Prioritizing game exclusivity on console - as a hypothetical Xbox strategy

[Sonic]

With the Activision purchase it makes sense to release some games on competing platforms to maximize revenue. I imagine Microsoft has a good idea of which those games should be. It's either that eor growth in revenue from gamepass subs would need to grow by an amount that at least covers the added cost Activision brings to the table. Whether that's just a million or ten+ million more subs needed MS would know the figures. If they foresee growth in gamepass not being able to cover those costs then going 3rd party is a much better option than layoffs and studio closures. I only see it as a good thing as it will allow more gamers to enjoy MS games. Doesn't have to be all games, but those that male sense for 3rd party might as well go ahead.

When trying to transition into a strong content production company it's best to get as many revenue streams coming in as possible from that revenue. Delayed releases to Nintendo and Sony consoles is a large market to tap into.

 

[stu11]

With the Activision purchase it makes sense to release some games on competing platforms to maximize revenue. I imagine Microsoft has a good idea of which those games should be. It's either that eor growth in revenue from gamepass subs would need to grow by an amount that at least covers the added cost Activision brings to the table. Whether that's just a million or ten+ million more subs needed MS would know the figures. If they foresee growth in gamepass not being able to cover those costs then going 3rd party is a much better option than layoffs and studio closures. I only see it as a good thing as it will allow more gamers to enjoy MS games. Doesn't have to be all games, but those that male sense for 3rd party might as well go ahead.

When trying to transition into a strong content production company it's best to get as many revenue streams coming in as possible from that revenue. Delayed releases to Nintendo and Sony consoles is a large market to tap into.

Well since there has been some unofficial reports that GamePass subcriptions are starting to slow down. Its been reported that GamePass only grew by 13% last year compared to 2022, which is down 2%, maybe that isn't a lot but MS maybe considering other options in case this continues. Thats after big hitters like StarField and HIFI RUSH and others hit the service. I'm sure that MS is going to get a nice bump thanks to buying up COD.

Xbox Game Pass hit 33.3 million users as of year-end 2023, Omdia estimates.​

That figure puts the platform's 2023 growth rate at 13%, 2 percentage points down compared to 2022.​

 

[fehu]

The truth is that Game Pass is already generating a profit

Do we have some official info on this?

 

[Cyan]

Do we have some official info on this?

from what I read, MS stopped sharing official gamepass subscription numbers in early 2022. I subbed for 2 years, then unsubbed but started buying, and as of late I am just not buying games -on any platform-.

They are ultimately a software company, so they want to push Gamepass to be like Netflix, and with some sacrifices they might end up achieving that.

 

[fehu]

Yes ok, but do we know if it's generating profit?

 

[iroboto]

Yes ok, but do we know if it's generating profit?

Microsoft says Xbox Game Pass is profitable as it sees subscription growth slow. Microsoft Gaming CEO Phil Spencer says Xbox Game Pass is already profitable and accounts for around 15 percent of Xbox content and services revenue​

Microsoft says Xbox Game Pass is profitable as it sees subscription growth slow

Microsoft Gaming CEO Phil Spencer provides rare Xbox insights.

www.theverge.com

Imo, 13% growth yoy if it could be sustained is a pretty decent number. If this is the low, the double up period is every 5 years. In 10 years you’re looking at 120M subscribers. And in 15 years it’s 240M subs. 480M subs after 20 years if it can sustain. That’s nearly 25% of the TAM at that time.

I would say, from these types of projections it’s worth committing to. 20 years time cloud should be a viable form of gaming.

 

[Johnny Awesome]

Yeah. 13% is huge growth for GP, really.

Estimates are that Sony is at 50 million PS5 and MS is at 25 million X Series. I'm sure MS was hoping for 45/30 at this point instead, but Europe has been very tough this gen for Xbox.

The forum seems to be split between a) people like me who thought 45/30 was possible and are somewhat disappointed in 50/25 and b) those people who somehow thought MS had a shot at 40/35 or something pie in the sky like that, who see the latest sales figures as a disaster and time to panic.

With 30 studios soon to be producing 4-6 AAA titles every year now, it's way too early for MS to throw in the towel just because they are likely only 5 million units behind their initial console sales projections (in fact, the leaked documents showed that they were hoping to be at 30 million now).

2024 is looking like this:

Hellblade 2
MS Flight Sim 2024
Diablo IV DLC (multi)
Starfield DLC
Halo Infinite, Grounded, Forza & Sea of Thieves GAAS content
Avowed
Indiana Jones
Call of Duty (multi)

Give me a break. Sony would dream to have such a strong lineup this year and I'm not even including things like Persona 3 Reloaded, Palworld, and Eiyuden Chronicle on GP.

MS will sprinkle in some multi platform stuff where there is opportunity, likely including Sea of Thieves and Hi Fi Rush, but they have no need to go 3rd party. They're just getting started really.

 

[Shifty Geezer]

Microsoft says Xbox Game Pass is profitable as it sees subscription growth slow. Microsoft Gaming CEO Phil Spencer says Xbox Game Pass is already profitable and accounts for around 15 percent of Xbox content and services revenue​

It's generating 1 billion revenue per quarter and 'a profit'. The actual degree of profitability is unknown. Furthermore, out of 1 billion a quarter profit for the content and services division (which I think is less than the number Qplayer is talking about?), Spencer tells us 15% is subs, so $150M per quarter from GP subs as of 2022.

I don't think anyone outside of MS knows what the business state actually is or how it's changed since that interview.

 

[iroboto]

It's generating 1 billion revenue per quarter and 'a profit'. The actual degree of profitability is unknown. Furthermore, out of 1 billion a quarter profit for the content and services division (which I think is less than the number Qplayer is talking about?), Spencer tells us 15% is subs, so $150M per quarter from GP subs as of 2022.

I don't think anyone outside of MS knows what the business state actually is or how it's changed since that interview.

Correct. So, I mean it answers the question if it is profitable. It just doesn’t tell you how profitable. I largely suspect as subs scale higher it’s just more profit after a certain point as they likely cap expenditure here for game pass.

 

[eastmen]

With the Activision purchase it makes sense to release some games on competing platforms to maximize revenue. I imagine Microsoft has a good idea of which those games should be. It's either that eor growth in revenue from gamepass subs would need to grow by an amount that at least covers the added cost Activision brings to the table. Whether that's just a million or ten+ million more subs needed MS would know the figures. If they foresee growth in gamepass not being able to cover those costs then going 3rd party is a much better option than layoffs and studio closures. I only see it as a good thing as it will allow more gamers to enjoy MS games. Doesn't have to be all games, but those that male sense for 3rd party might as well go ahead.

When trying to transition into a strong content production company it's best to get as many revenue streams coming in as possible from that revenue. Delayed releases to Nintendo and Sony consoles is a large market to tap into.

It will likely be that all single player /co-op games will be exclusive. Traditional first party games like halo/gears and so on with online components will be exclusive. Bethedsa/abk games that are multiplayer and traditionally multiplatform will stay that way.

All of it will come to game pass and be the best console version on xbox to draw people into the eccosystem

 

[Shifty Geezer]

Microsoft mulls major Xbox exclusives Starfield, Indiana Jones for PlayStation 5 - reports

Major Xbox console exclusives such as Bethesda's Starfield and the upcoming Indiana Jones and the Great Circle are bein…

www.eurogamer.net

"Major Xbox console exclusives such as Bethesda's Starfield and the upcoming Indiana Jones and the Great Circle are being considered for launch on Sony's PlayStation 5, as part of a huge shift in strategy by Microsoft."

 

[cheapchips]

It's a rubbish situation for MS that this is out there. Busy day in the comms department!

 

[Shifty Geezer]

By now, companies should be operating on the assumption that all their plans will, leak, I think!

That said, plenty of rumours end up not true also. Maybe they should start a campaign of misinformation with so many fake leaks that eventually the rumour mill is collapsed?

 

[Nisaaru]

It's a rubbish situation for MS that this is out there. Busy day in the comms department!

I agree. The level of disjointed rumours leaking from MS is really awful. Bad image.

 

[Johnny Awesome]

Sometimes companies "leak" things just to gauge reactions. I'm betting this one is true to a certain degree, but the devil's in the details.

This leak is nowhere near as bad as the Insomniac leak, which is likely the worst gaming industry leak in a decade.

 

[XavierS]

Both ZeniMax Media and Activision Blizzard were structured as 3rd parties and making them exclusive requires huge changes to their entire business models and structure. Microsoft decided they should continue to exist separately in Microsoft Gaming rather than moving the development studios to Xbox Game Studios. It would be interesting if ZeniMax and Activision Blizzard go back to/continue being primarily multi-platform and Xbox Game Studios is generally more exclusive content. That would help set expectations to customers and for internal business models make the line clear between general game publishing and ecosystem investment.

 

[Seanspeed]

As far as I know in MS's business reports, the Xbox division generates a massive billion dollars in revenue every quarter. The truth is that Game Pass is already generating a profit that puts Xbox in a better position than ever. The fact that fewer consoles may have been sold so far is not the point. The point here is in subscriptions, which generate much more money than mere game sales. If anyone should be worried, it is rather the competition, who are certainly lagging behind in this regard.

The question here is not whether the console business is worth it for Microsoft, the question here is how many and what quality games are made for us gamers in this strategic model.

I dont think it's yet shown that Gamepass is profitable, at least not in any proper way. They've said it's profitable, but they've not actually demonstrated that, and there's always ways to twist figures to make something sound profitable when it's not in reality. They've given no detailed figures on what they spend or anything, nor can they really take into account the unknowable amount of games they dont sell because of Gamepass. Also, game sales are determined as profitable in relation to their development+marketing costs, but Gamepass cant be figured in the same way all the while they ARE still spending all that money on development+marketing, so that's a very easy cheat right there to say Gamepass is profitable simply by excluding these massive costs.

They did say that Gamepass accounts for 15% of their revenue back in 2022 and that they dont expect that number to rise much, if at all. So I'm not sure it's true that subscriptions bring in more than game sales, and it's definitely not a total replacement strategy. Which - well, thank god, because gaming going to a subscription future sounds like a nightmare to me.

Though all this does still throw up a lot of questions over what Xbox's actual long-term strategy is. I sometimes wonder whether Xbox themselves really have any strong vision and plan, or whether they're just trying to adapt and morph as they go along, trying to fit into whatever position in the market that they fall into.

 

[BoardBonobo]

Allegedly this is out there because - ' The leaks happened because a Microsoft employee who didn't want this to happen leaked it, so there would be a public outcry.'

Here

 

[cheapchips]

Though all this does still throw up a lot of questions over what Xbox's actual long-term strategy is. I sometimes wonder whether Xbox themselves really have any strong vision and plan, or whether they're just trying to adapt and morph as they go along, trying to fit into whatever position in the market that they fall into.

It sounds like there's some serious debate within MS about that. Their Series strategy of 'most powerful' and most affordable console, coupled with streaming to widen the user base hasn't worked out. They'll be looking at the low mobile/PC streaming numbers, projected ceiling on Series console sales and the end result is the leaked discussion lighting up the Internet.

If it was me, I'd want to move Xbox console to being more PC like. It's silly to have them as a separate thing when the Deck shows how you can make that consumer friendly PC gaming. Set some minimum SoC standards for Series comparability, revenue share with OEMs off the friendly frontend store and you end up with something interesting.

Really no signs of them actually allocating resources to do that though. Er, good luck MS!

 

[BoardBonobo]

Wasn't it Spencer who said that they lost their one chance at gaining dominance in the console due to the disaster that was the One? That was the period that digital only was becoming more normalised and gamers were building none transferable libraries of games that would make it next to impossible to shift them from one platform to another, unless of course that platform disappears, and the PS4's popularity put the final nail in that coffin.

Buying their way to number one only works if they can realise a profit and, at the moment, they have a $80 billion + hole to fill before they can even think about profiting from this. And it looks like someone higher up has crunched the numbers and found them lacking, maybe Spencer spun a bit of yarn to get the funds to make these purchases in the first place, just to try and get ahead of Sony.

At this stage it probably make sense for MS to do Sega and just publish games and not have to support an entire ecosystem as well. They can always return to the market at a later date when, inevitably, Sony falls asleep at the wheel.