Microsoft's internal documents recognize that adding games to Game Pass would lead to cannibalization of Buy-To-Play sales

Over 12 months, I would think that almost every game shows a decline in sales.

Gamepass probably helps some games sell more and others sell less. There are a variety of factors at play here. Both can be true.
 
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I logged on to play video games yesterday. Series X. I counted 8 of my 15 or so friends online playing Hogwarts. This is anecdotal obviously but the game is selling well everywhere.
I think Hogwart's is going to be a big litmus test and a show of these contrasting business strategies by PS and Xbox.

It is going to be one of the biggest and best-selling games in 2023 (just like Elden Ring was in 2022), and PlayStation has marketed the hell out of this game.

If the game sells 20-25 million copies (very likely) and 10-12 million of those copies sell on PlayStation, it is going to make a world of difference -- in terms of perception, brand value, PlayStation third-party software revenue, sequels of the game, and PlayStation console sales.

Early indications are that PlayStation's plan might be working.

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Software sales charts splits will give us a better idea -- assuming we get some good info and data.
 
People say stupid shit. But this isn't a big gotcha moment for Microsoft.

Also, I don't know many people that believe or say that it doesn't cannibalize game sales. The biggest debates here I've seen is whether or not a subscription service is sustainable or if it's ultimately good for the developer to be on these services.

It's a big gotcha for Xbox fanboys, not Microsoft.

This has been obvious for years, but Xbox fans would always say, "but Phil said it was sustainable and profitable!"
 
It's a big gotcha for Xbox fanboys, not Microsoft.

This has been obvious for years, but Xbox fans would always say, "but Phil said it was sustainable and profitable!"
Fun fact: Phil Spencer actually never said, "Game Pass is profitable for us." 😛 Although that's what all the journalists and websites ran with.

Take a look at this.

The headline says, "Game Pass is Profitable."

The content (highlighted) puts Game Pass outside of quotation marks, and just says "is profitable for us," because he never said, "Game Pass is profitable." Phil was referring to something else entirely.

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I think Hogwart's is going to be a big litmus test and a show of these contrasting business strategies by PS and Xbox.

It is going to be one of the biggest and best-selling games in 2023 (just like Elden Ring was in 2022), and PlayStation has marketed the hell out of this game.

If the game sells 20-25 million copies (very likely) and 10-12 million of those copies sell on PlayStation, it is going to make a world of difference -- in terms of perception, brand value, PlayStation third-party software revenue, sequels of the game, and PlayStation console sales.

Early indications are that PlayStation's plan might be working.

11nTYYZ.png
vs.
ff0iOP3.png


Software sales charts splits will give us a better idea -- assuming we get some good info and data.
Using meteoritic user scores is a hell of a reach, Hogwarts Legacy has been a "culture war" battleground for some reason and the PS5 version is the first one when you google "Hogwarts Legacy Metacritic". It will sell more on PS, but I doubt is almost 5:1 like it's on there.
 
Using meteoritic user scores is a hell of a reach, Hogwarts Legacy has been a "culture war" battleground for some reason and the PS5 version is the first one when you google "Hogwarts Legacy Metacritic". It will sell more on PS, but I doubt is almost 5:1 like it's on there.
Not really because it shows the number of users on each platform?

In addition, the UK boxes split sales also show similar data now.

 
Not really because it shows the number of users on each platform?

In addition, the UK boxes split sales also show similar data now.


It doesn't? It's the first hit on google, checking the user review you can see a lot that haven't really played the game and are just there for the culture war, so they just comment on the first hit.

Physical sales are always much higher on PS, since you know half of its userbase isn't on a Digital only console. Elden Ring was the same 80% of the physical were on PS, but with digital it was much closer, where 84% of all Xbox sales were digital.
 
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Over 12 months, I would think that almost every game shows a decline in sales.

Gamepass probably helps some games sell more and others sell less. There are a variety of factors at play here. Both can be true.
I think what they meant is that a game released day one on GP sells less game units during its first 12 months.

It doesn't? It's the first hit on google, checking the user review you can see a lot that haven't really played the game and are just there for the culture war, so they just comment on the first hit.

Physical sales are always much higher on PS, since you know half of its userbase isn't on a Digital only console. Elden Ring was the same 80% of the physical were on PS, but with digital it was much closer, where 84% of all Xbox sales were digital.
I think he means that the digital game sales in Xbox are a bigger percentage of total game sales of Xbox than in the case of PS. Not that the digital sales in Xbox are bigger amount of units than the digital sales in PS.

Since the total game sales are much higher in PS than in XB, both digital and retail units sales should be higher in PS.
 
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Not the UK box sales again. :messenger_tears_of_joy:

A game with an equivalent tie ratio between systems will start at about a 70 to 30 split with a cross-gen game. 20% is actually just about on par for Xbox considering MS has higher digital sales. It's the same thing every time, and every time it is treated as new information. PS has a 2.5 to 1 advantage in available buyers, sales aren't going to be 50/50. And in Europe the split is worse actually. It would be unnatural for Sony NOT to sell more software.
 
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A game with an equivalent tie ratio between systems will start at about a 70 to 30 split

No it shouldn't

Hardly anyone is buying this on last gen

So you have to use current gen splits as a baseline

No way to spin 82% PS sales ratio as a good thing for Xbox, it's a terrible result and exactly what I stated previously about GP cannibalizing sales
 
Umm ... read the OP?

You read the OP and still posted that nonsense? I assumed it was just your usual warrior shitposting.

Again, you listed a small amount of japanese titles that were already skipping Xbox long before GamePass. How does that relate to the OP, discussing sales of GamePass titles being cannibalized?

You said unless MS pays them to put their games on GamePass, devs might not even port their games to Xbox. But the OP is literally about GamePass games losing sales.
 
Fun fact: Phil Spencer actually never said, "Game Pass is profitable for us." 😛 Although that's what all the journalists and websites ran with.

Take a look at this.

The headline says, "Game Pass is Profitable."

The content (highlighted) puts Game Pass outside of quotation marks, and just says "is profitable for us," because he never said, "Game Pass is profitable." Phil was referring to something else entirely.

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More warrior nonsense. I mean, these things you spout are all easily searchable before you post things that are flat out wrong. You can search for the Tech Live interview and listen to him literally say GamePass is profitable.

Or you can continue to read quotes on a website and draw your own conclusions on what you think he said based on what the writer wrote and where he put quotations. I'll leave that decision to you, god speed.
 
No it shouldn't

Hardly anyone is buying this on last gen

So you have to use current gen splits as a baseline

No way to spin 82% PS sales ratio as a good thing for Xbox, it's a terrible result and exactly what I stated previously about GP cannibalizing sales
Yep, the current console sales split is 1.6 at best. PS5 at 32 and Xbox at 20 million (estimated).
 
Fun fact: Phil Spencer actually never said, "Game Pass is profitable for us." 😛 Although that's what all the journalists and websites ran with.

Take a look at this.

The headline says, "Game Pass is Profitable."

The content (highlighted) puts Game Pass outside of quotation marks, and just says "is profitable for us," because he never said, "Game Pass is profitable." Phil was referring to something else entirely.

4nw4zJQ.jpg

Wait a second? Did he say live at the The Wall Street Journal's Tech live conference in October that Gamepass was profitable?

Did every gaming and tech publication quote him incorrectly? If so why didn't he correct them? Also, if he's not talking about Gamepass then what was he talking about.
 
Wait a second? Did he say live at the The Wall Street Journal's Tech live conference in October that Gamepass was profitable?
No, he did not say, "Game Pass is profitable." It was a word dump of many things. I'm going to post the exact transcription here.
Did every gaming and tech publication quote him incorrectly? If so why didn't he correct them?
Pretty much. And why would he.
Also, if he's not talking about Gamepass then what was he talking about.
Here is the full conversation (warning: it's long-winded):

Interviewer: "Let's talk about game pass a little bit more since that's a big bet for Microsoft. How many subscribers do we have now? And it does seem like a really good deal for the consumer, but what about the Microsoft investor? How is this a money maker for Microsoft?"

Phil: "Our last public number was 25 million subscribers that we've talked about. We did talk about growth on PC so our Game Pass subscription not expecting everybody's following the video game Market is available on gaming consoles and on personal computers and. You can subscribe in both places we're seeing incredible growth on PC.

I think Satya Nadella in our earnings yesterday, the CEO of Microsoft, talked about I think 130-140 percent year-over-year growth on PC which is really where we're focused on. Console, I've seen growth slow down on Game Pass mainly because at some point you've just reached everybody on Console who wants to subscribe and we don't see subscription unlike some other forms of media that have really moved almost solely to a subscription business today, Game Pass is an overall part of our content and service Revenue. It's probably 15 percent; I don't don't think it gets bigger than that. I think the overall Revenue grows so 15 percent of a bigger number is a bigger number but we don't have this future where I think 50, 60, 70 percent of our Revenue comes from subscriptions.

The largest business model in video games is free-to-play. You download a game that's free. You and I were talking about Fall Guys -- great game -- or Fortnite. These are games that you have a device you can download the game and then they will sell you things in game to monetize so that they do actually run a business in the game, but you're not forced to go buy those things in order to go play the game. That's the largest gaming business model across all screens; it's free to play.

As you mentioned there's retail. People still buy video games, a lot of them. That's far larger than game pass is for us, and we have the option of a subscription which we love as a choice but not to the extent not trying to kind of uh cannibalize the other businesses. We see it as just a customer choice and I think it will stay in that 10 to 15 percent of our overall revenue, and it's profitable for us."

As you can see, in this entire conversation, he never says "Game Pass is profitable." Instead, he talks about content revenue & services.

The question, specifically, was about Game Pass offering a lot of value to gamers, but what about investors and whether it's affecting the profitability of Xbox.

Phil answers by saying (among other things) that Game Pass is 10-15% of our total revenue, and retail is more important to us than Game Pass (in terms of profitability and revenue), and at 10-15% Game Pass is not cannibalizing our revenue -- which is profitable for us (because we don't see it growing 50, 60, 70% of total revenue).
 
Yep, the current console sales split is 1.6 at best. PS5 at 32 and Xbox at 20 million (estimated).

What do you figure the UK split is between PS5 systems with disk drives and Xbox series systems with disk drives? And PS4/X1 will get some sales here, this is a huge game and not everyone has converted yet.

Also, the raw numbers you gave there aren't much different from mine to start with, I gave 70/30 you come back with 62/38. If we adjusted for the XSS being largely more available (until recently) than the PS5 DE, we would probably be looking at more like 75/25 or 80/20 for physical games sales just looking at the current gen alone (but PS4 will get some sales here so that is unrealistic).
 
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It's a couple sentences with the actual percentage redacted. It really doesn't say a lot.

You could reframe the exact same data to say that consumers prefer a subscription to retail. It says sales decline for 12 months, but doesn't list a percentage. It also doesn't talk about sales after 12 months, which is when GP players would be buying the game if they want it as it leaves the service. It also doesn't cover small or AA games with little exposure, which we know do see a boost in sales because of word of mouth and increased exposure, as stated by a dozen different developers over the last few years. I expect big AAA third party titles would see a decrease in sales, but it's really only logical. Why would you pay to rent a game and buy it at the same time? You may rent it, and then buy it later. But even still, games like High on Life almost surely have seen a huge increase in sales because of GP exposure. I just think it's an incomplete statement. It also doesn't specify what the developers are paid to be on the sub service and whether or not they still come out ahead or not. It doesn't specify a lot of things. You would have to look at a broader picture to see if it's worth it for Xbox. You'd have to find out if customers buy more than 3 games every year, or if their amount paid through GP is higher than the amount they pay collectively over a year. Or maybe they sub and buy only 2 games a year instead of 3 (a decline in b2p titles of 33%), but they also sub to GP now equaling a larger amount of money at the end for MS. It just doesn't say. It also doesn't talk about games on GP that get exposure, but see increased sales on other competing platforms because the exposure generally is much higher.

A title like Call of Duty is probably uniquely suited to losing sales, since it comes out annually and if it's on the sub for 12 months, that's the most important time for a title like that. Other games could potentially have much longer sales trends. This could be seen as a negative, but it also basically shows why MS was always going to keep Call of Duty on PS like I said. Deal or no deal, they were never pulling the game or making it exclusive. They want to sell it on retail on PS but offer it on GP on Xbox. A Call of Duty player in particular is the type that may only play 3 or less titles per year, so even if they forgo buying Call of Duty, it could ultimately result in triple the revenue to MS if they own Activision. For more hardcore gamers that play a ton of the titles, they get a better value than the casual gamer who only buys a small amount. This also doesn't cover increased sales of microtransactions or expansions, which would benefit Call of Duty potentially or any GAAS game on GP.

But bonus points for it using the word "cannibalize" as that sounds terrifying.
 
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The whole business model is fundamentally flawed. Why give away something for free when otherwise your customers are forced to pay?

They are actively destroying their own business now in order to gouge the living daylights out of you later.

Gouge the living daylights how, exactly?

If the service gets too expensive, people can unsubscribe.

If the games aren't worth the price, people can unsubscribe.

I'm still waiting to read logical reasons why a company in third place will somehow make a service they see as 10-15% max of their revenue and make it as shitty and anti-consumer as doomsday predictors have been predicting for years. Never mind that these same people said the same thing for years about EA Access and here it still is, inconsequential as hell.
 
Fun fact: Phil Spencer actually never said, "Game Pass is profitable for us." 😛 Although that's what all the journalists and websites ran with.

Take a look at this.

The headline says, "Game Pass is Profitable."

The content (highlighted) puts Game Pass outside of quotation marks, and just says "is profitable for us," because he never said, "Game Pass is profitable." Phil was referring to something else entirely.

4nw4zJQ.jpg
With the whole "profitable" messaging, I wonder if they isolate studio game sales losses due to Gamepass, with Gamepass profitability, or is it just cost of running Gamepass on Azure and getting a sub. You can characterize it many ways, but unless you break down all costs for GP and then show that with a 15$ a month sub, its profitable, I doubt they are making as much as they want to/should be making without GP.
 
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God, even GI.biz are now posting "warrior nonsense", what's the world coming to?

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Man, I caught so much flack for pointing out the fact that Halo couldnt hit the NPD top 20 in 2021 and Forza barely hit top 20 getting beaten out by hits like Back4blood and Mortal Kombat 2019.

VINDICATED!!!

Dont believe these suits, gaf. Please for my sake.
 
No it shouldn't

Hardly anyone is buying this on last gen

So you have to use current gen splits as a baseline

No way to spin 82% PS sales ratio as a good thing for Xbox, it's a terrible result and exactly what I stated previously about GP cannibalizing sales
Hardly? Dude, there are no last gen SKUs. They were delayed until April. Switch version was delayed till June.

We've seen this since the start of the gen. Im sure the overall sales split isnt 82-18, but i highly doubt the splits go to 50-50 or even 60-40 when digital sales are figured in. PS5 also sells a digital only SKU and their owners also buy digital 60-70% of the time according to Sony. It's highly likely that MS has conditioned their gamers to wait for games to become available on gamepas. Hell, we saw it here with people saying they will wait for the game to come out on gamepass. Proud of the fact that they no longer spend full price on games.
 
Hardly? Dude, there are no last gen SKUs. They were delayed until April. Switch version was delayed till June.

We've seen this since the start of the gen. Im sure the overall sales split isnt 82-18, but i highly doubt the splits go to 50-50 or even 60-40 when digital sales are figured in. PS5 also sells a digital only SKU and their owners also buy digital 60-70% of the time according to Sony. It's highly likely that MS has conditioned their gamers to wait for games to become available on gamepas. Hell, we saw it here with people saying they will wait for the game to come out on gamepass. Proud of the fact that they no longer spend full price on games.

I didn't realize the last-gen version was postponed. But really, you could never hit 50/50 or 60/40, unless Xbox owners purchase the game at a much higher rate. The Xbox split wouldn't be this high in the UK.
 
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Well of course, i didn't bought any MS first party games since gamepass launched and i played a lot of them and would have bought them if gamepass didn't exist.
If there's a game mildly interested i don't buy it as i hope it will there or at a good discount later.
I saved money with gamepass during all this years.
I only buy big 3rd party games on xbox now and sony exclusives on PS5.
 
Yo this is so much worse than I thought. I nean I'm not surprised. Everyone knows that was the case. But the fact xbox did this to itself
Um.....reading the article, doesn't it say that after a year, games on Gamepass begins to lose sales?
 
Well of course, i didn't bought any MS first party games since gamepass launched and i played a lot of them and would have bought them if gamepass didn't exist.
If there's a game mildly interested i don't buy it as i hope it will there or at a good discount later.
I saved money with gamepass during all this years.
I only buy big 3rd party games on xbox now and sony exclusives on PS5.
All games bought from Gamepass are discounted.
 
Um.....reading the article, doesn't it say that after a year, games on Gamepass begins to lose sales?

I don't think so, I think it meant that they measured after 12 months of time on the market and the sales were less. Which is obvious and makes sense.

Now, the question is, does MS offset those lost sales with additional MTX/DLC revenue? For example, three GamePass users buying Horizon 5 expansion passes makes MS more money than one person buying the game at retail, probably even more than two people. GamePass adds a lot of users to the monetization pool, devs have talked about this.

When Phil was talking about the service leading to more sales, he was talking about sales happening because of word of mouth and exposure that GamePass brings. So that can lead to sales the game would have otherwise not seen, not necessarily MORE sales. Again, devs have spoke on this.

But it's a MS thread, so everyone is suddenly just kind of stupid.
 
Um.....reading the article, doesn't it say that after a year, games on Gamepass begins to lose sales?

I've seen this interpretation here and at other places.

No, it says in those 12 months. That's the data being analyzed, the 12 months following the game's launch on gamepass.

MS has also released big guns on gamepass day one, sequels to their best sellers really. Easy to compare those in case anybody wants to try a dumb theory.

The fake is over.
 
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Now, the question is, does MS offset those lost sales with additional MTX/DLC revenue? For example, three GamePass users buying Horizon 5 expansion passes makes MS more money than one person buying the game at retail, probably even more than two people. GamePass adds a lot of users to the monetization pool, devs have talked about this.

Well I don't know, can you try and back up your theory?

And what about games that aren't monetized to hell and back? And if the main revenue source of your game is supposed to be via MTX… why not F2P?
 
I don't think so, I think it meant that they measured after 12 months of time on the market and the sales were less. Which is obvious and makes sense.

Now, the question is, does MS offset those lost sales with additional MTX/DLC revenue? For example, three GamePass users buying Horizon 5 expansion passes makes MS more money than one person buying the game at retail, probably even more than two people. GamePass adds a lot of users to the monetization pool, devs have talked about this.

When Phil was talking about the service leading to more sales, he was talking about sales happening because of word of mouth and exposure that GamePass brings. So that can lead to sales the game would have otherwise not seen, not necessarily MORE sales. Again, devs have spoke on this.

But it's a MS thread, so everyone is suddenly just kind of stupid.
Great post. Kinda of what I was thinking. Makes sense why people are running with this narrative now.
 
Well I don't know, can you try and back up your theory?

And what about games that aren't monetized to hell and back? And if the main revenue source of your game is supposed to be via MTX… why not F2P?

I wasn't making any kind of theory, I was just asking a question. Not that the theory really needs any backing up, it makes all the logical sense in the world.

And I never said anything about a games main revenue source being MTX. I agree that if that's the main way a game plans on monetizing, it should be F2P. Like Halos MP, or how Factions is rumored to be MP.

Publishers get paid to put the games on the service, and they make money off however they monetize the game. We've seen multiple devs come out and say the service was great for them, have we seen multiple come out and say otherwise? I honestly don't know.
 
Im bemused at this guy . Not every gene launches in game pass, particularly the more high profile bigger budget releases and in particular from day one.

If sales of those games decline or decline further, what's the incentive from publishers to put their games on the platform in future? It will get to a point more end more Xbox users will wait it out in the hope a game launches on the service and what if it doesn't?

And yeah I'm talking from a consumer standpoint. Not every Xbox player is a subscriber but the way some talk you would think they were.

 
I didn't realize the last-gen version was postponed. But really, you could never hit 50/50 or 60/40, unless Xbox owners purchase the game at a much higher rate. The Xbox split wouldn't be this high in the UK.
Console sales for PS5 and XBS are roughly the same in the UK. So this much disparity in Hogwart's Legacy game sales further validate this point that Xbox has lower software sales.

 
The narratives are… insane. Hell, Spencer literally said it's profitable and you have people stumbling all over themselves trying to twist his words into something else.
Again, he never said, "Game Pass is profitable."

Here is the transcription of his WSJ Tech Live interview.

Interviewer: "Let's talk about game pass a little bit more since that's a big bet for Microsoft. How many subscribers do we have now? And it does seem like a really good deal for the consumer, but what about the Microsoft investor? How is this a money maker for Microsoft?"

Phil: "Our last public number was 25 million subscribers that we've talked about. We did talk about growth on PC so our Game Pass subscription not expecting everybody's following the video game Market is available on gaming consoles and on personal computers and. You can subscribe in both places we're seeing incredible growth on PC.

I think Satya Nadella in our earnings yesterday, the CEO of Microsoft, talked about I think 130-140 percent year-over-year growth on PC which is really where we're focused on. Console, I've seen growth slow down on Game Pass mainly because at some point you've just reached everybody on Console who wants to subscribe and we don't see subscription unlike some other forms of media that have really moved almost solely to a subscription business today, Game Pass is an overall part of our content and service Revenue. It's probably 15 percent; I don't don't think it gets bigger than that. I think the overall Revenue grows so 15 percent of a bigger number is a bigger number but we don't have this future where I think 50, 60, 70 percent of our Revenue comes from subscriptions.

The largest business model in video games is free-to-play. You download a game that's free. You and I were talking about Fall Guys -- great game -- or Fortnite. These are games that you have a device you can download the game and then they will sell you things in game to monetize so that they do actually run a business in the game, but you're not forced to go buy those things in order to go play the game. That's the largest gaming business model across all screens; it's free to play.

As you mentioned there's retail. People still buy video games, a lot of them. That's far larger than game pass is for us, and we have the option of a subscription which we love as a choice but not to the extent not trying to kind of uh cannibalize the other businesses. We see it as just a customer choice and I think it will stay in that 10 to 15 percent of our overall revenue, and it's profitable for us."
 
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If sales of those games decline or decline further, what's the incentive from publishers to put their games on the platform in future? It will get to a point more end more Xbox users will wait it out in the hope a game launches on the service and what if it doesn't?
Publishers get paid based on how much the game is played. So if the game is played a lot, you get paid more. Xbox players might wait until it's on GP, then the publisher can choose how long they want to wait. This is just market dynamics, follow the consumer, or wait.

I also want to point out that I think great games, like for example Hogwarts Legacy, will sell regardless of it being on GP day 1 or not. It's mediocre games that might have more difficulty with this, but this should push the quality higher for gamers anyway.
 
Again, he never said, "Game Pass is profitable."

Here is the transcription of his WSJ Tech Live interview.

See? Insanity. Quotes the full transcript where he is asked directly about the profitability of GamePass, Phil goes into detail about how big they expect GamePass to get and how it lines up against people buying games, and ends by answering that it is profitable, and this dude is still claiming he never said it was profitable. You just can't reach or reason with warrior mentality like this.
 
Game Pass doesn't make a game "shit". I guess it could reduce sales from deceptive marketing.
Not by itself but if you think that games designed for a streaming services, knowing that people subbing on it would not pay for the game outside of the subscription, would not affect its game design and monetisation you are kidding yourself sorry. Convincing players that there is no value in buying games / destroying perceived value is not without its side effects but just watch the mobile gaming space…
 
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