Xbox Game Pass is Profitable and Accounts for About 15% of Xbox Revenue, Says Phil Spencer - News
by William D'Angelo , posted on 26 October 2022 / 8,900 Views
Microsoft Gaming CEO Phil Spencer during today's Wall Street Journal's Tech Live conference revealed Xbox Game Pass is profitable and the revenue generated from it accounts for about 15 percent of Microsoft's gaming revenue.
"Game Pass as an overall part of our content and services revenue is probably 15 percent I don’t think it gets bigger than that," he said. "I think the overall revenue grows so 15 percent of a bigger number, but we don’t have this future where I think 50–70 percent of our revenue comes from subscriptions."
Spencer added, "I think it will stay in that 10-15 percent of our overall revenue, and it's profitable for us."
Spencer said that Microsoft is seeing "incredible" growth for PC Game Pass, however, the growth on Xbox consoles has slowed down recently.
"We're seeing incredibly growth on PC," he said. "On console I've seen growth slow down, mainly because at some point you've reached everybody on console that wants to subscribe."
Microsoft in its earnings report for the first quarter of the 2023 fiscal year, which ended up September 30, 2022, revealed Xbox gaming revenue reached $3.61 billion. That would put Xbox Game Pass revenue around $541.5 million for the July to September quarter.
Microsoft CEO Satya Nadella this week also revealed the number of PC Game Pass subscribers has grown by 159 percent year-over-year.
Thanks, The Verge.
A life-long and avid gamer, William D'Angelo was first introduced to VGChartz in 2007. After years of supporting the site, he was brought on in 2010 as a junior analyst, working his way up to lead analyst in 2012 and taking over the hardware estimates in 2017. He has expanded his involvement in the gaming community by producing content on his own YouTube channel and Twitch channel. You can contact the author on Twitter @TrunksWD.
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So the whole, "It's not profitable" talk can end.
But it won't.
We don't know how profitable, is it 30% profit or closer to break even with a little bit of profit. The kind of information anyone that owns Microsoft stock should want to know.
As long as its above breaking even, which it evidentally is, I think thats a win, as a people commonly expected it to lose them money.
Of course it'd be interesting to see if they count things like the expected loss in revenue from full game price sales they otherwise would have gotten, which they can only estimate, but if they do, then it sounds more sustainable than Sony were thinking.
I own a lot of Microsoft stock... And I do not need to know that. I need to know the growth, the revenues and the overall profit. I do not care how much % of the Xbox Revenue is GamePass generating or what is the % :)
AlI kept hearing is how it was bleeding money. I'm acknowledging how we can stop making this false claim now.
When you don't provide the numbers (except 15% of total revenue) there isn't much clout to the claim.
You realize Microsoft is a public company. If the CEO of Xbox is telling you that it is profitable... well, it is. They do not need to provide "numbers" for that.
Sure I do, but it can be 0.00001% of revenue or 50%, just because both would be profit the actual meaning wouldn't be the same, would it?
Even if it is 0.000001% (which is again not likely, or he would not talk publicly like this about it because it would be very deceptive); this shows that GamePass IS successful and that's the important part (very important) because it also means that it is sustainable and even if the profit is less than 5%; this is bringing in new players and marketshare, this is big news for the shareholders.
Nope, there is a difference between being profitable, being sustainable, growing, etc. And bringing new players and marketshare (well even if we ignore that the growth in consoles have basically stopped) is a whole different point than I was making anyway.
I do know I exaggerated with the zeros, but even if "deceptive" it wouldn't be a lie so no enforcement against it.
Not sure what your "nope" is about.
Well, it is essential, and it is also why Microsoft communicated that publicly. This shows sustainability and is the number ONE question/concern everyone had about GamePass for anyone who cares about it (and a shareholder like me). GamePass is bringing new customers in (growth), and if the model is sustainable (like Microsoft just confirmed); it will end up bringing in more profit (see, all your keywords are there and driven by the fact that GamePass is sustainable).
At this point, you are just coming out to basically insinuate/assume (as always) that for some reason without some numbers, you do not believe this is true, relevant, or important and talk about borderline conspiracy and false pretends. We both know, you care about "numbers" for only one reason, compare it to Sony and brag about it... Not to actually understand how well or not Microsoft/Xbox/GamePass is doing on its own. This is why you have no understanding of how good the fact is that GamePass is profitable and why numbers do not matter.
Yes I saw they saying it is sustainable (I wasn't disputing that, I just said that giving profit and being sustainable isn't the same thing), about growth from this report they saw growth in PC, cloud is absent and console is almost stagnant. So it seems the overall rythm slowed a lot (a lot of ground from 20-25M to 4B kkkk).
You are the one assuming. I just said that without numbers we really don't know how well it is performing, I like to see numbers from all 3.
No, you said that: "When you don't provide the numbers (except 15% of total revenue) there isn't much clout to the claim.".
Spinning it after does not change it; and what I said is that there is a LOT of clout to the claim because of what GamePass being profitable means for Microsoft/Xbox overall, no matter what are those "numbers" you are looking for.
If that is what you want to imagine, so be it.
Wow! People really will believe anything wont they! So tell me this: Is phil's statement about gamepass being profitable just referring to last financial year, or since it's creation? No figures means this statement means nothing.
How is it important if it is last year or since the creation?
What's important is what it means for the business NOW and in the future of it. It is not about "believing" anything; it is about the state of GamePass AS OF TODAY and what it means for its future of it. It does not matter if it was not profitable at first... Like not at all. What matters and what it represents today for the gaming business of Microsoft. Almost nothing is profitable from the start... It always takes time; the important part is that it is becoming profitable at some point. and you can use it as a tool to grow the business/market share. And this even (they confirmed it) if the growth for GamePass has slowed down; it is one of the best tools (if not the best last year) for Microsoft to bring new people to the Xbox ecosystem.
Now you can go ahead and challenge that or not believe whatever Microsoft is PUBLICLY saying to be true, but this is another kind of discussion at this point, and you can have it with the people that are interested in that. And if it is important to you that it was not "profitable" since the creation, good for you, that's not what I'm interested as a shareholder. Simple as that.
just to be sure... what timeframe covers "from the start"?
You really want a timeframe for "from the start"?... Well, it is "from the start"... Hope this clarifies it.
Also, because this is a Microsoft article and I can see coming from a mile, this is not about the fact that some other products are profitable from the start; services are usually not, it takes time. GamePass is a service and like any service, it takes months/years before to become profitable. Some services are failing to, and they are usually shutdown (Stadia for instance), some others like GamePass based on Microsoft comment, are succeeding at it. How hard is this to understand?
If you guys want to argue about how not true this is and blah blah, sure, go ahead, people (usually from one specific side) are claiming since the start that it is not a sustainable model. I'm not even going to waste time arguing with you about that; what is the point.
Yes. Because you can mean first month, first year or whatever arbitrary timeframe for "most investments don't profit at start". Most companies likely wouldn´t consider 2 or 3 years without profit as a "at the start" as ROIs are usually between 3-5 years.
I'm not arguing on it being false or whatever, we are asking on the precision of the information and to have more data, not sure why you get offended when asking for more clarity.
That's pretty important. Let's say for the past 4 years MS invested $50 Million a year.
Now this year, they didn't make any investments and as a result they made $5 Million.
How is that actually a profit.
This is just made up numbers on my part, but an example how numbers with no contect mean zedo
Ya, like what about net income?
How much did XB actually make that got put into the bank of MS?
Even if Game Pass is making a little more than just breaking even, this is MS, a multi trillion dollar company. They aren't going to allow that for too long and will want much larger profits.
It's not surprising we're also hearing about how XB is going to have to raise prices of their products soon.
Microsoft has described this as a once-in-a-generation opportunity to become the Netflix of gaming, so they're focused on growth rather than profit for the foreseeable future. At some point that will likely change, but it's probably years away.
There's another new article on the site where Phil flat out says they will have to raise prices soon but that they're attempting to hold off until after the holidays.
That's a couple of months away, so has MS given up then?
They are raising the prices for more profit. Corporate greed will always be Corporate greed.
I disagree.
I don't think XB is doing this solely out of greed. A smaller amount out of greed, a larger amount out of past, recent, and future inflation.
PS just ripped the band aid off knowing they would have to. XB took the opportunity to make PS look bad, while soon to do the same thing anyway because they have to due to inflation.
Even as crazy rich as MS is, they can't eat costs forever, just longer than most.
At the end of the day it's mostly business. Sony just took the high road this time, while also taking the brunt of the backlash.
The issue is both PS and Xbox devisions are making billions of profits yearly. Due to that, they SHOULD be eating
their own costs, not the customers.
This is only to make rich people richer. They arent happy with their 10% profit margin, they want 20% because they have a holiday house to buy.
This will continue yearly because they want to continue making more money than the year before.
No joke, the owner of the buisness i work for took away the company Xmas parties and coincidences went on to buy a $40m mansion out of the brands profits. This is all about greed.
I once worked for a company like that as well. CEO was so good at putting on a smile and being friendly I couldn't help but to ever so slightly respect how well he faked it. Didn't matter how much the company made, it was cuts for the employees and bigger bonuses for management and a vault of gold coins for the CEO.
The other companies I've worked for, one being the largest of them all, were quite reasonable when it came to equal treatment across the board, or at least equal in terms of those who truly did more work got bigger raises or bonuses when money was made.
I agree some of it is greed here, but I don't think it's the majority.
We'll see what prices go up and how much. That will give us a better idea of how much extra they're trying to take beyond business costs.
They couldn't take the cost for the employees =p
Laying off employees and price hiking are very different. You should know this.
Indeed they are, and again since it is superfluous good versus employee losing jobs not being optional even as libertarian I side with the employees.
Don, do you support and purchase lootboxes and MTs? Those business models also support Devs. And atleast with Lootboxes and MTs you actually get something in return. We as customers gain nothing for price hikes. We are just paying them more money.
Nope I don't and I don't buy MTs, lootboxes, usually I don't even buy DLC.
I guess the part of OPTION isn't sinking in on you.
Wait.. so having a paid option is a bad idea but a forced price hike is okay? Wow.
You just said you want to support the developers and have them stay at their jobs.. so support them by buying Lootboxes and MTs. Money is money, no matter how you spend it, aslong as it goes towards the company you are supporting. Otherwise you really dont care asmuch as you are claiming here.
I don't know why I lose my time, but let's go again. I haven't said paid option is a bad idea, I say I don't support it (I don't buy or want them), but I'm not complaining about they existing. I said time and again that for price I have the option to wait for reduction but people that lose jobs don't have the option of not being fired.
You spin the argument so much it is patetic.
Don, waiting for price discounts is a poor argument. You have more choice to just simply not buy a lootbox or MT. You either support the devs or you don't. You choose to ignore the business practices that actually helps the developers which you so heavily support and push for a price hike that actually affects everyone.. even those struggling to afford these systems and games. What about those people Don? Your logic is "force everyone to pay more" to support your ideals.
I disagree that either of them has to raise prices. Game consoles are sold on the razor - razorblade model, and are frequently sold at or below cost. So raising prices is a choice. Higher price means fewer units sold in the long-term, and therefore fewer game sales, less subscription revenue, and fewer accessories too.
Microsoft wasn't being generous by declining to raise prices IMO, they were deciding to follow market reaction to Sony's increases and deciding what the most profitable course of action for Xbox console pricing is.
And after getting the benefit of poor reception for Sony (on media, but not on sales) they will raise their price after holidays probably.
I think they will raise game prices. And I think they may tweak subscription prices. But I doubt they'll raise the price of the Series S, especially with all the highly publicized $249 USD promo they're running right now. Series S supply running ahead of demand precludes them dropping the price on it, IMO. More likely than them raising the price would be a refresh, perhaps one with more RAM, perhaps one with an optical drive, to capture demand that the current unit is missing.
As for the Series X, they might tweak the price of that depending on demand. My guess it either won't go up, or won't go up much, because supply and demand are now relatively closely aligned for the Series X, and supply may start to run ahead of demand for the first time after the holidays.
My guess is that Microsoft is going to hold the line on price as long as they can, and perhaps even drop prices if supply runs too far ahead of demand, as they're willing to lose money on the consoles in exchange for game/subscription/accessory revenue. Tweaking prices down, as they've done for Black Friday on the Series S, let's them account for currency fluctuation by only dropping it in territories where the currency has climbed. So it's the same thing Sony did, but in reverse.
Your reasoning can certainly be what will happen, MS didn't say they are going to raise price of everything, just that there may be increases in price after holiday. And agree with you that if Series S is already being with production greater than sales there isn't much point in raising the price (and MS have the money to keep those loses for a greater profit later on).
Yep this is just a growing phase for them so it doesn't really matter if it's profitable or not. The slow down of console GP adoption isn't good though and neither is canceling their cloud device but it seems cloud gaming wasn't being used as much as they hoped it would be. With that said looks like PC gaming will help them a lot. This is good for me. Hopefully they start catering more towards their PC userbase. They've already made some great changes to the app so I hope to see more of this.
I think we all know it's not at a point where it's a hugely profitable service. I'm merely pointing out how we know it's profitable now though many would have you believe the opposite.
Ok, on that sure I have nothing to disagree. Just as I said I sure would like more numbers from MS =]
Why?
Why someone on a sales site would like to see sales number? That is really a mysterious wish isn't it?
The site is more than just sales. However why do these numbers matter so much to you? Are you wanting a reason to flex?
Actually for me and others it is more surprising how much you claim you don't care about them at all. And everything else that isn't sales number and discussion that is available here is available in a lot of different places, so if I didn't care about sales discussion I don't think I would had ever found here and possibly you would be the same.
Just like Hynad, you didnt anwser the question and trying to spin it about me. You got your PS numbers, why do you need numbers on a platform you dont own and could care nothing about?
To me it sounds like you need these numbers to flex console wars because i sure know you are not an investor for MS.
First you shouldn't call people that aren't part of the conversation. Second what spin I'm doing about you? You challenged my reason for wanting numbers (which I explained) and you insisted and I just pointed that you just say you have 0 interest for numbers... since you think I need the numbers just to flex in console wars (where we don't even need the HW sales numbers as PS+ have close to twice Gold subs, Profit of PS department is bigger than Xbox, SW sales is higher, etc) the reason you don't want numbers is to not see Xbox losing?
And there is the Flex ladies and gentleman. Didnt take long to prove my point. Don wants numbers just to brag and flex. Without offical numbers he can only assume.
The only numbers i care about that matter are for MP and Online games which helps populate servers and matchmaking, you know, the numbers you dislike hearing.
One of my favourite games of all time is a VR title and we all know that it would not have set any records. Weather it sold 1m or 20m means nothing to me. But keep going please. Use those numbers to justify your purchase.
Likely not they will just continue to say that Spencer is a fraud and it’s just PR talk.
But but but
Jim Ryan won't like this article lol
Man them same few Sony fans seem to be in more Ms articles than Ms fans.
Than*
Fixed :-P :-)
Say that again.
Than*
MS apparently makes money on Game Pass and it brings in users.
Sony loses money to keep content off Game Pass.
So as I have been saying all along. $541.5 mil for Q3, $180.5 mil per month. Average gamepass price: $10. 180.50mil/ 10 =
18 million subscribers.
Announced 25 million subscribers back in January 2022. Silent since.
And $180.5mil per month is even on the high side using 15% of revenue. He said about 15% and goes on to say it will be 10-15% in the future. Impying it's less than 15%.
I don't know the fiscal obligations of the company. Can Microsoft's cloud department allow the use of the infrastructure by Xbox for free ? Can it be profitable without costs normaly linked to this kind of services or is it totaly forbidden ? Without numbers and a legal knowledge of this I see why some people doubt. I hope and think the infrastructures costs are in the balance.
Go put PC Game Pass available on Steam Deck please
Kinda surprised they haven't made that move yet. Clearly workable as EA Play can be purchased on Steam.
All my guess would be with PC Gamepass still growing rapidly on the Xbox Store alone maybe they don't want to get the 30% away yet, so may be more likely when new PC subscribers begin to plateau.
I mean if they make a xbox launcher compatible with the steam os, it would probably work. You can somehow play games through Origin and Ubisoft Connect for eg
you can play Game Pass on steam deck, it can run windows
Well there is no real limit on what you can do on the steam deck, technically speaking, but having a SteamOS Xbox launcher would be different than having a Windows installation on it
Well there is no real limit on what you can do on the steam deck, technically speaking, but having a SteamOS Xbox launcher would be different than having a Windows installation on it
Well there is no real limit on what you can do on the steam deck, technically speaking, but having a SteamOS Xbox launcher would be different than having a Windows installation on it
I agree and dont understand why someone is down voting you. It would be nice when i finally get my steamdeck to be able to use gamepass on it without having to install windows or stream the games. Ms should make a gamepass linux app.
This comment section is funny.
loool - you have to take the words "profitable" with a pinch of salt. If Gamepass were an independent company and had to pay fees from revenue to all of the games it hosts it's pretty unlikely to be profitable. I doubt it pays a penny towards all the MSFT divisions that are providing games. Hell even if it is "profitable", gamepass the division/company/whatever doesn't bare the costs of absorbing a $70billion transaction such as Activision - that's MSFT. So MSFT buys everything and anything it wants, gifts them to gamepass and woohooo easy money.
Hopefully the CMA will get access to the full financials behind this division and how its funded so they can pass judgement.
Who is suprised? Honestly a trillion dollar company implements an idea that wont have long term affects? Come on now.
