What you're describing is cost of acquisition, but that's incorrect usage because carrots are taken away when the goal is reached. MS wants all games to launch on game pass, it's the product, it's what they are working towards; in that sense they are building the product and not hanging the carrot. You cannot look at the individual margins of titles on game pass to determine the overall profitability of the service. It doesn't work like that. A service like game pass to be profitable may require say, 80M a quarter in revenue, at that point in time you're just looking to get as many subscribers as possible to move the service into profitability. That doesn't factor in the additional profits from selling the titles as normal or microtransactions.
Looking at individual titles aren't relevant to the pricing model here, the aim to keep the service alive is to spend money to drive customers and ultimately move the service from unprofitable to profitable. There's not really much about it. Sony doesn't want to do it because it frankly doesn't benefit their model. They are currently the market leader by 2:1, meaning it's cost effective for them to just rely on marketing deals and exclusivity contracts. As MS contracts as a platform, the cost of picking up the tab for exclusivity lessens because they have less market share they need to account for. If MS exits entirely, there no longer needs to be exclusivity or marketing contracts entirely. Seems a pretty straight forward strategy that Sony's best interest is to force MS to compete in the console space in the traditional manner, they have no additional capital spend, they don't have to change processes or models, or invest in anything to build new products. MS on the other hand has to pay 2x or more for marketing and exclusivity rights to make up for the loss on Sony's platform, and the real gain in customers is likely near dismal. It's frankly a waste of money for them and in the 20 some odd years of competing in the console space, they have not been able to progress any further on the console front against Sony. It is pure folly and a misunderstanding by readers to suggest that MS can just spend 70B on making studios and become the leader. Steam has done absolutely nothing when Epic arrived, with their cheaper margins and free games monthly. Epic is nowhere close to making a dent on steam, and steam is now enjoying their highest ever concurrent player base. Entrenched leaders hold significant power and sway over the market, and Sony continues to wield its market power by increasing prices for revenue in a highly competitive space is something the other 2 cannot do. In economics there is no greater indicator of market power than increasing prices with impunity. They have done so in every market except the US where Xbox continues to hold them at nearly 1:1. In a world where 2 companies have nearly 99% identical libraries, but one is $10 cheaper per title, offers game pass, offers cloud gaming, offers better backwards compatibility titles, offers cheaper and smaller consoles, and better accessories and feature sets; this should easily be in favour of Xbox, but it's not. That is how entrenched Sony is in the market.
The pivot to cloud and game pass makes sense for MS where there is no current established leader and they can be that leader, provided they can create a service compelling enough to challenge the traditional market, they have the capital and enough recognition with the gaming industry to actually build the service successfully, so they have.
What MS wants from these acquisitions is definitive global brand recognition for its trial services which are not quite there yet. They acquire to bolster, but more importantly in the long run, it's significantly cheaper for them to produce their titles and put them onto game pass than to have to continually pay out to third parties for a couple of months at a time in which contracts need to be renegotiated. Can Sony do what MS does? No, they cannot. They've neither the capital or infrastructure costs to do it the way MS has. But that does not mean MS is risk free from failure, there is no bullet proof game plan, MS is making this play book by the month and people are watching to see where they stumble. Facebook just spent 15B on complete BS. Expensive failures happen. The services that MS are investing can still very much fail because all it takes, really, is for the expense rate to far surpass the revenue rate, it doesn't matter if you are the leader in cloud gaming and multi game subscriptions if the ventures are not sustainably profitable.
