Support NeoGAF

[Lunatic_Gamer]

Microsoft's recent Game Pass price hike will lead to a spike in earnings, at least that's what analysts are predicting. Ampere Analysis head of research Piers Harding-Rolls gave an interesting prediction regarding Game Pass revenue forecasts, with the subscription service expected to achieve a whopping $5.5 billion in annual earnings in 2025.

The reason? Ultimate's price increase is undoubtedly a catalyst for this growth, however it's the perceived value fracturing of the subscription tiers--the entire removal of the Console tier and its "degraded" Standard tier replacement--that will ultimately (pun intended) urge users towards the more expensive $19.99/month tier. Note that this estimate reflects the totality of Xbox Game Pass, including options on console and PC, as well as revenues earned via cloud gaming access.

Harding-Rolls explains in a research note:

"...Reaching an audience off console and PC does not necessarily deliver profitability because the distribution costs in cloud gaming are significant - far more than just downloading games. As such, Microsoft needs existing subscribers to pay more, while also paying less to license games. The need to act has also been driven by the confirmation that new Call of Duty releases will be added to Game Pass Ultimate: Because that is such a significant annual premium release, offsetting some of the costs of that move was necessary.

"Microsoft is mitigating the impact by improving consumer ARPU through price increases, driving users to the Ultimate tier of Game Pass, and limiting the subscription stacking for Game Pass Console to 13 months. Gamers who want to dip into Game Pass to play the new release will have to do it at the Ultimate (or PC) tier.

"These strategies together should help increase ARPU significantly at the end of 2024 and into 2025. Ampere estimates that global Game Pass ARPU across all service tiers will increase by 5.4% in 2024 and that is expected to jump to an increase of 15.3% in 2025. Global consumer spending on Game Pass as a whole is expected to reach almost $5.5bn in 2025."

To put those numbers into perspective, we've been able to calculate Xbox Game Pass revenues based on two sources: the Brazilian anti-trust regulatory body called CADE, and Xbox CEO Phil Spencer himself.

Based on findings published by CADE in 2022, which we were the first to report on, the totality of Xbox Game Pass made $2.9 billion throughout 2021. This information was later redacted and taken out of the regulator's report.

Then some time later, Xbox CEO Phil Spencer said that Game Pass makes between 10-15% of annual Xbox content & services revenues. We did the calculations and the ranges look like this:

- 2021 Game Pass Revenue - Between $1.258 billion and $1.887 billion

- 2022 Game Pass Revenue - Between $1.197 billion $1.796 billion

If Harding-Rolls' prediction is accurate, Game Pass' 2025 revenues will increase by over 200% over these top-end values.

Also, Game Pass' $5.5 billion would make up approximately 35% of Xbox's annual FY23 revenues of $15.47 billion.

Read more: https://www.tweaktown.com/news/9934...on-in-2025-more-than-200-over-2022/index.html

 

[Gojiira]

Lol or their carefully orchestrated manipulation of their customers will backfire and Gamepass will continue to make zero money. Time will tell I guess.

 

[feynoob]

If they add all of COD, they will make $6b+. COD gamepass pc would be a heaven to pc cheaters.

 

[Magic Carpet]

200%? They only raised prices 20%.

 

[feynoob]

200%? They only raised prices 20%.

They destroyed regular xbox gamepass, increased normal xbox live and now made the ultimate 20$ with pc getting increase. Every part of the service is jacked up.

Imagine costoco charging more for membership, while increasing the price of items they sell.

 

[lmimmfn]

No interest in "Owning nothing and being happy with it" and being a slave to price increases, good luck M$

 

[bender]

If they add all of COD, they will make $6b+. COD gamepass pc would be a heaven to pc cheaters.

 

[kazuyamishima]

 

[DaGwaphics]

200%? They only raised prices 20%.

Probably a mix of the price increases along with users coming off of promos etc.

At least there isn't a tier of GP now where you don't have access to online, that was always an odd choice once Live Gold was rebranded to GP core. When you look at the value of the day one games, being $2 more a month than Sony's offering doesn't seem like too much to ask.

 

[Three]

200%? They only raised prices 20%.

They raised Gamepass Core/online multiplayer access by 33%. They expect an influx of new users to switch to a more expensive tier. They will use that to pay for the next console launch most likely if the 2025 rumour is true.

 

[mayham2199]

They destroyed regular xbox gamepass, increased normal xbox live and now made the ultimate 20$ with pc getting increase. Every part of the service is jacked up.

Imagine costoco charging more for membership, while increasing the price of items they sell.

Yea but don't most (or all) of these changes only apply to new subscribers? Seems like they would need a huge influx of new subs to reach that 200% increase.

 

[ChorizoPicozo]

what does Michael Pachter say?

 

[reinking]

Does this include mtx/sales through Game Pass? If so, they will absolutely exceed that 200% increase.

 

[Edmund]

But still getting outspent on marketing by Sony. Poor trillion dollar company.

 

[TransTrender]

Game Pass changes: Focus on profitability as Microsoft gets ready for ‘day one’ Call of Duty

Microsoft has announced price increases and a new tier for its Game Pass multi-game subscription offering. Ampere investigates the implications.

www.ampereanalysis.com

*SureJan.gif*

 

[VolticArchangel]

Banking on existing customers and exploiting them through nickel and diming, to get your ROI, is wild but that's corporate strategy 101 these days when shit hits the fan.

Everyone knew this was coming. Hook, line and sinker.

 

[GHG]

This is the full original article/analysis by the way for anyone interested in reading without the journalistic spin:

Game Pass changes: Focus on profitability as Microsoft gets ready for ‘day one’ Call of Duty

Microsoft has announced price increases and a new tier for its Game Pass multi-game subscription offering. Ampere investigates the implications.

www.ampereanalysis.com

Microsoft has announced price increases and a new tier for its Game Pass multi-game subscription offering. The highest tier, Game Pass Ultimate, will see price increases across all global markets, rising from $16.99 per month to $19.99 (+18%) in the US, going from £12.99 to £14.99 (+15%) in the UK and from €14.99 to €17.99 (+20%) in European markets. PC Game Pass, the PC-only version of the service, will also increase from $9.99 to $11.99 a month in the US, £7.99 to £9.99 in the UK and €9.99 to €11.99 in Europe. Game Pass Core, the basic multiplayer offering for the Xbox consoles, will also see price increases for a 12-month subscription of between 12% and 25%. All price increases will take place on the 12th of September before the launch of the latest Call of Duty at the end of October.

Alongside news of these price increases, Microsoft also announced the upcoming launch of a new tier – Xbox Game Pass Standard – which will include access to a catalogue of Xbox console games bundled with multiplayer access on Xbox devices. This new service will exclude the inclusion of day-and-date (or ‘day one’ as Microsoft brands it) releases of games, a cornerstone of the Game Pass offering.

This new standard tier is poised to replace the existing Game Pass Console, which is now no longer available to new subscribers, although Microsoft has yet to confirm the launch date of the new tier. Conversely, Game Pass Console currently includes day one releases but does not include multiplayer gaming. Existing Game Pass Console subscribers will be able to maintain their offering for as long as they keep their subscription active.

Making the Game Pass offering on console more coherent

Microsoft’s changes to Game Pass are meant to improve the coherence of the offer but have also added another layer of complexity. Previously, Game Pass Console had its own challenges within the portfolio because it didn’t include multiplayer access, which is offered by Game Pass Core (or Xbox Live Gold as it was originally called).

However, it was impossible to bundle that into the Console version of Game Pass and maintain good differentiation from Game Pass Ultimate, which brings together the multi-game subscription service across PC and console, multiplayer access on console, EA Play and cloud streaming across multiple screens into one offer. Hence the need for a launch of a new tier at a more expensive price point but one that does not include day one releases to clearly differentiate it from Game Pass Ultimate.

With day one releases key to the value proposition for many consumers, this will inevitably drive most new subscribers to the Ultimate tier of the service, which is already the most popular tier. Ampere estimates that 74% of current Game Pass subs on console are the Ultimate version with Core and Console making up the remainder. The fact that most subscribers are on the Ultimate tier, and with existing Game Pass Console subscribers retaining access if they keep on subscribing, means third-party games that launch into Game Pass will not have their exposure significantly impacted by a lack of inclusion in Game Pass Standard.

This shift makes sense in the context of the console subscription offer, but is partly at odds with PC Game Pass, which has no multiplayer subscription requirement, includes day one releases and is cheaper than Xbox Game Pass Standard. The move also now makes Game Pass on console – Core, Standard and Ultimate – aligned with its key competition: Sony’s PlayStation Plus Essential, Extra and Premium.

This might not be the last version of Game Pass to come to market. Microsoft is in the midst of building its own mobile app store, so we might also see a new mobile-focused version of Game Pass including perks related to King's portfolio of games such as Candy Crush Saga.

Costs have increased and profitability is the key target

The commercial landscape for the games sector in 2024 is one focused on reining in costs and trying to deliver profitability. Microsoft has been pursuing that aim across its whole games portfolio and Game Pass is no exception. In some ways, Game Pass’s profitability is driven by its scale, and with growth slowing, the company needs to look at other ways of driving up spend per user to offset escalating costs.

However, reaching an audience off console and PC does not necessarily deliver profitability because the distribution costs in cloud gaming are significant – far more than just downloading games. As such, Microsoft needs existing subscribers to pay more, while also paying less to license games. The need to act has also been driven by the confirmation that new Call of Duty releases will be added to Game Pass Ultimate: Because that is such a significant annual premium release, offsetting some of the costs of that move was necessary.

Microsoft is mitigating the impact by improving consumer ARPU through price increases, driving users to the Ultimate tier of Game Pass, and limiting the subscription stacking for Game Pass Console to 13 months. Gamers who want to dip into Game Pass to play the new release will have to do it at the Ultimate (or PC) tier.

These strategies together should help increase ARPU significantly at the end of 2024 and into 2025. Ampere estimates that global Game Pass ARPU across all service tiers will increase by 5.4% in 2024 and that is expected to jump to an increase of 15.3% in 2025. Global consumer spending on Game Pass as a whole is expected to reach almost $5.5bn in 2025.

I've bolded where I think it is they see the opportunity for a possible 200% increase.

 

[Skifi28]

They're also expecting 100 million subs. Having expectations for the future is nice, but the truth often differs.

 

[feynoob]

This is the full original article/analysis by the way for anyone interested in reading without the journalistic spin:

Game Pass changes: Focus on profitability as Microsoft gets ready for ‘day one’ Call of Duty

Microsoft has announced price increases and a new tier for its Game Pass multi-game subscription offering. Ampere investigates the implications.

www.ampereanalysis.com

I've bolded where I think it is they see the opportunity for a possible 200% increase.

 

[rapid32.5]

200%? They only raised prices 20%.

$1->$20 a month.

 

[rm082e]

How long before they raise prices again? I'm betting Q1 2026.

 

[Kenneth Haight]

Will the customer receive 200% more value, that’s the real question.

 

[Bernardougf]

what does Michael Pachter say?

As long as he dosent say the world will never end.. we will be fine.

And I sure hope their profits increase ...they have a whole new publisher now to pay for and will loose lots of money on game sales from all the games now coming to GP.

 

[Pop]

WOW

They are banking on COD hard. Aint no way. Gamepass cost is pretty much maxed out

 

[Kerotan]

If you're mainly a cod player you'd be better off just buying the game instead of pay that much per month.

 

[Rockondevil]

No interest in "Owning nothing and being happy with it" and being a slave to price increases, good luck M$

I get that and I buy games I want.
I use Game Pass to play a plethora of games I’d never consider buying otherwise.

Each to their own though.

 

[SHA]

what does Michael Pachter say?

The obvious, which is not yet.

 

[GrayDock]

 

[Majima Everywhere System]

Yeah, I don’t think so. You tweak the model, you lose. If anything they a juicing the subs now to kick the can down the road.

My sub lapsed a few months ago. Do you know what is a great deal? Pay 20 if 3 must haves hit the platform, and clean up in a single month.

There is little reason to stay subscribed.

 

[yurinka]

This is the full original article/analysis by the way for anyone interested in reading without the journalistic spin:

Game Pass changes: Focus on profitability as Microsoft gets ready for ‘day one’ Call of Duty

Microsoft has announced price increases and a new tier for its Game Pass multi-game subscription offering. Ampere investigates the implications.

www.ampereanalysis.com

This is the same moron who in a previous estimate/presentation said Game Pass was the leading gaming subscrition on a benchmark with estimates of different game subs. But oh surprise, PS+ wasn't in the comparision because of potatoes.

He has no credibility.

what does Michael Pachter say?

This guy made up a $5.5B figure, so Michael could made up a $10B figure, why not.

 

[MarkMe2525]

I get that and I buy games I want.
I use Game Pass to play a plethora of games I’d never consider buying otherwise.

Each to their own though.

Whenever I decide to get a month sub, it is to do this.

 

[digital_ghost]

what does Michael Pachter say?

He stood behind his firm belief that the 360/PS3/Wii was the final generation.

When ps4 was announced we knew not to believe that idiot.

 

[LavitzSlambert]

Banking on existing customers and exploiting them through nickel and diming, to get your ROI, is wild but that's corporate strategy 101 these days when shit hits the fan.

Everyone knew this was coming. Hook, line and sinker.

These days? It's been Microsoft's strategy from the beginning. They're outright hostile to their enterprise software customers, I'm not surprised that they take the same approach to gaming customers. We just saw them to try double the price of XBL Gold a few years back, and they had to backpedal that.

 

[DenchDeckard]

 

[Deerock71]

If that doesn't include the CoD titles...fuck no.

 

[BlackTron]

"Expected"

 

[Nitty_Grimes]

How long before they raise prices again? I'm betting Q1 2026.

Once a year now I reckon along with all the other subscription service models - so one next year around the same time.

 

[adamsapple]

And here I thought they were going to kill the service before CoD comes out ... Or at least that's what I read somewhere.

 

[BigLee74]

Small thread for a Gamepass thread!

 

[cireza]

If people are dumb enough to pay, what can we do ? They put their money where they think there is (perceived) value.

If this change in Game Pass leads to a 200% increase, then it will be an excellent move from a business perspective for Microsoft.

 

[Nitty_Grimes]

And here I thought they were going to kill the service before CoD comes out ... Or at least that's what I read somewhere.

Didn't 'not a chance' win that poll though? Unless you've read something else...

 

[feynoob]

And here I thought they were going to kill the service before CoD comes out ... Or at least that's what I read somewhere.

They did. Big phil took one big fat nut on the service. Sadly, you missed that one.

 

[Little Chicken]

I think it will be more.

 

[TheKratos]

Not possible unless console sales show accelerated growth AND they hike prices significantly. The latter alone will not help.

 

[Elios83]

Ampere Analysis always had great imagination

Prices have not been increased by 200% and when you raise prices it's hard to raise users, usually even the opposite happens.
For subscriptions prices are raised precisely when it's clear that at current prices there won't be an increase in userbase enough to cover costs so it's better to squeeze current users.

 

[Shubh_C63]

Gamepass is for casuals who only pay 1 or 2 games entire year and this subscription makes it cheaper and gives more game visibility.
However no gamepass day one per recent reports so idk.

Enthusiasts would want to exploit Gamepass but also wants to own the game they play. So idk there either.

I reckon Gamepass to be "successful" not by 2025 but 2035.

 

[King Dazzar]

So definitely mobile and maybe other platforms like Fire TV will be the main focus. I wonder what that means for console longer term.

 

[Daniel_Mallorca1985]

El reciente aumento de precio de Game Pass de Microsoft provocará un aumento de las ganancias, al menos eso es lo que predicen los analistas. El jefe de investigación de Ampere Analysis, Piers Harding-Rolls, hizo una predicción interesante sobre las previsiones de ingresos de Game Pass: se espera que el servicio de suscripción alcance la friolera de 5.500 millones de dólares en ganancias anuales en 2025.

¿El motivo? El aumento de precio de Ultimate es, sin duda, un catalizador de este crecimiento, pero es la percepción de la fractura de valor de los niveles de suscripción (la eliminación total del nivel de consola y su reemplazo "degradado" por el nivel estándar) lo que, en última instancia (juego de palabras intencionado), impulsará a los usuarios hacia el nivel más caro de $19,99/mes. Tenga en cuenta que esta estimación refleja la totalidad de Xbox Game Pass, incluidas las opciones en consola y PC, así como los ingresos obtenidos a través del acceso a juegos en la nube.

Harding-Rolls explica en una nota de investigación:







Para poner esos números en perspectiva, hemos podido calcular los ingresos de Xbox Game Pass en base a dos fuentes: el organismo regulador antimonopolio brasileño llamado CADE y el propio CEO de Xbox, Phil Spencer.

Según los resultados publicados por CADE en 2022, que fuimos los primeros en informar, la totalidad de Xbox Game Pass recaudó 2.900 millones de dólares a lo largo de 2021. Esta información fue posteriormente censurada y eliminada del informe del regulador.

Luego, un tiempo después, el director ejecutivo de Xbox, Phil Spencer, dijo que Game Pass genera entre el 10 y el 15 % de los ingresos anuales por contenido y servicios de Xbox. Hicimos los cálculos y los rangos se ven así:

- Ingresos de Game Pass en 2021: entre 1.258 y 1.887 millones de dólares

- Ingresos de Game Pass 2022: entre $1.197 mil millones y $1.796 mil millones

Si la predicción de Harding-Rolls es correcta, los ingresos de Game Pass en 2025 aumentarán más del 200 % con respecto a estos valores máximos.

Además, los 5.500 millones de dólares de Game Pass representarían aproximadamente el 35% de los ingresos anuales de Xbox para el año fiscal 23, de 15.470 millones de dólares.

Leer más: https://www.tweaktown.com/news/9934...on-in-2025-more-than-200-over-2022/index.html

 

[Ronin_7]

What a delusional man

 

[KungFucius]

They destroyed regular xbox gamepass, increased normal xbox live and now made the ultimate 20$ with pc getting increase. Every part of the service is jacked up.

Imagine costoco charging more for membership, while increasing the price of items they sell.

This isn't the only factor. They raised prices and will shift many to Ultimate. That does not account for 200% increase. The rest is an increase in users on gamepass. From 2022 to 2025 is a fairly long period. I actually didn't sub on PC until early 2023.