They cannot make a 180 degree spin overnight, no company can, that's simply impossible, I think that's obvious? So of course they still have to provide/rely on traditional console model, and will have for the next decade or two, it will take quite some time until old pricks like us step aside and the younger generations take over the gaming market, because that's the long-term plan, any by long-term isn't just the next mere 5 years or so, they have a plan for way past beyond just the upcoming generation of consoles, that's why they wan to completely shift their strategy, their business model. And they can always keep providing traditional digital/physical copies for those who prefer such way of distribution. It's called diversifying the source of income. That's the whole point, instead of having a single strategy that will either succeed or not, they have multiple options and every one of them brings revenue, and all combined together bring a big pile of cash, even if one works less than the others.
No they're not, MS already showed the strategy brings them more money than ever despite hardware sales constantly dropping down, it's a fact, it's a public company and they cannot lie in their yearly/quarterly financial statements you know. It already works and they haven't even fully started to execute it.
We don't know any of that. We're not old pricks, and we should leave gaming for future generations (by voting with our wallets) on business models that provide quality, value and move the industry forward as best it can. The traditional model does that. The execs bitching about AAA budgets getting bigger and "unsustainable" sure cry tears of pain as they look at their billions in profits every year wondering why oh why my profit margins can't increase tendfold. All this investor pressure what am I'm going to do? Why o why am I forced to constantly be on the edge competitive wise, technology wise? Why can't I stagnate and provide as little as possible and reap as much as possible off these peasants... why all this pressure, can't take it....mwaaahhh. Peasant pay more for games... no used games for you peasant... low quality, broken games in chunks as a service... expect less peasant... that's what you deserve peasant - be happy about it too peasant - that's the inevitable future you peasant, accept it... yeah that's right, bend over....yeahhhhh.
Also; "Please die out so Gamepass-like models are successful".... the hell? I know you don't mean it like that but oooffff...
Again typical Microsoft...
Microsoft's full-year gaming revenues nearly flat for fiscal 2020
Microsoft managed to eke out a slight increase in its overall gaming revenues year-over-year for fiscal 2020 thanks to strong Xbox content and services revenue, and unsurprisingly no real help from hardware sales.
Actual 10k during COVID (gaming boon)...
Gaming revenue increased $189 million or 2%, driven by an increase in Xbox content and services, offset in part by a decrease in Xbox hardware. Xbox content and services revenue increased $943 million or 11% on a strong prior year comparable, driven by growth in Minecraft, third-party titles, and subscriptions, accelerated by higher engagement during stay-at-home guidelines. Xbox hardware revenue declined 31%, primarily due to a decrease in volume and price of consoles sold.
In other words about $10 billion in gaming revenue. It's profitable says Nadella. How much of that is profit? What is punching above its weight to make the division profitable vs. what's providing a net loss or barely breaks even? What is profitable has always being the question.
There is the Minecraft cash-cow (insignificant upkeep expenses) - no doubt immensely profitable. Not tied to the box necessarily. Sold on many platforms.
Tied to to the box for success ventures (indirectly incurring cost of the hardware like manufacturing cost, R&D cost and marketing expenses):
-- The Xbox Live Gold cash-cow (+ server's expense, + free content expense) - absolutely no doubt immensely profitable.
--Third party games/services royalties (+ server/storefront expense) - immensely profitable.
-- Gamepass (loss-leader strategy with significant expense when tied to the box, slightly less outside the box aka PC) - profitable?????? Consider:
*Server upkeep/delivery cost
*Content cost (games library and rotating line up - varies by title notoriety)
*Sunk cost/opportunity cost of first party title sales foregoing the $60 tag. In effect development/marketing cost of first party studios and games.
*Marketing cost taking away budget from the hardware segment that ultimately pushes Xbox Live Gold, game royalties and the like (the real cash cows).
*Assuming the Gamepass push, and all it entails has no negative side-effect on hardware adoption by making it less attractive to adopt relative to the competition. MS doesn't live in a bubble without market pressure.
That's a big bet to forego so much and invest so much for such a venture. Its success is intrinsically tied to the box unless it's taking the PC market by storm (Steam sales charts for MS exclusive titles point otherwise).
So out of that $10 billion in revenue, after accounting for all the related expenses and costs, both sunk, opportunity and recurring, how profitable is the Xbox division without Minecraft? and within that, how profitable is the Gamepass venture? is the gamepass venture sustainable by itself as it currently stands without the box? Because again, you make it sound like you're certain it's a profitable venture when we don't have the numbers at all. MS touts 10 million subscribers but how much did it cost to get those 10 million? how many are active subscribers out of that 10 million? what is the average profit margin, if any, of the currently active? what is the average subscription length and at what profit margin? what is the growth, if any, month to month? What is the subscriber split between Xbox and PC? In essense; how many subscribers are dependent on the success of the hardware? What is the average profit margin, active subscribers count, and average subscriber length on PC? What is the cost to drive growth?
Is there positive or negative correlation to hardware adoption rates - i.e is it helping sell the box, or is it a net negative when competing forces (PS/Nintendo etc) are taken into account?
So many questions.
To me it sounds more like pie in the sky as MS other ventures that have gotten the axe. They always market the hell out of them, charging with the wallet ..... they flop, and get cut. And the gaming division has been on that threshold (being axed) many times from what has been reported. At least they've been smart about taking investor's eyes away from that division to avoid investor pressure by fudging the numbers and only providing what they want you to see.