Xbox Game Pass Does Decrease Base Game Sales, Microsoft Says

Microsoft's pending acquision of Activision Blizzard has been under scrutiny by the UK Competition and Markets Authority, and a provisional findings report released on Feburary 8 reveals more details on how Xbox Game Pass affects sales.

According to Microsoft, base game sales do decrease after inclusion on Game Pass. "Microsoft also submitted that its internal analysis shows a [redacted]% decline in base game sales twelve months following their addition on Game Pass," the CMA states.

Later in the report, internal Microsoft documents also recognize that Game Pass does cannibalize direct purchases of games (called buy-to-play, or B2P in the report) sales. An exact number is unknown, as three different figures present in internal exchanges have been redacted in the CMA report.

This is different from what Microsoft Gaming boss Phil Spencer previously said in a 2018 levelup.com interview where he claimed that Game Pass actually encourages sales of the base game.

"When you put a game like Forza Horizon 4 on Game Pass, you instantly have more players of the game, which is actually leading to more sales of the game," Spencer said. "Some people have questioned that, but when State of Decay 2 launched, you saw if you looked in the US at the NPD you saw this game selling really well the month it launched on Game Pass."

GameSpot has reached out Microsoft for comment.

Microsoft's comments on Game Pass are located in the report section where Microsoft argues that subscription services like Game Pass (MGS) are not a separate market from B2P. Microsoft views Game Pass and other subscription services as a type of different payment from B2P.

To support its argument, Microsoft also submitted evidence that players frequently switch between the two different "payment methods."

"Between [redacted]% and [redacted]% of Xbox gamers continue playing games purchased on a B2P basis in the 12 months after unsubscribing from Game Pass," claims Microsoft. "Between [redacted]% and [redacted]% of gamers purchase a game on a B2P basis within a year after unsubscribing from Game Pass."

In the provisional report, CMA concludes that it finds "console B2P and MGS are within the same product market, but recognise there is some differentiation between the two."

Regarding the entire acquisition, the CMA "provisionally concludes" that the buyout "could result in higher prices, fewer choices, or less innovation for UK gamers." It did offer potential actions Microsoft could take to get approval on the buyout, including possibly dropping the Activision unit and Call of Duty from the merger. The CMA's final report will be released on or before April 26, 2023.

In addition to the CMA, Microsoft also currently faces a lawsuit from the FTC over the Activision Blizzard buyout. Reportedly, the European Union is also gearing up to give Microsoft an antitrust warning. The EU will make its decision by April 11.