Game Pass is Reportedly Profitable Even When You Factor in Lost Revenue From First-Party Games - News
by William D'Angelo , posted on 08 July 2025 / 6,047 Views
It was reported yesterday by Christopher Dring that the "Game Pass is profitable" claims from Microsoft in the past does not include first-party costs.
Dring has now provided an update that sources have told him that Game Pass remains profitable even when you factor in the lost revenue from first-party games.
"Ok, I need to correct/clarify something," he said. "First, Xbox Game Pass is profitable, even when you factor in the lost sales for its first-party teams, sources who would know have told me."
He mentioned doing research over 18 months ago as he "was looking to see if Game Pass’s costs factor in the impact to unit sales of their internal studios. I was told that first-party games have their own P&L separate to Game Pass as they make money via other means.
" I felt this piece of internal accountancy might mean Game Pass is profitable, but it sure does put pressure on the margins for its internal games and POSSIBLY means some studios don’t make as much profit (or any profit at all).
"That doesn’t actually matter in real terms, but seeing the impact Game Pass was having on first-party games, and the amount of money Xbox was spending on studios, I wanted to check if the full impact of the service was being considered in their ‘Game Pass is profitable’ line."
This was all done before Xbox started publishing more of its games on PlayStation and Nintendo hardware.
"Studios can now make stronger margins on premium sales as a result of that move," said Dring.
"But regardless to all that. sources have reached out to tell me that even when you include lost revenue associated with first-party party games (not just unit sales, but microtransactions), Game Pass is still profitable. So… that’s great!"
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 follow the author on Bluesky.
More Articles
That's alot of dancing around to spin this into a positive...
I understand that we all want what’s best for the industry: better games, fairer compensation for developers, and consumer-friendly practices. However, it seems that when it comes to these companies and their business practices / earnings, we’re often reacting without reliable sources and treating whatever X said on Y social media as unquestionable fact. That only leads to this nonending series of confusing news.
There are multiple accounting discrepancies when it comes to gamepass though. 1st party dev costs aren't counted as a cost even when said game is a day 1 release on gamepass. The loss of third party royalty fees when a 3rd party game sells poorly due to being on gamepass isn't accounted for. People that sign up for the lowest level of gamepass (which is really just XBL) get their monthly revenue counted as gamepass revenue even if it is just them paying a fee to play online. Even for gamepass ultimate customers a portion of their monthly fee should count as regular Xbox revenue since they too are paying for online gameplay. When a game goes on sale to gamepass subscribers and they purchase that game the revenue gets counted as gamepass revenue even though it should be counted as regular Xbox game revenue. The 70 billion Activision acquisition and 7 billion Bethesda acquisition isn't counted as a cost for gamepass, or even a cost for Xbox. Gamepass is cheaper in different countries so it's not as simple as multiplying the number of gamepass users by a set amount to get monthly revenue. So there's all sorts of revenue and costs that are shifted around in order for the PR department to say that gamepass is profitable. It's all smoke, mirrors, and fluff. Same reason MS doesn't announce console sales figures or game sales figures anymore. It's all PR obfuscation.
Gamepass is a just a predatory pricing scheme designed to monopolize the industry by temporarily selling games below cost. Then once Xbox is the only game in town they will jack prices up. It's a well known business tactic and is illegal. https://en.wikipedia.org/wiki/Predatory_pricing
https://www.investopedia.com/terms/p/predatory-pricing.asp
Your XDS (Xbox Derangment syndrome) is showing. See what I did there?
Xbox offers a value friendly service for consumers, while prices of everything in gaming is going up, and you are worried about their fiscal reports and it being predatory practices? Geez dude. What is the price of PS+ compared to Game Pass? Basically the same with Game Pass being slightly more expensive. Your claim doesnt exist in reality or else something would have happened by now.
You mean like mass layoffs, the closure of an all-star studio and releasing games to PS5?
Why on earth would you count those acquisitions as GamePass costs? I do not think you understand how acquisitions works unless you believe that those companies revenue will become 0 because of it? Or that they would significantly drop because of GamePass which would ludicrous at best lol.
There is no decrepancies at all. People keeps making them up and at some point for some reason. It becomes facts in their head. And fear mongering about all things you believe the big evil Microsoft is ‘planing’ id even more ludicrous at this point.
Of course those companies' revenue will significantly drop due to gamepass. You are going from getting $60 per customer to a portion of $11 per customer. MS could just release sales figures for the games that those companies make, but they refuse to. Why? Because the actual sales numbers are embarrassing and releasing such numbers would destroy their narrative.
The reason why $77 Billion in acquisitions isn't counted as a cost for Xbox much less for gamepass is because of loopholes in modern business accounting practices. I own a company and my father-in-law gives me a free 7 million to buy a new company building. I can then go to my PNL sheet and write down that I just made 7 million in profit this year. Why? Because that building counts as an asset which increases the value of my company. In reality my father-in-law just lost 7 million. But on paper my company is a fantastic growth stock! Microsoft as a whole is the father-in-law giving Xbox free money.
To answer your question of why they should count as gamepass costs, it's because those companies are mainly being used to make gamepass content. Profit is revenue minus cost of goods sold. Buying up multiple studios in order to make games go to gamepass is a cost of goods sold. Simple.
Funny how you say Xbox games don't sell, while they has 5 games in the top 20 best sellers for 2025 as of May. That's the 2nd most of any publisher for this year so far.
If you are going to be throwing around claims and using it as the main crutch to your argument, you should at least updated on the current game sales market.
Do you mean in the USA? https://mynintendonews.com/2025/07/09/us-heres-the-best-selling-games-in-may-2025/ https://www.gamespot.com/gallery/xbox-published-games-dominate-mays-best-selling-games-in-the-us/2900-6752/
If you must exclude sales outside the USA to make them best sellers then they obviously aren't best sellers. Doing so is committing the Texas Sharpshooter fallacy. The Texas sharpshooter fallacy often arises when a person has a large amount of data at their disposal but only focuses on a small subset of that data (only focusing on USA sales in this example). The USA is roughly 30% of the games market. If Microsoft released sales figures on a per console basis and it was revealed that only a fraction of total game sales came from Series S/X customers it would destroy their narrative.
The only thing that I would say is selling well is Forza 5 but that game is a 10/10 masterpiece and just launched on Playstation. It's clearly sold over 10 million units by now. But compare that to Sony and Nintendo's tentpole releases and it's still behind despite being a 3rd party game. GoW Ragnarok sold 15 million copies as of May 23 and is probably over 20 million by now. Tears of the Kingdom is over 21 million units by now. As an open world racing game Forza Horizon has the mass appeal and potential to hit 40 million sales like Animal Crossing and Mario Kart. But it won't because being on Gamepass holds it back.
Geez dude, I'm not excluding data like it's purposefully. I'm just using the most recent data available. If you want to share with us what the best selling games are WW for this year as of May, go for it. I would like to see it. I'm sure most of these Xbox 1st party games are best sellers WW like; CoD, Forza Horizon 5, and Oblivion remaster.
The entire point I'm making is, game sales are still a big part for Xbox 1st party games and they clearly are based on the data. My point still stands and prove you wrong because this isnt about comparing games on Ps5 and Switch. These games selling well on other platforms only reinforces this point. I really don't care if these games would sell better if Game Pass wasn't around. That's not the point I'm making.
The point I'm making though is that these games would sell better if Gamepass wasn't around. And considering the type of games they are selling the sales are embarrassing. I'd love to share the info on the best selling games up to this year. Too bad vgchartz gave up entirely on tracking game sales a few years ago. We no longer get exact sales numbers from many studios. Also it would be much better to share the best selling games once we have December's sales data since that's a massive chunk of revenue for the industry.
No, this is not the anwser to my question :) As it should not, of VERY little.
1 - Even if it will bring does SOME revenues, it is not "significant" esp. based on how many games sale on Xbox compared to the rest.
2 - In this equation you need to also consider the new paying GamePass customer... This is offseting that (I mean, this is 100% assuption on my side and I'm not arguing that but it is very likely).
3 - On top of that even for some loss (some...not a lot) there is a big different between accounting for a while 9B and 70B and when those companies will add revenues to the Xbox LOB. I'm sorry but this is 100% wrong.
Not only your exemple is way too simple (and reflect how people think so simply about all of this) and does not account for a lot of variables. At the end; Microsoft should definitely NOT account the 70B and 9B into the "cost" of GamePass. And if it does (and they are probably) it is for a fraction of it and will also be at a depreciation.
Even if it will bring does some revenues? What is the it you are talking about? Your grammar is too confusing here.
What equation?
Accounting for a while? Do you mean a whole? What's LOB short for?
I'm not sure I understand what you are trying to say. Did you type this up in a hurry on a phone?
Yes typed on my phone and I'm bad at this :)
Obviously that's was a typo.. "does" - > "down". and "while" -> "whole"... I mean for the "does"; I get that I made a typo but it was pretty obvious ;)
LOB - Line of Business
-
Do we have sales data for how many Xbox 1st party games sell on Xbox compared to how many 1st party Xbox games sell PS5/PC/Switch?
-
I have considered the gamepass user. They typically pay under $8 a month on average once you take out XBL money.
-
No, there's not a big difference. Any asset will add revenue by way of being used to produce something. Whether your company acquires copper mines to make more copper pipes or buys a bunch of studios to make more games for gamepass they are costs of production. Profit = revenue minus costs of production.
My example is fine. Your grammar is not. Fix it or I'm not responding to your next reply. I'm not going to argue with someone if they are too lazy to write at a 3rd grade level.
Yes, you win the argument because of typos from my phone :) Good for you bud.
No your exemple is not fine, it is ridiculous at best and just the fact you did not know what LOB means shows how much knowledge you have about all of this. Again, I'm arguing with a 'gamer' about something that Microsoft themselves figured out and is running for more than 6 years now. Sure, you know better :)
This is not about how to beat a game, this is about business and numbers. I'm done being nice with you and your non-sense.
Let's hope there is no typos in this comment or you will talk about for the next 10 replies...
I suggest you read American Amnesia or some other book that goes over the history of how American politics have been captured by big business interests. Then read up on the gilded age and robber barons. Learn something about how monopolies or near monopolies form and operate.
I had a class on business in college and did well in it. MS execs can know more than me on business but that's a moot point when they aren't being honest. It's like you are trying to argue that since J.P. Morgan and Rockefeller have business degrees that the average man can't call them crooks.
P.S. There's no such thing as the Xbox LOB. The Moore Personal Computing Department is the LOB that Xbox operates in. Xbox isn't its own LOB by itself. This helps MS hide losses incurred by spending to strong arm their way into more of the videogame market.
Yah I think we are done here :) You definitely have no clue what you are talking about, have a very narrow way of looking at this, have no idea what a line of business is (this part is actually the funniest part of your last reply and the fact LOB is used very commonly for that kind of discussion tells me that your class was probably more about how to manage a limonade stand instead of actual multi-trillion dollars businesses), and calling anyone/anyone crooks based on thin air whatever conspiracy you want to assume/believe is not going to lead you very far :) You also have very little knowledge of how public companies work and what are their obligations when they come up with public statements.
And yes Microsoft execs know way better than you about all of this :) Again, this is not a video game we are talking about…
I’m on my phone so if any typos are going to start another whole wall of text don’t waste your time, I’m really not going to waste my time with you anymore :) So feel free to respond and believe that you got the upper end of it as I’m not going to even read it :)
Understanding the history of monopolization is more important than knowing every last detail on artificially inflated mark-to-market accounting practices. You don't have to know how every magic trick works to know it's all an illusion and there's no real magic being performed.
That's good to know. But, the real question that most of us are asking, even if we don't realize it, is: is the existence of game pass a net positive for Microsoft's gaming business? In other words, is Microsoft making more money, or less money overall, due to game pass?
They make $340m a month for doing nothing.
Look at that.
If it's profitable, it's profitable. But it's weird that Microsoft has to publish a statement nearly every day stating their business is actually perfectly fine.
Man, I never knew so many people are interested in Microsoft's financials. They are acting like it is their dead beat son or something. News flash Microsoft is the world's richest company. They will be fine lol.
Also, game pass existed for 8 years now. If it wasn't profitable I highly doubt Microsoft would've kept it going.
Doubt many people care about MS's financial situation (outside how much tax they pay) but they are concerned about the stability of the industry, one where MS just axed thousands of jobs, cancelled multiple games and basically all but shut down studios.
If MS were doing so well, why did they do this?
The whole situation reads to me like the top brass, CEO Satya Nadella and CFO Amy Hood, decided they need to cut spending and increase profit across all of Microsoft, supposedly so that they could afford to invest more money in AI technology development. There were 9,000 layoffs this time, 6,000 earlier on in May, and quite alot of them weren't within the gaming division between the two layoff rounds. We even heard that one of the cancelled games, Zenimax Online's Project Blackbird, was going well and that Phil Spencer had enjoyed playing it so much that he could barely put the controller down at the dev teams last meeting with Phil, which implies the decision to axe that particular game came from above Spencer. I'd assume that Satya Nadella had Amy Hood go through all of Microsoft's financials to find things with high budgets, and then axed a bunch of them.
‘Concerned’ about the stability of industry? You cannot be serious lol
Anyone with a 401k or IRA more than likely has Microsoft stock or a mutual fund/etf with Microsoft stock.
Yes but they still confirmed they aren't including first party dev cost into game pass. He never said GP wasn't profitable just that they don't include first party dev cost.
Why would they include it? 1st party isn't sold exclusive to the service.
Just can’t trust anything MS says!!!
Q: does game pass profit?
A: Game Pass is Reportedly Profitable Even When You Factor in Lost Revenue From First-Party Games
Q: yes or no answer please
Typical people listen to the wrong information, spread it like wild fire, and now all look like complete idiots.
Just do the maths yourselves, its not rocket science. Its simple maths.
Everything looks great!
