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[FalsettoVibe]

There are two reasons why all those Bethesda studios closed, and neither of them have anything to do with Bethesda (directly)...

Game Pass and Activision.

The biggest paradox with Game Pass is that basically every game that launches on the service badly misses its sales goals. Makes sense though, why pay full price to buy a game when you can play it for "free" as part of your subscription? This is accounted for somewhat by attributing portions of revenue to top-performing Game Pass games every month, but there are factors working against games. Namely, the fact that most games don't stay at the top of the chart for more than a month or two, and also that Game Pass growth has stagnated. So games like Hi-Fi Rush, which is incredible mind you, gets a very small bump in revenue from being the hot Game Pass game for a month, then it falls off a cliff when everyone moves onto the next thing. Poor Redfall had it even worse since it launched so rough, it never had a chance.

This system was fine for a while when Game Pass was growing like gangbusters, but now it's slowed way down and the amount of revenue it's attributing to games isn't keeping up with the budgets to make them.

But, all that wouldn't have mattered even 3 or 4 years ago because back then Xbox was basically a rounding error on Microsoft's books. The division made some money, but more importantly, it didn't cost that much and other parts of the business easily covered the gap. Then Xbox went on a buying spree and spent a lot of money on Bethesda, but orders of magnitude more on Activision. Now, the Eye of Sauron has turned, and Xbox is expected to start making that $70B back, or at least cut expenses to the bone (and then some) while they try.

That brings us back to Game Pass. So far, the big bets on driving new subscriptions (Redfall, Starfield) haven't spurred near enough growth, and there's not much on the horizon that is likely to restart the momentum. The best bet is COD, but do you really risk the guaranteed sales revenue that franchise brings by putting it on Game Pass on Day 1 and potentially lose massive sales? I don't know what the plans are, but either you put it on Game Pass and lose money, or you don't and the subscribers revolt because they think that's what they signed up for.

COD will be fine though, as will the other mega-studios with huge IPs, but you're seeing the impact; all those smaller studios making really interesting games are going to fall away, simply because as good as games like Hi-Fi Rush are, they're never going to make enough money to make up that $70B hole that Xbox now has to dig itself out of.

Interesting.

 

[feynoob]

Phil spencer this gen

 

[Mibu no ookami]

Correct assessment minus the part about Microsoft needing to dig themselves out of 70B dollar hole.

It doesn't work like that. ABK is an asset not an expenditure.

Is more attention on the business to be profitable? Absolutely, but there is no 70B dollar hole.

 

[Tiago Rodrigues]

The biggest paradox with Game Pass is that basically every game that launches on the service badly misses its sales goals.

Everyone looking like fools.

I actually was banned for trolling on the other forum for even considering the possibility of this being true. Time really is the ultimate teller.

This was such an obvious thing as well.

The way everyone ate up Xbox PR for like half a decade...and for what?

 

[intbal]

I can offer them the perspective of a single gamer.

Back when you still needed a subscription to play PUBG, I would sub to Gamepass regularly. As soon as it went 100% Free to Play, I never subscribed to Gamepass again.

Maybe yank the single player games off of Gamepass and keep the multiplayer ones there. People get addicted to multiplayer and will pay for it for years.

 

[H-I-M]

Lord Jesus, we've been saying for years that the GP model didn't make any sense and wasn't sustainable.

 

[Punished Miku]

I've never personally cared about Call of Duty on GP. I doubt there's any revolt over it being on there or not. I sub to it for other things.

And as far as sales goals, the whole thing changes when they go multiplat. Guess we'll see if they cut it or not.

 

[rm082e]

Correct assessment minus the part about Microsoft needing to dig themselves out of 70B dollar hole.

It doesn't work like that. ABK is an asset not an expenditure.

Is more attention on the business to be profitable? Absolutely, but there is no 70B dollar hole.

You are technically correct in terms of how the corporate books are kept. But it's not the corporate books that represent the "Eye of Sauron" he mentions - it's the expectation of the C-Suite, Board, and investors. All of them are looking at this division thinking "You spent Seventy Six Billion dollars buying these studios. Now we expect a return on that investment."

 

[Loomy]

Correct assessment minus the part about Microsoft needing to dig themselves out of 70B dollar hole.

It doesn't work like that. ABK is an asset not an expenditure.

Is more attention on the business to be profitable? Absolutely, but there is no 70B dollar hole.

You're right in that they don't have a $70b hole, but I guarantee you there's at least 1 person with some power at Microsoft who believed that investment would yield better results elsewhere in their portfolio and is going to take every opportunity possible to point that out.

But yeah, GamePass never made long term business sense. Great for gamers, but Microsoft would have had to be sweatshopping games to make it make sense for them. But they can't even sustain a regular cadence for games.

 

[Pelta88]

"The biggest paradox with game pass is that basically every game that launches on the service badly misses its sales target"

 

[Cyberpunkd]

Correct assessment minus the part about Microsoft needing to dig themselves out of 70B dollar hole.

It doesn't work like that. ABK is an asset not an expenditure.

Is more attention on the business to be profitable? Absolutely, but there is no 70B dollar hole.

It has to start making back money that justified the cost of its acquisition. He is correct - the division that was not super important suddenly spent 70 billion on an acquisition, you can be sure a lot more heads in Microsoft turned to look at the fundamentals after this.

To put it differently: Xbox was a big fish in a small pool, but Phil wanted to play in the big leagues so he changed the tank. Guess what - bigger tank has bigger fishes.

I don’t think Phil is on the level of other executives at Azure or Windows, and now he has to play by their rules.

 

[XXL]

 

[rm082e]

That moment when he says Game Pass isn't profitable.

Wasn't this known from the ABK trial leak? I thought there was a line of detail in there saying they needed to get to 50 million subs to reach break even on Game Pass?

 

[Mibu no ookami]

You are technically correct in terms of how the corporate books are kept. But it's not the corporate books that represent the "Eye of Sauron" he mentions - it's the expectation of the C-Suite, Board, and investors. All of them are looking at this division thinking "You spent Seventy Six Billion dollars buying these studios. Now we expect a return on that investment."

Please re-read what I said. I said there's definitely more attention on them, but describing it as a 70B dollar hole is not accurate and is extremely misleading. It actually shows a general failing of the education system to have people understand how finance works.

For ABK to turn into a hole, Microsoft would need to sell them for less than 70B or the value of the company would at least need to plummet.

Microsoft was cash heavy, so they needed to put their money somewhere less it reduce in value due to inflation.

 

[onQ123]

Opinion - Game Pass is hurting day one software sales on Xbox could this push publishers & devs away from Xbox Scarlett or will they wait it out?

Right now Game Pass is hurting software sales on Xbox but if Microsoft is successful in creating the Netflix of gaming it could benefit games in the post physical media era when people are not willing to pay $60 for a download.

www.neogaf.com

 

[Mibu no ookami]

You're right in that they don't have a $70b hole, but I guarantee you there's at least 1 person with some power at Microsoft who believed that investment would yield better results elsewhere in their portfolio and is going to take every opportunity possible to point that out.

But yeah, GamePass never made long term business sense. Great for gamers, but Microsoft would have had to be sweatshopping games to make it make sense for them. But they can't even sustain a regular cadence for games.

Like I said in my 3rd sentence. More attention is on them for sure.

They actually spent 80 billion dollars when you include zenimax and their hardware sales since spending that have evaporated and as a result gamepass hasn't grown.

Now there is no prospect of growth in hardware and thus no prospect of growth in gamepass. So what do you do? You pivot to 3rd party and make as much as you can on software.

 

[adamsapple]

Opinion - Game Pass is hurting day one software sales on Xbox could this push publishers & devs away from Xbox Scarlett or will they wait it out?

Right now Game Pass is hurting software sales on Xbox but if Microsoft is successful in creating the Netflix of gaming it could benefit games in the post physical media era when people are not willing to pay $60 for a download.

www.neogaf.com

 

[Topher]

Probably because he was saying the same thing dozens of others here had been saying for quite some time.

 

[AmuroChan]

Not exactly a novel take. I think most people here realized early on that if you train your customers to not buy games, they will happily oblige.

 

[rm082e]

Please re-read what I said. I said there's definitely more attention on them, but describing it as a 70B dollar hole is not accurate and is extremely misleading. It actually shows a general failing of the education system to have people understand how finance works.

For ABK to turn into a hole, Microsoft would need to sell them for less than 70B or the value of the company would at least need to plummet.

Microsoft was cash heavy, so they needed to put their money somewhere less it reduce in value due to inflation.

I didn't say it's a "hole". I understand how the business side of this works and it's not a "hole". You are correct.

I said the point the guy was making is that investors now have an expectation because of the 70B they spent. Are you suggesting Microsoft spending that 70B has not created an expectation of increased revenue among investors?

 

[Spitfire098]

Omg phil needs to send out emails to his dick riders for a new game pass narrative!! It's all falling apart

 

[violence]

Phil, why did you have to put on the ring!

 

[Mibu no ookami]

I didn't say it's a "hole". I understand how the business side of this works and it's not a "hole". You are correct.

I said the point the guy was making is that investors now have an expectation because of the 70B they spent. Are you suggesting Microsoft spending that 70B has not created an expectation of increased revenue among investors?

You didn't say hole the author of the piece did.

He described it as a hole, which it isn't.

I SPECIFICALLY said there is more attention on them as a result. Jesus christ.

 

[feynoob]

Opinion - Game Pass is hurting day one software sales on Xbox could this push publishers & devs away from Xbox Scarlett or will they wait it out?

Right now Game Pass is hurting software sales on Xbox but if Microsoft is successful in creating the Netflix of gaming it could benefit games in the post physical media era when people are not willing to pay $60 for a download.

www.neogaf.com

 

[Punished Miku]

Omg phil needs to send out emails to his dick riders for a new game pass narrative!! It's all falling apart

Not really. This proves it is literally the best deal in gaming by far. Problem is not enough people signed up for it. And if they didn't want to sign up for it, they could just buy the game, since it's entirely optional. People didn't want to do that either, or buy the console. That's the real issue.

 

[rm082e]

You didn't say hole the author of the piece did.

He described it as a hole, which it isn't.

I SPECIFICALLY said there is more attention on them as a result. Jesus christ.

 

[SneakersSO]

Wasn't this known from the ABK trial leak? I thought there was a line of detail in there saying they needed to get to 50 million subs to reach break even on Game Pass?

When Phil first pitched this idea to Nadella and the higher ups, the goal was 100m sub users in 10 years, so 2017-2027. However, when this pitch originally happened, Game Pass did not feature day 1 new game releases. It also didn't feature any of the costs they needed to spurn growth, aka, buying out two publishers. So that number simply kept increasing, but they were bolstered by the growth they experienced in 2020 and 2021, the issue being that they weren't attributing it to the pandemic and instead thought it was a result of the buyouts and XSX/S reception.

 

[feynoob]

You didn't say hole the author of the piece did.

He described it as a hole, which it isn't.

I SPECIFICALLY said there is more attention on them as a result. Jesus christ.

A hole is a hole, not matter what hole it is.
Kiss each other now.

 

[DonkeyPunchJr]

I have a great idea:

1. Put the new Call of Duty on Gamepass

2. When this fails to boost Gamepass subscription #s, compensate by increasing the cost of Gamepass

3. Compensate for the lower CoD sales #s by closing some smaller studios and laying people off

MS if you’re looking to replace Phill Spencer, make me an offer.

 

[Chukhopops]

I don’t understand his logic and some of his statements are factually wrong, starting from this:

But, all that wouldn't have mattered even 3 or 4 years ago because back then Xbox was basically a rounding error on Microsoft's books.

Back then the gaming business was around 10% of total MS revenue (if you take 2021). 10% isn’t a « rounding error » no matter how much you stretch it.

I would also probably STFU forever if my resume included running the PR for 343i in the past 5 years. Not exactly a crowning achievement.

 

[rm082e]

When Phil first pitched this idea to Nadella and the higher ups, the goal was 100m sub users in 10 years, so 2017-2027. However, when this pitch originally happened, Game Pass did not feature day 1 new game releases. It also didn't feature any of the costs they needed to spurn growth, aka, buying out two publishers. So that number simply kept increasing, but they were bolstered by the growth they experienced in 2020 and 2021, the issue being that they weren't attributing it to the pandemic and instead thought it was a result of the buyouts and XSX/S reception.

Yeah, I remember that graph with the 100 million subs target that looked like someone just dreamed it up out of nowhere. I thought one of the additional lines said they were expecting (at that time) to be break even around 50 million. You're right though, as the costs increased, it would push up the minimum sub requirement to break even. I can't imagine what that would be now if they actually put COD on Game Pass day 1...

 

[THE DUCK]

Like the guy clearly said and is being ignored, gamepass is fine if it meets its critical mass.
Not selling enough consoles makes it a lot harder. Like any product or service that fails to meet its goal, there is going to be problems.
Gamepass model isn't flawed, the lack of great games to drive subs is.

 

[feynoob]

Put the new Call of Duty on Gamepass

Dumb

When this fails to boost Gamepass subscription #s, compensate by increasing the cost of Gamepass

Dumb

Compensate for the lower CoD sales #s by closing some smaller studios and laying people off

Dumb

MS if you’re looking to replace Phill Spencer, make me an offer.

I agree 100%. I recommend this guy MS. All of us here will vouch for his skills. Great guy, knows what he is doing. Much better than virgin phil, booty and Sarah.

 

[DryvBy]

 

[VideoGameEnjoyer]

Yea, basically just common sense. PS+ found the right balance where you can boost some smaller games to relevance. But all of your biggest games day and date was always just unbelievably stupid and unsustainable.

Go figure that their tent pole games all became underbaked, mediocre, unfinished crap. Why go all out, when the game won't be selling real copies based on its own merits? Just put more shit on Gamepass so we can say something is on Gamepass.

 

[feynoob]

I don’t understand his logic and some of his statements are factually wrong, starting from this:



Back then the gaming business was around 10% of total MS revenue (if you take 2021). 10% isn’t a « rounding error » no matter how much you stretch it.

I would also probably STFU forever if my resume included running the PR for 343i in the past 5 years. Not exactly a crowning achievement.

Because Xbox value was lower. Now with 70b, their value is higher and would demand more revenue.
Keep in mind that their release schedule was shit, and all of their games revenue combined was going to be less than COD yearly.

 

[Woopah]

Correct assessment minus the part about Microsoft needing to dig themselves out of 70B dollar hole.

It doesn't work like that. ABK is an asset not an expenditure.

Is more attention on the business to be profitable? Absolutely, but there is no 70B dollar hole.

This. CapEx and OpEx are different things and this is not 70 billion leaving a bank account with nothing to show for it. It directly lead to additional assets on MS' books.

 

[Killjoy-NL]

Not really. This proves it is literally the best deal in gaming by far. Problem is not enough people signed up for it. And if they didn't want to sign up for it, they could just buy the game, since it's entirely optional. People didn't want to do that either, or buy the console. That's the real issue.

So good, barely anyone thinks it's worth the full price.

 

[Cyberpunkd]

Microsoft was cash heavy, so they needed to put their money somewhere less it reduce in value due to inflation.

I’m sure there are multiple project at Azure waiting to be funded that provide infinitely better ROI than console gaming.

 

[Punished Miku]

So good, barely anyone thinks it's worth the full price.

Well, not the first time. Most stuff I'm into turns out like that.

 

[Cyberpunkd]

This proves it is literally the best deal in gaming by far. Problem is not enough people signed up for it.

These two sentences are contradictory. Or not if you want to go “stupid customers not realising the great value” spin. If so:

 

[Punished Miku]

These two sentences are contradictory. Or not if you want to go “stupid customers not realising the great value” spin. If so:

Yeah, because it's impossible to see value in something unless the masses do. Good one dude. Everyone here knows I like GP and think it's been great for 3 years. If I didn't blame consumers I would literally be lying. My opinion of the service is different from theirs. This is common sense.

 

[feynoob]

These two sentences are contradictory. Or not if you want to go “stupid customers not realising the great value” spin. If so:

For my pocket, yet. For MS no.

Me like free games. More money for my side hustle stuff.

 

[VideoGameEnjoyer]

Not really. This proves it is literally the best deal in gaming by far. Problem is not enough people signed up for it. And if they didn't want to sign up for it, they could just buy the game, since it's entirely optional. People didn't want to do that either, or buy the console. That's the real issue.

It would be an amazing deal if their first party output was worth a damn. Not enough people care for the time machine of quality games on the service. They needed new, big hits.

 

[Sushi_Combo]

So the Activision deal was indeed bad news for gamers.

 

[GHG]

I've never personally cared about Call of Duty on GP. I doubt there's any revolt over it being on there or not. I sub to it for other things.

And as far as sales goals, the whole thing changes when they go multiplat. Guess we'll see if they cut it or not.

That underpinned the premise of the deal going through, both to regulators and the general public:

"The acquisition also bolsters Microsoft’s Game Pass portfolio with plans to launch Activision Blizzard games into Game Pass, which has reached a new milestone of over 25 million subscribers. With Activision Blizzard’s nearly 400 million monthly active players in 190 countries and three billion-dollar franchises, this acquisition will make Game Pass one of the most compelling and diverse lineups of gaming content in the industry. Upon close, Microsoft will have 30 internal game development studios, along with additional publishing and esports production capabilities."

Microsoft to acquire Activision Blizzard to bring the joy and community of gaming to everyone, across every device - Stories

Legendary games, immersive interactive entertainment and publishing expertise accelerate growth in Microsoft’s Gaming business across mobile, PC, console and cloud. REDMOND, Wash. and Santa Monica, Calif. – Jan. 18, 2022 – With three billion people actively playing games today, and fueled by a...

news.microsoft.com

And:

Our vision for gaming: More choice and more games for people everywhere

news.microsoft.com

If there isn't a resulting revolt then it says a lot about the people who are sticking by them after you all spent the best part of 2 years regurgitating their PR/marketing surrounding the deal and gaslighting anyone who had anything different to say about it.

 

[rm082e]

Not really. This proves it is literally the best deal in gaming by far. Problem is not enough people signed up for it. And if they didn't want to sign up for it, they could just buy the game, since it's entirely optional. People didn't want to do that either, or buy the console. That's the real issue.

People stopped buying the console because MS chose to invest in Game Pass instead of exciting new exclusives. They thought Game Pass was going to be the reason to buy the console, rather than a bonus feature. Gamers saw a console that wasn't as good as the PlayStation, that also lacked exclusives, so they didn't care about the bonus feature.

 

[Lorianus]

Im not a Microsoft fan or anything but this is a PR Guy talking out of his ass as if he was part of financial meetings, clout chaser/attention whore

 

[DryvBy]

For my pocket, yet. For MS no.

Me like free games. More money for my side hustle stuff.

You're not getting free games on GP. You're paying a Blockbuster rental fee.

 

[Red5]

Not really. This proves it is literally the best deal in gaming by far. Problem is not enough people signed up for it. And if they didn't want to sign up for it, they could just buy the game, since it's entirely optional. People didn't want to do that either, or buy the console. That's the real issue.

Probably best deal for consumers and wouldn't fault consumers who care only for their hard earned money but Gamepass turned out to be a double edged sword, killing the studios that MS bought up to support it. Gamepass need a lot more time to to be the Netflix of games because games take a lot more time to make than TV series and can be a lot more expensive and MS isn't willing to play the long game like Netflix is starting to trim the fat and kill studios that were supposed to be the backbone of Gamepass.

I would rather buy a copy of Hi-Fi Rush and Ghostwire Tokyo if it meant a sequel rather than subbing to Gamepass and have the IP's shelved and the studios closed.