIndustry.biz

 

[ZywyPL]

Each game added to Gamepass reduce the share each game can earn from it, it must be compensated by an always higher amount of subscription. So it's "substainable" as long it can grow proportionally...

I don't think it works this way in the grand scheme of things, for 3rd part titles they agree for a fixed amount per unique download, so the more 3rd party titles and their downloads, it's MS who loses here, not the devs who get their agreed chunk, but those kind of games are minority anyway, the vast majority of content comes from 1st party studios, and when you have let's say 100 devs with 100k salary, that's all your expenses, it's fixed, no matter how many games are on the service, how many people download and play them, if the said studio makes 1 or 3 titles a year, and so on, there's just no share from those games, they might get a bonus if a game does really really well, but that's it. So the trick is, to keep increasing the user base (revenue), while the expenses on 1st party studios is more or less constant.

 

[Gaelyon]

I don't think it works this way in the grand scheme of things, for 3rd part titles they agree for a fixed amount per unique download, so the more 3rd party titles and their downloads, it's MS who loses here, not the devs who get their agreed chunk, but those kind of games are minority anyway, the vast majority of content comes from 1st party studios, and when you have let's say 100 devs with 100k salary, that's all your expenses, it's fixed, no matter how many games are on the service, how many people download and play them, if the said studio makes 1 or 3 titles a year, and so on, there's just no share from those games, they might get a bonus if a game does really really well, but that's it. So the trick is, to keep increasing the user base (revenue), while the expenses on 1st party studios is more or less constant.

Sure, so 3rd party games cost MS the more they have in Gamepass, unless subscriptions raise proportionally (which is possible but not easy/incertain), and 1st party can't globally exceed a budget set by those subscriptions or they also lose money. Currently they lose money but project constant subscriptions raise to hopefully attain such a huge critical mass worldwide where noone can ignore Gamepass anymore. Is this is sustainable ? Well we don't know yet for sure, but MS have the money to take a loss for years... Personally i much prefer the Steam model over Stadia/Gamepass/PS+

 

[ZywyPL]

[...] and 1st party can't globally exceed a budget set by those subscriptions or they also lose money.

That's the tricky part tho, those games are also available as standalone versions in both physical and digital form, and no one knows how much each title will sell, if the games were GP exclusives things would be so much easier to calculate, but with three different distribution channels, it's pretty much impossible. I guess MS will have to adjust their strategy/budged accordingly on the fly.

 

[Mattyp]

I can't see the dream lasting very long. Even with 10 million subscribers per month at the current price is not going to cover all the costs and Microsoft can't eat that up forever. They either change the product or raise the price.

Or... wait for it... they get more subscribers! Mind blowing I know. The jump from 10 million to 15 million didn't take long and I bet we see 20 million announced by the end of the year.

 

[Nikana]

Their projections must be looking pretty good to make a statement like that.

 

[ZywyPL]

Their projections must be looking pretty good to make a statement like that.

Well the userbase have grown from 10M to 15M in less than half a year, with barely any new XB consoles sold during that period, so so far so good.

 

[Maybe It's Medicine?]

Maybe sustainable for MS, but what about the developers? If a game is on gamepass, how does the developer get paid?

If a game is on psplus, how does a developer get paid?

 

[Maybe It's Medicine?]

The Sony concern trolls are fucking obnoxious. Then again, I wouldn't expect a group of morons that pay for strong armed mediocre plus subscriptions to understand what an actual service looks like and how it works. Will prices go up eventually? Probably yes, even at 15 or 20 dollars a month though, it's still the best value in gaming and easy to justify if you're someone who is, you know, actually in it for the games and not to give out handjobs to your favorite corporation.

 

[farmerboy]

If a game is on psplus, how does a developer get paid?

Equally relevant question. There is a difference between the two though, in that games that come onto psplus tend to be at the end of their income deriving life. They've already been out for a while and psplus gives them a pretty big market that may have overlooked them initially.

Gamepass wants games on there as soon as possible, though developers can ultimately choose when a game goes on there.

Anyway, whats wrong with wanting to understand the model more? Its intricacies? Pros and cons? Because even as a Sony fan, my concern is with the developers first, and I wonder what a gamepass (or Sony equivalent) means for crunch, artistic output and profitability?

 

[kikonawa]

....for now

 

[JohnnyFootball]

Maybe, but they need full time payers in LARGE numbers for me to trust it will not lead to crappy games.

 

[LavitzSlambert]

I understand what they are trying to do, but I’m not confident it’s sustainable. The idea is that the more games on game pass, the more subscribers. Think about if all the games released on game pass were million sellers, and instead of the devs necessarily capturing sales per copy sold, they’re paid by Microsoft and it won’t be as lucrative. Microsoft is taking the Silicon Valley investor approach where they moneyhat all the games and once in a while there is a breakout hit that everyone wants to play.

It will keep people subbed and all that extra predictable monthly sub money will go into keeping game pass running and paying devs to license their games on the service. Where this breaks down will eventually be when devs think they can earn more without being on game pass. Right now Microsoft is counting on being able to buy those studios or at least buy rights to exclusivity (permanent or timed).

What will determine if their approach is viable in the long run is how licensing will work. The more companies negotiate and the bigger the standout games are, the more difficult it will be for Microsoft to avoid increasing sub price. Look at Netflix - the only way they can maintain profit is by owning their own production and exclusives. They had a great run licensing movies and shows owned by others but now that they aren’t the only streaming service around, they are forced to differentiate. This is part of Microsoft’s strategy and a huge reason why they bought Bethesda and other studios. Get them now before the price increases even further.

 

[reforen]

Maybe sustainable for MS, but what about the developers? If a game is on gamepass, how does the developer get paid?

rights management? a contract? they should have a deal like netflix

 

[IntentionalPun]

Each game added to Gamepass reduce the share each game can earn from it, it must be compensated by an always higher amount of subscription. So it's "substainable" as long it can grow proportionally...

Games rotate out though.

1st party games don't, but they.... aren't that numerous lol

Devs put their games on Gamepass for more than just the revenue they earn directly from Gamepass too.

 

[CrustyBritches]

Also, it's not like the Game Pass is the only source of income to support development. The games are being sold normally in other channels, too. (Microsoft Store, Steam etc..)

Yep. And on top of that it's a wonderful tool to expose people to your game and get them buying DLC, or familiarize people to the series before the next iteration releases. They did this with The Division leading up to the release of Div 2.

 

[Nikana]

rights management? a contract? they should have a deal like netflix

They do have a deal like netflix.

 

[Plantoid]

Concerned ps fans questioning the trillion dollar company

Even at 20$ a month, with all first party day one it's still the best deal in gaming

Also, first party studios will be the focus of the service for sure

 

[LNXD]

Also, it's not like the Game Pass is the only source of income to support development. The games are being sold normally in other channels, too. (Microsoft Store, Steam etc..)

DLC and microtransaction too.
Netflix can't sell a better skin/hat for stranger things.

 

[McCarth]

Hahaha I don't believe this for a second. Unless they plan to sunset more and more third party games faster and push their own first party content predominately, this is simply not possible.

 

[FF:Enhanced_Reality]

Or... wait for it... they get more subscribers! Mind blowing I know. The jump from 10 million to 15 million didn't take long and I bet we see 20 million announced by the end of the year.

Having just spent money like they have they need that done ASAP. I can't see Microsoft growing it fast enough for that.

 

[EverydayBeast]

I guarantee you there’s a price hike haha

 

[Wherewithal Not Found]

Game pass is pretty great as is. I wish it had more first or third person rpgs on it.

 

[longdi]

I guarantee you there’s a price hike haha

I was expecting a price hike in late 2021.
But with this declaration from Phil, imo the hike is probably put off until XSX Pro revision in 3 years time.

 

[Thirty7ven]

Sure, we believe you MS

 

[BusierDonkey]

"I am terribly concerned that Microsoft is asking too little for a product I don't use. I am also terribly concerned that they will raise the price on that product despite the fact that the people using it have the option to opt out of using it if they deem it to no longer be worth the price."

Thank goodness the world has people who are willing to be concerned on behalf of others.

 

[Hey Blinkin]

Of course it will increase in price....eventually.

When the price exceeds the value I get out of it, I'll cancel.

Fortunately I'm good for the next 3 years.

 

[Metnut]

Netflix said the same thing a few years back.

 

[DaleinCalgary]

Of course it will increase in price....eventually.

When the price exceeds the value I get out of it, I'll cancel.

Fortunately I'm good for the next 3 years.

Yup, Turning years of gold into ultimate didn't cost me much either

 

[Calverz]

Sure, we believe you MS

I love how there are people in neogaf who know more about xbox financials and forecasts than their ceo.

 

[JoeyWestSide]

Makes sense, low price attracts more users, more users generate mor revenue, while the expenses are constant, for example, if a game costs 100M to make t's way easier to get that money back from 10$ x 10M users, than setting up the price at 100$ and praying to get even 1M users on the service. Make no mistake, the price will eventually go up, not within 5 years, but inflation is a real thing and they'll have to counter it sooner or late.

Exactly. This is why Netflix is raising prices in recent years, because user growth is starting to slow. Until this is starting to be seen with GP, price should be secure.

 

[polybius80]

Makes sense, low price attracts more users, more users generate mor revenue, while the expenses are constant, for example, if a game costs 100M to make t's way easier to get that money back from 10$ x 10M users, than setting up the price at 100$ and praying to get even 1M users on the service. Make no mistake, the price will eventually go up, not within 5 years, but inflation is a real thing and they'll have to counter it sooner or late.

but there is more than 1 game in the service

if your game costs 100M then MS will give you those 10$ x 10M just to you and none to other devs of the other games?

if your game costs 100M I am sure you expect to obtain more than your development costs

 

[NoMoChokeSJ]

Equally relevant question. There is a difference between the two though, in that games that come onto psplus tend to be at the end of their income deriving life. They've already been out for a while and psplus gives them a pretty big market that may have overlooked them initially.

Gamepass wants games on there as soon as possible, though developers can ultimately choose when a game goes on there.

Anyway, whats wrong with wanting to understand the model more? Its intricacies? Pros and cons? Because even as a Sony fan, my concern is with the developers first, and I wonder what a gamepass (or Sony equivalent) means for crunch, artistic output and profitability?

End of their income deriving life... like Bugsnaks and Destruction All Stars?

As a Sony fan you're concerned about crunch and profitabilty? Fucking Why? I could give a fuck about that stuff as a consumer. I don't own or work for the company.. they are trying to convince me to spend money on their products. That is their incentive to produce quality.

The whole gamepass "concern" on here is so ridiculous. If you don't like or believe in the service, don't subscribe. But lets be honest the most vocal opponents to the service on here are people who have no interest in it and no intention of investing in the platform.

 

[farmerboy]

End of their income deriving life... like Bugsnaks and Destruction All Stars?

As a Sony fan you're concerned about crunch and profitabilty? Fucking Why? I could give a fuck about that stuff as a consumer. I don't own or work for the company.. they are trying to convince me to spend money on their products. That is their incentive to produce quality.

The whole gamepass "concern" on here is so ridiculous. If you don't like or believe in the service, don't subscribe. But lets be honest the most vocal opponents to the service on here are people who have no interest in it and no intention of investing in the platform.

On the contrary, gamepass is the best reason I, as a Sony fan, will consider getting an xbox. I'd still have the same concerns if Sony wants to do it, and I actually think they will.