Bloomberg: Xbox’s Hike on Game Pass Shows Cost of Lost ‘Call of Duty’ Sales(gave up more than $300 million in sales)

jm89

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Microsoft Corp.'s Xbox division surprised many video game enthusiasts this week when the company announced a 50% price hike, to $30 a month, for the highest level tier in its Game Pass subscription service.

Online reaction was swift, with California Governor Gavin Newsom blaming the price increase on President Donald Trump's tariffs, and video game retailer GameStop Corp. posting a cartoon suggesting customers would be better off just buying games in stores.

The price hike and other changes to the Game Pass plans are a sign that Xbox's big streaming push is still not generating the revenue it would like eight years after launch, according to interviews with seven current and former Xbox employees. The company is putting some of its top titles on the streaming service, but that's cutting into sales of higher-margin games like Call of Duty, which came with Microsoft's 2023 acquisition of Activision Blizzard Inc., said the people, who asked to not be identified discussing internal company matters.
Xbox gave up more than $300 million in sales of Call of Duty on console and PCs last year, according to one of the former employees, who asked not to be identified discussing internal estimates.

"Game Pass hasn't delivered the explosive growth Microsoft anticipated post-Activision, and they've realized their infrastructure costs don't align with their pricing model," said Joost Van Dreunen, founder of the video-game analytics firm Aldora.

A spokesperson for Xbox declined to comment for this story.

The company has largely lost the race for dominance in game hardware to Sony Group Corp.'s PlayStation and Nintendo Co.'s Switch, which developed exclusive titles that proved to be extended hits with fans. Game Pass, which offers games for a monthly fee, is a potential growth vehicle for Xbox, one that offers steady, repeatable revenue.
Like other entertainment companies such as Netflix Inc. and Walt Disney Co., Xbox launched its streaming service at a relatively low price. It cost $10 a month for over 100 games when it debuted in 2017. Those were all older titles. A year later, Xbox announced it would offer subscribers its own new games, on the day of their release, for no extra fee.

Current and former employees said that move was controversial internally. Developing new video games can take years and cost hundreds of millions of dollars and the model had long been to sell them for $60 to $70 each, making more still on upgrades and in-game purchases. The Game Pass streaming model upended that by putting so many titles in an all-you can-eat subscription.

Over the past decade, Microsoft invested billions acquiring some of the most successful video game studios. The $69 billion deal to purchase Activision Blizzard was the largest video game acquisition in history. Microsoft told a UK regulator that acquiring new titles for Game Pass was one of the reasons for the purchase.

Putting Call of Duty on Game Pass was a great deal for subscribers, but not great for Xbox's sales of the game, according to former employees with knowledge of the business. While the latest iteration of the shooting title, Call of Duty: Black Ops 6, was the top selling video game in the US last year, and the biggest ever for the franchise, that was largely due to Sony's PlayStation, which accounted for 82% of sales, the trade publication IGN reported.
Subscription revenue was up 16% industrywide, according to IGN, due in part to customers playing the new Call of Duty on Game Pass. Some may have paid for a month or two and canceled, unlike the industry's old model where they would have paid $70 and owned the game.

Sony, by contrast, doesn't offer big new games like Call of Duty on the day they are released on its subscription service, called PlayStation Plus.

In September, former Xbox Game Studios vice president Shannon Loftis wrote on LinkedIn that while Game Pass "can claim a few victories with games that otherwise would have sunk beneath the waves (Human Fall Flat, e.g.), the majority of game adoption on [Game Pass] comes at the expense of retail revenue." Loftis declined to comment further to Bloomberg.

The games industry in general has struggled in recent years, with players spending more time on existing titles and not taking as many chances on new ones. In September 2024, Microsoft cut 650 jobs in the Xbox unit after slashing 1,900 months prior in January. This year brought more layoffs and at least four games canceled. Microsoft Chief Financial Officer Amy Hood has asked Xbox to find other ways to increase profit, according to the current and former employees.
Former Federal Trade Commission Chair Lina Kahn, who unsuccessfully sued to block Microsoft's Activision merger, said in a post on X Friday that "Microsoft's acquisition of Activision has been followed by significant price hikes and layoffs, harming both gamers and developers."

After a surge during the pandemic, Game Pass's rate of growth has slowed significantly, from 80% between 2020 and 2021 to 36% between 2022 and 2024, according to numbers Xbox released. Subscribers were 34 million in February of 2024, the last time the company shared the data.

Xbox has said Game Pass is profitable, with revenue reaching a record of nearly $5 billion for the fiscal year that ended in June.

Xbox announced three pricing tiers for Game Pass on Oct. 1. Fans can pay $10 a month for about 50 titles, $15 for 200 games and $30 for 400-plus games, including 75 on the same day they are released for consoles. That list will include highly anticipated new titles like Call of Duty: Black Ops 7 and The Outer Worlds 2.

"We know not everyone wants the same thing in their Xbox experience, so we're evolving Game Pass to offer more flexibility, choice, and value to all players," the company said in a press release.

Meaning if you want to play those pricey new titles on day one with Game Pass, you'll have to pay more for the subscription.
 
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Scared Homer Simpson GIF by reactionseditor
Phil in the boardroom when discussing 300 million in losses
 
They must have really thought CoD would increase subscribers. It probably did, but only temporarily. I was actually surprised when they went ahead with it - just simply due to how much money they would lose in sales.
 
I'm convinced they wanted people to cancel their subscriptions.

Theory:
Game Pass is well behind 100 million subscribers, and they're losing significant revenue due to day-one game releases. Since they can't backtrack on the day-one release, they decided to drastically raise the subscription price....essentially pushing users to unsubscribe and purchase games individually instead.
 
Putting a franchise as huge as COD on gamepass is one of the dumbest things anyone could ever do. It's the equivalent to dropping GTA 6 on gamepass day 1 and being surprised that you tanked its sales. Phil spencer and xbox leadership are dumbasses that have tanked the brand and tanked multiple franchises.
 
A few years ago, Phil thought Gamepass would be so successful that it would allow Microsoft to buy Nintendo, something which he said would be a "career moment"

How the tables have turned in only a few short years.
 
How many more subscribers would they have needed to make up that shortfall at last year's gamepass prices (at the time COD launched)?

20 million? Did they really think 20 million more people would subscribe to gamepass just for COD?
 
I'm still laughing over the fact that Gov. Newsom blamed the price hike of a subscription service on tariffs.

Clown Suicide GIF
Its not unrelated. I am kind of laughing at how people dismiss the cost of infrastructure, i.e. servers, and how none of that shit is made in the US anymore. FFS the article in this OP cites that as a major driver.
 
Isn't this literally what Bobby Kotick testified under oath during the antitrust review of the ABK acquisition? He literally said he would never put Call of Duty on a subscription service because it would reduce revenues LMAO

"Bobby was right about everything" #1,568

I hope the man is enjoying his well-earned retirement
 
Whats crazy to me is that for all the millions these people make, we've got tons of keybopard analysts on here that could have told them this is all exactly what would happen for free.

How tone deaf, how much of a bubble must at least 10 people that had a hand in these decisions over the last 8 years have to be in to not have seen this coming?
 
Isn't this literally what Bobby Kotick testified under oath during the antitrust review of the ABK acquisition? He literally said he would never put Call of Duty on a subscription service because it would reduce revenues LMAO

"Bobby was right about everything" #1,568

I hope the man is enjoying his well-earned retirement
Say what you want about the guy, but he built his empire on his sheer cutthroat talent
 
Even Bobby Kotick said he wouldn't put COD on Gamepass
Kotick should be running Xbox now. They'd be right in the black and doing things that the majority of gamers actually want.

Would they be at the head of the industry? Probably not. Nintendo and Sony have a generational lead that's very hard to overcome but I'm certain Xbox would be closer to them with some like kotick at the helm.

Spencer and Bond have some reality distortion field around them that seems to protect them from an absolutely justified firing.
 
Its not unrelated. I am kind of laughing at how people dismiss the cost of infrastructure, i.e. servers, and how none of that shit is made in the US anymore. FFS the article in this OP cites that as a major driver.

It's bullshit. Microsoft has had server farms and data centers established in the US long before the first tariff was levied. I don't care what line Microsoft fed any of these people. The Game Pass price hike has nothing to do with tariffs.
 
It's bullshit. Microsoft has had server farms and data centers established in the US long before the first tariff was levied. I don't care what line Microsoft fed any of these people. The Game Pass price hike has nothing to do with tariffs.
The part I really don't understand about using "Orange Man Bad" as a response or an excuse for everything is that the Orange Man is only going to be President for 3 more years. What exactly are the Democrats and the tech megacorps (same thing really) going to do after 2028? Do they even have a plan for the day when the Orange Man isn't around anymore to be blamed for literally everything?
 
The part I really don't understand about using "Orange Man Bad" as a response or an excuse for everything is that the Orange Man is only going to be President for 3 more years. What exactly are the Democrats and the tech megacorps (same thing really) going to do after 2028? Do they even have a plan for the day when the Orange Man isn't around anymore to be blamed for literally everything?

Eh....don't think we should get into party politics bro.
 
>gets utterly beaten by the PS5 in its first 14 months in the market
>tries to acquire a mega publisher on a relatively vulnerable position PR-wise (at the time) for 70B, "more game pass value, more xbox exclusives, this will surely do it!"
>acquisition process ends up being a huge mess with several concessions being made, including the support of a multiplatform COD for a decade
>literally nothing changes and xbox has a sharp decline on hardware unit sales in 2023 versus 2022
>has the top bean counters of the conglomerate looking closely at your division after you spend 70B on it
>realizes that doing exclusives for a dead platform is a fucking bad idea
>realizes that day one game pass is a fucking bad idea
>pivots to a full multiplatform strategy
>messes with the game pass model and offers different tiers with non-day one titles, in order to slowly get their userbase to be less accustomed to the old proposition
>rises hardware prices for the sake of meeting full profit on it to the point of getting to absurdly high pricing, especially for a dead platform
>rises game pass prices so much that a big amount of the userbase is not seeing any worth on staying to the day one titles tier
In the end, what was the point of all of it?
 
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Every hundred million he loses the company he has to take off 5 lbs of his own weight.

Story checks:

G1ilgLzWUAAZbgT.jpg


FWIW this is what my dad started to look like when he learned he had cancer… I hope for his sake that isn't the case.
 
Eh....don't think we should get into party politics bro.
Explicitly trying to blame tariffs and even roping in the Governor of California by getting his intern to make a Twitter post is an openly political way for MS to try and excuse their price increases. But yes you are right, I won't mention it again since no politics rule
 
Xbox has said Game Pass is profitable, with revenue reaching a record of nearly $5 billion for the fiscal year that ended in June.
This is, by FAR, the most idiotic thing ive ever read. I can 'accept' a startup trying to seduce a venture capital investiment firm with this like of phrase and the only real proof being' trust us, bro'. A public listed company doing this is shows an absurd level of incompetence and lack of due diligence.
 
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(16:02)
GrpSxXesFSAyGNwu.jpg

Maybe you should've listened to those people, you dumbass.

That interview is the most clear example of how narcissistic and egocentric Phil Spencer really is.
 
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Every hundred million he loses the company he has to take off 5 lbs of his own weight.

Story checks:

G1ilgLzWUAAZbgT.jpg


FWIW this is what my dad started to look like when he learned he had cancer… I hope for his sake that isn't the case.
Yeah he doesn't look great in this photo
 
Every hundred million he loses the company he has to take off 5 lbs of his own weight.

Story checks:

G1ilgLzWUAAZbgT.jpg


FWIW this is what my dad started to look like when he learned he had cancer… I hope for his sake that isn't the case.
the pressure sure has to be insane. He just needs piss off and let this clusterfuck behind.
 
Explicitly trying to blame tariffs and even roping in the Governor of California by getting his intern to make a Twitter post is an openly political way for MS to try and excuse their price increases. But yes you are right, I won't mention it again since no politics rule
Allot of companies today are just using tariff issue as escape goat to cover there blunder and mismanagement.
 
the pressure sure has to be insane. He just needs piss off and let this clusterfuck behind.
It's a lost cause. This MF really believes the game world orbits him and his decisions, and he KNOWS he will go down into game history books as the worst execute ever, even with a bunch of yes-men around him (including some idiots here). He probably is just waiting his last paycheck and his golden parachute (if im being honest, Id wait it too).
 
It's a lost cause. This MF really believes the game world orbits him and his decisions, and he KNOWS he will go down into game history books as the worst execute ever, even with a bunch of yes-men around him (including some idiots here). He probably is just waiting his last paycheck and his golden parachute (if im being honest, Id wait it too).
i think he wants to frame his exit in a good light, as an achievement and triumph. And the the only way he can even attempt to do that is with a new console relase and new marketing cycle. (on top of his golden parachute)
 
Kotick should be running Xbox now. They'd be right in the black and doing things that the majority of gamers actually want.

Would they be at the head of the industry? Probably not. Nintendo and Sony have a generational lead that's very hard to overcome but I'm certain Xbox would be closer to them with some like kotick at the helm.

Spencer and Bond have some reality distortion field around them that seems to protect them from an absolutely justified firing.
His reputation was tarnished already, the only saviour willing to take that sinking ship was MS, but at that time, they didn't want to accept that they were the sinking ship.
 
Spencer and Bond have some reality distortion field around them that seems to protect them from an absolutely justified firing.

It's called Growth Mindset, laid out in the book Nadella wrote and that he makes his employees read. To fix the rot in the company he really needs to go as well.
 
It's called Growth Mindset, laid out in the book Nadella wrote and that he makes his employees read. To fix the rot in the company he really needs to go as well.

I think it is bigger than Nadella. It is Microsoft's culture. Goes all the way back to Bill Gates and Steve Ballmer
 
i think he wants to frame his exit in a good light, as an achievement and triumph. And the the only way he can even attempt to do that is with a new console relase and new marketing cycle. (on top of his golden parachute)
I can say it right now... that will be the most stupid thing they can do. Which just means they are definitely going to do it. They have a $600 handheld on the market that absolutely no one asked for. And even with the bleeding that has happened with the XB1 and XBS generations, they are still thinking about making a new console? Even after having gone full multiplatform?

Why? Like, how stupid can they be? Like, at what point do they just stop burning money? Like I can see no upside in this in any way, no silver linings... nothing.

And yet I can think of ways they make this so much easier and better for themselves in the long run, and it would cost them a fraction of whatever they have been spending.

Damn, MS has got to be the most stupid company on the planet.
 
Whats crazy to me is that for all the millions these people make, we've got tons of keybopard analysts on here that could have told them this is all exactly what would happen for free.

How tone deaf, how much of a bubble must at least 10 people that had a hand in these decisions over the last 8 years have to be in to not have seen this coming?
one weird aspect of social media is how we've come to see that, when it comes to any number of relatively big issues, it consistently turns out that many of us seem to have a better grasp of the consequences of a number of policy choices & decisions than the select group of individuals directly responsible. it's absolutely a bizarre phenomenon, & one of the reasons for a number of conspiracy theories, predicated on the idea that there must be some other 'agenda' at work that isn't being stated (tho, in this instance, i'd just put it down to a serious miscalculation based in greed & the need to dominate)...
 
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