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Xbox Game Pass Missed Internal Growth Target for Two Straight Years

Xbox Game Pass Missed Internal Growth Target for Two Straight Years - News

by William D'Angelo , posted on 28 October 2022 / 4,871 Views

Xbox Game Pass did see growth in Microsoft's most recent fiscal year, however, it failed to miss Microsoft's internal target number, according to a new financial filing made SEC that shows the annual target tied to the pay for CEO Satya Nadella.

Microsoft set a target of 72.88 percent for Xbox Game Pass in the 2022 fiscal year, which ended June 30, 2022. The actual growth in the number of Xbox Game Pass subscribers was 28.07 percent.

This is the second year in a row Microsoft failed to reach its forecast. In the 2021 fiscal year which ended June 30, 2021, Xbox Game Pass grew 37.48 percent, while the internal target was 47.79 percent.

The 2020 fiscal year target was met as Xbox Game Pass saw growth of 85.75 percent, compared to a target of 71 percent.

Xbox Game Pass Misses Internal Growth Target

Microsoft Gaming CEO Phil Spencer this week did reveal 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 at the time. "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, "We're seeing incredibly growth on PC. On console I've seen growth slow down, mainly because at some point you've reached everybody on console that wants to subscribe."

Xbox Game Pass surpassed 25 million subscribers in January of this year.

Thanks, Axios.

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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UnderwaterFunktown (on 28 October 2022)

Damn they expected over 70 % growth in the 2022 FY? That's bold.

  • +13
VAMatt UnderwaterFunktown (on 28 October 2022)

I'm sure they did not expect 70% growth. If that's what they expected, the CEO's bonus threshold would have been much higher.

  • 0
Alistair UnderwaterFunktown (on 29 October 2022)

Don't forget Starfield and much more was originally supposed to come out this year.

  • +1
holzi UnderwaterFunktown (on 31 October 2022)

You get a bonus if you exceed expectations, not if you just reach them. 70% was likely a very ambitious target.

  • 0
VAMatt (on 28 October 2022)

To be clear, these are bonus milestones for the CEO. These are likely not the same as their targets. These would typically be stretch goals, thus triggering bonus payouts.

  • +8
rapsuperstar31 (on 28 October 2022)

72.88% growth was obviously too ambitious, but supply constraints are certainly holding them back. If they released another 2 million Xbox Series X's in that time frame the number would be closer.

  • +7
jason1637 (on 28 October 2022)

They gotta start dropping first party games.

  • +6
aTokenYeti (on 28 October 2022)

I think Gamepass is reaching a ceiling of market penetration because of the number of Xboxes currently on the market. Everyone on Xbox that wants gamepass probably already has it, aand with only 17.5 million Xbox Series X|S consoles currently on the market there is limited room for further growth for the time being. Xbox One users waiting to get their hands on a Series X instead of buying now is probably compounding the issue.

Gamepass will have to continue to prioritize PC growth for the short to medium term, but in the long term I think the penetration of the Series X|S will help grow the service in a healthy and sustainable way. If at the end of those console generation there are 70 million Series X|S consoles on the market, and just a third of them are gamepass subs, that's 25 million subs on Xbox alone.

  • +6
siebensus4 (on 28 October 2022)

So the growth is continuously declining. Interesting.

  • +4
method114 siebensus4 (on 28 October 2022)

Didn't notice that but your right. They also missed their target by a very large amount. Last time it was only 10% this time it was much more than that. With an incoming recession I doubt they hit any other targets unless they severely drop their expectations. One of the first things to go will be subscription services and gaming subscriptions will probably be first before TV.

  • 0
SecondWar method114 (on 28 October 2022)

Can work both ways with the recession. Sure, people could ditch the subscription but equally others could see a day one release that they want a get a month subscription for that game. That’s what I’ve done with Plague Tale Requiem.
It does depend on how many don’t just immediately drop the subscription once the month is up.

  • +1
scrapking method114 (on 30 October 2022)

Incorrect. We don't know what their internal targets were, they didn't release them. CEO bonus thresholds are like a "stretch goal".

  • +1
EpicRandy siebensus4 (on 28 October 2022)

the growth rate is slowing and should be expected to. It is harder to do a 50% growth on a 30m userbase than 10m. In actual number though the 37.48% of last year and the 28.07% of this year might be way more alike than would seems. The 28.07% might even be bigger in absolute term then the 37.48% of last year

  • +5
method114 EpicRandy (on 28 October 2022)

It might have been expected to you but it clearly wasn't for MS. Which is really all that matters. MS is doing a lot of heavy investing into gaming and game pass. They are expecting a certain amount of return for that investment. They are missing internal targets. Regardless of what anyone outside of the company expected we know what MS expected. They aren't hitting that expectation.

  • 0
EpicRandy method114 (on 28 October 2022)

that's the weird part for me, expecting an higher rate that was previously expected even when you didn't even reach your first target.
It rings like auto sabotage, that said if both target were set at the same time, missing the first will inflate the second.
like if in 2020 they set 2021 target to the like of 30m and 40m for 2022 than at first 2022 was about a 33% growth but when missing the first let say by 5m then it becomes a 60% growth target

  • 0
scrapking EpicRandy (on 30 October 2022)

You're conflating CEO bonus thresholds with actual anticipated growth targets. Who gets a bonus for merely hitting the anticipated level? You get a bonus for going above and beyond. The actual targets would have been lower, and haven't been disclosed to the public.

  • 0
EpicRandy scrapking (on 30 October 2022)

Well Ryuu made that clear after my post but the actual article never mention it was CEO bonus threshold so I'm pretty sure you can't say I'm conflating things when the information was not even available at this point.
However my point still stand for whatever reason those target were set for.
I know Ryuu pointed out it is unlikely that both target were set at the same time but It still offer a logical explanation for why such a discrepancy between the two goal when the 1st one was not even met.

  • -1
Ryuu96 method114 (on 28 October 2022)

Just to note that these are specifically executive bonus targets, so, these are targets needed to reach for Satya Nadella and other high-ranking executives to receive fat bonuses, so they are intentionally not easy to achieve.

We won't know what Xbox's internal growth target is. It's likely less than that, I still think the 73% target was ridiculous though even if it was just for executive bonuses, they never would have reached that, someone was smoking something hard, Lol.

And they are to my knowledge set at the start of every fiscal year and don't tend to change to account for delays and such because they could just change them whenever they like and meet the target all the time, always receive a bonus.

  • +7
scrapking method114 (on 30 October 2022)

Incorrect. We don't know what their internal targets were, they didn't share these. These were CEO bonus thresholds. Those are like a stretch goal on a Kickstarter. The actual targets would have been lower.

  • +1
Signalstar (on 28 October 2022)

Gamepass for PC has much more potential upside than Xbox Gamepass. It is the way MS can compete with Steam and Epic in the PC space and Sony can't readily respond because they lack a major PC presence (though they are laying the foundation)

  • +1
LudicrousSpeed (on 30 October 2022)

Halo Infinite MP sucked and flopped, and they have jack shit in terms of big releases for 2022. Not surprising that the numbers weren’t as good as they hoped.

  • 0
Jumpinbeans (on 29 October 2022)

key points -

"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"

"We're seeing incredibly growth on PC. On console I've seen growth slow down, mainly because at some point you've reached everybody on console that wants to subscribe."

PC Game Pass Subscribers Grew 159% Year-Over-Year, Nearly Half of Series S Buyers Are New to Xbox (article - )

Some key points -

  1. GP growth will likely be 15% for the coming years.
  2. Little to no growth on consoles.
  3. GP growth driven by PC platform (combining view from this and other VGchartz article)

    On consoles - with growth slowing, GP is going to be spending more and more money on retaining numbers rather than growing them. If as Phil Spencer said in another article ( that prices will rise this will put pressure on growth/retention too.

  • 0
Azzanation (on 29 October 2022)

Considering the delays of most of their 1st party titles doesnt help.

  • 0
Giggity_goo (on 29 October 2022)

i can see it being more than that once all of the back catalogue of call of duty games hit it

  • 0
Vizigoth04 (on 28 October 2022)

I think raising the price would be the best solution for this. All kidding aside, once they do drop a first party game that delivers subscribers are sure to go up and then the subscription price. Bait and switch.

  • 0
Alistair (on 29 October 2022)

What would help is if Microsoft would manufacture 8 million more consoles. No excuse with the Series S happening to not match Sony here. Open the check book Microsoft for manufacturing.

  • -2
scrapking Alistair (on 30 October 2022)

There were stories of Microsoft reportedly doing just that (paying for chip fab priority).

  • +1
KratosLives (on 29 October 2022)

Really hate the corporate structure of things. While they get their fat bonus while devs work crunch.

  • -3
scrapking KratosLives (on 30 October 2022)

Glassdoor suggests that Microsoft tends to pay the best in the industry, and has mostly done away with crunch.

And this story is about Nadella not making a fat bonus over Game Pass.

In general what you say has a lot of truth to it, but Microsoft is not a worst offender in this particular case.

  • 0
KratosLives scrapking (on 31 October 2022)

Don't know why the dislikes. I was referring to the industry as a whole, not microsoft.

  • 0
AJNShelton (on 28 October 2022)

I think it's a hint: a company setting way too high expectations and is disappointed even if the results are great. MS will buy Square Enix

  • -3
Johnd AJNShelton (on 28 October 2022)

Sony wouldn't have Microsoft put their greedy mitts on them!

  • 0
y2jarmyofficial Johnd (on 28 October 2022)

Funny.Sony doesn’t have the money to do anything about it

  • -7
method114 y2jarmyofficial (on 28 October 2022)

True it would be a great move by MS to get more Sony players but I doubt Square would even sell to MS.

  • -1
y2jarmyofficial method114 (on 28 October 2022)

If and don’t . Still though if no square Enix than other companies.

  • -8
NoLimitVito y2jarmyofficial (on 28 October 2022)

Funny, Sony could afford to spend 3.6bn on a single developer alone like Bungie and PS has a bigger gaming revenue admitted by MS themselves yet don't have money according to a no name forum dweller wanna be business experts like you.

If Sony ends up buying SE you would just move to your new excuse " Yeah but SE was only 5bn anyway, Sony cant afford (insert new company name)".

The goal post and excuses never ends, there's always a new one.

  • -1
y2jarmyofficial NoLimitVito (on 29 October 2022)

Bigger revenue in gaming but as a whole ms is leagues ahead . Wow. 3.6 billion is a lot too you….making an argument that ms having more money is an excuse hahaha . You fail to offer up any links or such to me so I reply you your message (yet don't have money according to a no name forum dweller wanna be business experts like you.) :)

  • -1
y2jarmyofficial NoLimitVito (on 29 October 2022)

3.6 billion lol that’s bill gates pocket change lol here’s a real wallet

  • -1
Random_Matt AJNShelton (on 28 October 2022)

American companies cannot do that very easily, if at all.

  • +3
ClassicGamingWizzz (on 28 October 2022)

They need more pringles one month free subs and other deals like these to grab people by the balls ,let them taste it then they cant drop it like a drug.

When the first party games start to drop day one they sure hope the subs start to grow to cover the cost of people not buying it at 70 dolars or papa phil head will be on a spike ala game of thrones.

  • -6