Xbox Game Pass, the $10 per month downloading of games service, in a Netflix style, just got an upgrade.
Update (25/01/18) – Turns out retailers aren’t happy.
As noted by WCCFTech, an Austrian retailer has delisted all Xbox One inventory, stating that if Microsoft wants to profit purely from software, they can do it alone.
So it seems a number of things are happening now.
Microsoft as we know traditionally launches and for a while sells consoles at a loss, making the difference in licensing and software. Lord knows Xbox One X breaks even at most. Naturally because of this, the margins for retailers selling consoles, especially new ones, cant be that high, and we already hear from most places that selling new sealed games isn’t very profitable, if at all, for retailers.
So with the Game Pass announcement that games from Microsoft will be there day and date for that same $10 fee, it seems like MS is moving to a model that allows them to keep making their limited library, and getting a constant stream of revenue from more users, rather than making a handful of games yearly and selling them to a smaller base for $60 a pop. Of course, that latter option will still exist.
Plus MS can easily eat up any potentially lost revenue from other areas of the business. Remember they have done that before.
But what’s apparently more shocking is that according to those who have worked in the retail scene, MS games are historically 30% better with margins than first party stuff from Nintendo and Sony. MS games, for retailers, are the best ones to sell new. They are now losing a potential source of revenue that will shift to MS directly and make MS more money than the $60 per sale.
Alright, I'll let you guys in on something here. The games we would make the most money on for new games were Microsoft First Party games. Gears, Forza, Halo etc all had margins up to 30% better than Sony and Nintendo First party games. Retailers are losing their best games.
— Spawn Wave (@SpawnWaveMedia) January 25, 2018
Basically, $10 per month from 10 million people is better for investors than $60 per game every few months from 2 million people. But one retailer isn’t happy about this it seems. They’ve caught on that this does nothing for them and are dropping Xbox inventory.
All future first party releases will not only be available via Xbox Live, and in stores, but Game Pass…on launch day.
So now not only do you get Xbox 360 and Xbox One games for $10, you now get included in that price, full price retail games on the day they launch.
This is an incredible move from Microsoft that has some people scratching their heads. Why would Microsoft release their own games for $60, and give you what is undeniably a better deal for $10 monthly, alongside a host of other games ready to go when you want?
Simple. Retailers, manufacturing, all of that stuff is factored into a $60 price tag. Plus, say a game got 2 million sales for $60. Lot of money, probably recoup development costs at that point. Now imagine 10 million people paying $10 a month.
For a company that hasn’t got the largest portfolio of first party software, this is a great move. They will be making in-house software fairly infrequently, as we have seen in the past few years, so why not sweeten the deal for a constant flow of $10 subscriptions each month?
The pros outweigh the cons it seems for Microsoft. Further, the Xbox brand historically has been covered by huge profits from other hardware and even Windows alone. Microsoft is fine with Xbox being a loss leader and with a subscription service…the bills effectively pay themselves.
I do believe this a way to get more money while not having to buy into more studios and make more games in a shorter time.
Of course there are cons to this however. If you stop paying your $10 a month, you can’t access the games, as is the case with PS Plus. You will be able to bulk buy 6 months at a time soon, so there is that for those who need it.
Secondly, the games are in rotation. They are only available for as long as they are up, just like shows on Netflix or BBC iPlayer. If it remains on the server, you can play it. For the new titles this is unlikely to be an issue, but older 360 titles may fall to this.
Finally, and this is the eventuality, what happens when the service ends? Would Microsoft let you play the games offline? Would you just get to keep them as you do with your physical Xbox 360 games?
These are the important questions and sadly they can’t be answered because this day has yet to come. We don’t know and I’m not sure Microsoft does either.
When considering Game Pass at face value, it is an excellent deal, but if you don’t play games much, you’re likely better off paying the $60 for a game outright.
Yes the eventuality of that is even physical copies of games now are subject to patches and updates, so when the servers one day go own, some games will be “unfinished” as it were, or at least unrefined. But at least you won’t lose access to the games entirely.
So this is the situation. Microsoft has made an aggressive move into a Netflix like format, and the payoffs are obvious: It’s more money, monthly, rather than per game.
But for us consumers, maybe it’s not so great in the very long-term, or even medium term depending on how the service is received or games are rotated.
Maybe we need to wait and see, but I didn’t think this day would come so soon.
Thanks for reading! I hope you enjoy this article, and I will be updating everyone on developments as they happen via social media. Until next time, Happy Gaming!