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Opinion Business Game Dev Phil Spencer: Xbox Game Pass isn’t “burning money to gain customers”

IbizaPocholo

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At X019 in London late last year, Spencer admitted to Stevivor that Microsoft has “been a little bit opaque [about] how many subscribers” the subscription service has, but that it’s “a good business” for the company.

Spencer’s comments about Game Pass came after we asked if the program was viable; in addition to the library of 100+ older first- and third-party games available as part of the subscription, Microsoft’s new first-party titles are also available from launch. That means Microsoft essentially loses a $100 AUD sale for the likes of Gears 5 over the subscription’s monthly cost. While that mightn’t seem difficult for Microsoft to absorb in 2019, we already know that 2020 is already chock-full of first-party titles like Grounded, Bleeding Edge, Halo Infinite and many, many more. It’s also unclear if users are subscribing to the service, ad hoc, when titles that interest them are first released, or if they’re sticking with Game Pass for the long run.

“Game Pass for us right now is a good business,” Spencer asserted. “It’s something that we’re comfortable running the way it is and it’s more than doubled in size, year over year. It’s on a great trajectory.”

Spencer also confirmed that Microsoft’s hasn’t employed a bait and switch tactic where Xbox Game Pass will suddenly skyrocket in price to support its myriad new first-party studios.

“I know some people — I’ve seen it — some people say, ‘Oh, they’re just kind of burning money left and right in order to gain customers so they can trick you into raising the price later.’

“There’s no model like that, for us,” he said. “We feel good in the business that we’re running now. We’re definitely investing in it, but not investing in a way that’s unsustainable.

“We’ll do promotional deals and stuff — any service will,” Spencer said of promotions where new subscribers can join for a single dollar for their first month, “but it’s a business and it’s a business that does well.”
 

GymWolf

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You doubt he knows more than Phil about game passes profitability?!! Outrageous. Him and Danielsm are holding the meeting discussing figures right now 😂

Couldn’t even go more than one post without a poor quality shit post. I’m all for trolling at least make it decent.
Do you expect people clapping at every thing phil has to say??

It's a fucking videogame forum, calm your tits broh :messenger_blowing_kiss:
 
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TBiddy

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You doubt he knows more than Phil about game passes profitability?!! Outrageous. Him and Danielsm are holding the meeting discussing figures right now 😂

Couldn’t even go more than one post without a poor quality shit post. I’m all for trolling at least make it decent.
Agreed. If you need to shitpost, at least make an effort.
 
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H@3@ld23

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Not sure.

Up until last year Game Pass PC was 1 dollar a month the first one and then 3.99.

For the price of one single game bought at launch, you get a year of Game Pass.

Tell me lies, tell me sweet little lies? Seriously i don't see how that can be profitable unless they start increasing the price. Or maybe there's something else we don't know: like they sell data gathered from Game Pass.
 
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Woo-Fu

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Tell me lies, tell me sweet little lies? Seriously i don't see how that can be profitable unless they start increasing the price. Or maybe there's something else we don't know: like they sell data gathered from Game Pass.
It'll work the way any game that has a revenue stream after the initial sale does now and Microsoft doesn't have to be Nostradamus to predict that more games are going to use that model going forward.

"This game only cost me a dollar, I don't mind spending $10 on this virtual item to make my character look slightly different."
 
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PocoJoe

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It'll work the way any game that has a revenue stream after the initial sale does now and Microsoft doesn't have to be Nostradamus to predict that more games are going to use that model going forward.

"This game only cost me a dollar, I don't mind spending $10 on this virtual item to make my character look slightly different."
We need some statistics to back it up.

They give out these games technically for free, as running costs of servers vs. Few dollars a month already sounds like there isnt much left.

If people spend the same amount as they would with normally paid game, they just lose the initial purchase.

It just doesnt sound viable when things like netflix costs more and still make losses.

If pass is 3.99$ and there are +100 games, how would devs get anything from the deal unless MS pays them?
 
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Woo-Fu

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If pass is 3.99$ and there are +100 games, how would devs get anything from the deal unless MS pays them?
Of course MS is paying them. That's what publishers do. I thought the argument was that Microsoft couldn't possibly be making any money this way now or in the future without changing their pricing model?
 

Max_Po

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Most people I know are set for 3 years for 1 dollar. By most I mean thousands at RedFlagDeals...lol
 

Hawking Radiation

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Smells of triggered folk in here.

But whatever.

With ever increasing budgets to produce games and the millions more to market them, asking Phil if the Gamepass service (at $1 a pop to access thse big budget titles) is a sustainable model is a more than valid question.

They must be making the money back in a different way. You cant hope that gamers will spend crap tons of money on microtransactions when a game is sat on gamepass for a dollar.
 

Sussoloc

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It's all about customer loyalty. I bought 3 years of game pass ultimate for under 100 bucks. So it's damn sure that the series X will be my main console except the ps5 is significantly stronger. It will pay off for Microsoft.
 

Grinchy

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Why would it be bad if they were? It's such a standard business move. Amazon is the king of it.

Charging $1 for something that costs you way more than $1 to buy mindshare is not some negative thing you have to lie about to save face. It's good business when it works out in the long term.

Everyone knows what game pass is now. The money they've spent has bought them something very important. No reason to concoct this fairy tale about it.
 

CeeJay

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Just think of all the games they could have money hatted instead with that Gamepass investment /s
 
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Neofirezero

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Not sure.

Up until last year Game Pass PC was 1 dollar a month the first one and then 3.99.

For the price of one single game bought at launch, you get a year of Game Pass.

Tell me lies, tell me sweet little lies? Seriously i don't see how that can be profitable unless they start increasing the price. Or maybe there's something else we don't know: like they sell data gathered from Game Pass.
Very good point, logically MS is only doing it to gain marketshare. I doubt the "were not burning money" line especially considering how much they burned through on the first Xbox to get the brand up and running.

Phil should have just stuck to the "gamers win" line and called it a day.
 
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Rolling_Start

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I already do that mr smarty poopypants
So you already buy several $20 ~ $50 games a month, but when Gamepass costs you more than $1 a month (not sure how you get it for $1 a month every month tbh), then it'll become bad value?

I mean, you've got to do what makes sense to you, but that doesn't seem like a great way to maximise your gaming within your budget.
 

Spukc

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So you already buy several $20 ~ $50 games a month, but when Gamepass costs you more than $1 a month (not sure how you get it for $1 a month every month tbh), then it'll become bad value?

I mean, you've got to do what makes sense to you, but that doesn't seem like a great way to maximise your gaming within your budget.
Got it with the 1 dollar 3 year upgrade trick.

I only use gamepass to test games.
And i still buy em
 
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CeeJay

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Very good point, logically MS is only doing it to gain marketshare. I doubt the "were not burning money" line especially considering how much they burned through on the first Xbox to get the brand up and running.

Phil should have just stuck to the "gamers win" line and called it a day.
When MS or Sony pay for marketing rights for a third party game, is that burning money, what about some exclusive content? When they moneyhat a 3rd party for exclusivity, is that burning money, what about paying a large sum to get a streamer to move to your platform, what about putting on a big fancy show with a fancy stage, what about giving the press free pens with your logo on it? Where is the line drawn where investing in marketing your business is classed as burning money? It seems like there is this investment = good but burning money = bad narrative that has sprung up yet it doesn't affect you as an end user. In fact, a lot of the money that these big companies invest/burn has no benefit to you as an end user (moneyhatting, marketing, exclusive content etc.) yet when they do something that is really good for us gamers it's met with scepticism, doubt and fear?

edit: this isn't specifically aimed as a reply to your post but rather the mentality to so called money burning.
 
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Elenchus

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As usual GAF doesn’t get the information it wants and just makes up other information to discuss. This place really does exist in a bubble.

Everyone is very interested in MS’s revenue numbers but when you post them everyone gets upset. It’s hilarious.
 

xrnzaaas

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I don't think I know anyone who legitimately pays full price for the Game Pass subscription. They either used the trick to get it cheap long term or wait for 1$ per month deals which are still happening once every few months. I think Microsoft is trying too hard and as a result lowering the value of the service. Why bother paying the full amount when you can wait for another GP deal?
 
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Vawn

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“We’ll do promotional deals and stuff — any service will,”

Your deals are way more aggressive than a typical service. Outrageously aggressive at times.
It's because it is much easier to keep people from stopping a subscription that becomes more than they'd like to spend than it is to get them to sign up in the first place at that price.

Cable companies know this well.
 

vkbest

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I don't believe it, at least I don't believe the current model with AAA games.
 
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Rolling_Start

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MS will also have data on how many subscribers go on to by the games at the Gamepass reduced rates (you get a discount on digital sales), and how many upgrade to Gamepass Ultimate so they can play the special edition versions or play these gamepass games online via Xbox Live.

It's not all just about Gamepass "standard" revenue.

Sorry for over-egging that bit, but I feel this is missed too often in these discussions. MS will analysing the shit out of all the data (and the do have All The Data) and feel this is a business model worth investing in.
 
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How else would you call a loss leader? You sell something under cost in order to get customers in the store, hoping they spend on other stuff so you end up making money.

It's not a bad strategy, just please don't tell us this is not what you are doing!

Also, like Epic's free games, don't expect that they will keep doing this when they get significant traction compared to Steam or whoever they see as their main competition.
 
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