Microsoft’s recent decision to lay off over 9000 staff, primarily within its gaming division, has sparked much debate online. Amongst discussions of studio viability and the fumbling of many promising video game projects (Perfect Dark and ZeniMax’s Blackbird, to name two), the conversation has now tilted towards Xbox Game Pass, and what it actually offers developers.
This has primarily been driven by Arkane co-founder Raphael Colantonio, who suggested one of the ‘elephants in the room’ around Microsoft’s recent layoffs was the potential impact of Xbox Game Pass on direct game sales and profits for developers.
‘I think Game Pass is an unsustainable model that has been increasingly damaging the industry for a decade, subsidised by MS’s “infinite money,” but at some point reality has to hit,’ Colantonio said on X. ‘I don’t think GP can coexist with other models. They’ll either kill everyone else, or give up.’
‘It’s hard to explain on twitter, but I swear, if some day we have coffee together, I could calmly explain why the maths don’t work for most publishers/devs nor for Xbox once they stop investing, and you would likely agree once you see the entire picture.’
Read: Microsoft initiates sweeping Xbox layoffs, cancels several games
While this reflects one singular argument, Colantonio’s analysis has sparked much back-and-forth, with many providing anecdotal benefits and harms around their experiences with Xbox Game Pass. For many indie developers, it’s a way for more players to discover their works, and it’s definitively boosted their profile and profits.
Speaking to GamesIndustry.biz, Rebellion CEO Jason Kingsley recently described the studio’s partnership with Xbox Game Pass for Atomfall‘s launch as being a major success.
‘With Game Pass, you can get people to try it, then as a result of those people trying it, they like it, and they then tell their mates on social media, “I found this game on Game Pass, I really enjoyed it, you should have a go,”‘ Kingsley said.
He believed Xbox Game Pass had allowed a significant degree of discovery, and not only that, it had guaranteed ‘a certain level of income’ for the studio. While he agreed Xbox Game Pass was ‘cannibalising one section of the audience’ in terms of tangible sales, he also firmly stated ‘what you gain from that cost is disproportionate.’
In a recent post on social media, reporter Christopher Dring reportedly asked Microsoft about the profitability of Xbox Game Pass as a platform, and was told it was profitable – although ‘no first-party costs are included.’ That hasn’t stopped criticism of the platform, and conversations about how it might eat into profits for studios.
As many have pointed out, games being available as part of Xbox Game Pass does naturally reduce the appeal of purchasing games outright. With games now costing up to AUD $124.95 on launch, and Xbox Game Pass subscriptions starting at AUD $13.95, the value-add for players is irresistible. Particularly when games can be played within a week or a month, paying full price versus purchasing a subscription is difficult to justify.
What does the games industry think about Xbox Game Pass?
Former Sony boss Jim Ryan claimed in 2023 that games industry publishers believed the platform destroyed value for video games, and said they ‘unanimously do not like Game Pass’ for this reason.
‘The Game Pass business model appears to have some challenges, and Microsoft appears to be losing a lot of money on it,’ Ryan claimed.
Per Rebellion’s Jason Kingsley, the cannibalisation isn’t rigorous enough to cause issue – but it’s worth noting this is one case, for one studio. It’s unclear whether other developers who contribute games to Xbox Game Pass are experiencing the same level of success.
It’s worth noting anyway that games launching on Xbox Game Pass have created a precedent. Anecdotally, you’ll often hear of players willing to purchase games outright until they learn a title is on Xbox Game Pass. Typically, the subscription is preferred, as a means to save money and possibly dive into games. In that case, it’s difficult to know how much profit is lost in the transaction, versus profile and prestige gained from players having access, and possibly experiencing other games, as well.
There is no definitive answer here, and it’s likely debate around Xbox Game Pass and its benefits will continue to rage for months and years to come. The reality is the platform can be a very good thing for developers and players, in the right circumstances.
But there’s no doubt it’s also reshaped how people perceive the value of video games, and whether or not they’re willing to pay full price to support developers in the longer term.