Xbox Game Pass Is Not A Big Money-Maker Right Now, But Microsoft Is Thinking Long Term
"[Xbox Game Pass] is not a big profit play," Aaron Greenberg says of the subscription service.
Xbox Game Pass offers such a good value that many are wondering how Microsoft isn't losing money hand over fist on it. This is a sentiment that Xbox marketing boss Aaron Greenberg hears often, he said in a recent interview with What's Good Games.
Greenberg said people don't need to worry about Microsoft--they'll be just fine. In terms of the profitability of Xbox Game Pass for Microsoft, Greenberg confirmed it's "not a big profit play" right now, as Microsoft is just starting the program. Greenberg said the investments Microsoft is making in Xbox Game Pass today might be costly in the short term, but they will ultimately pay dividends down the road if everything goes to plan.
"We always laugh [when we hear that]. Please don't worry about us," Greenberg said about people expressing concerns that Microsoft is losing money on Xbox Game Pass. "Microsoft is going to be alright. We're gonna make it--I think we're gonna be OK."
With Xbox Game Pass, Microsoft is focusing on over-delivering on value, even if it comes at the cost of profits in the short term.
"It's a different mindset. If you do optimize for profit, and you do specifically say ... you can either say, 'How we do get as much profit out of each customer?' Or, do you pivot that and say, 'How do we add as much value to our fans?' 'How can we actually over-deliver on value?' If you do that, you build fans for life," Greenberg said.
Greenberg went on to say that Microsoft is focused on enriching the value of Xbox Game Pass, and the company has already done this by adding Project xCloud to the service at no extra cost. If people enjoy your product, they may tell their friends, and this is some of the most effective and influential marketing in existence, Greenberg said.
"When people feel like you're over-delivering on value, they want to not only continue to use your service but they want to tell their friends about it," he explained. "The most powerful marketing is word-of-mouth marketing. We can't create as many advertisements, as many assets as we want, but if both of you go tell one of your closest friends, 'You have to get Game Pass!' that's way more effective than any marketing I can do. For us, we just want to keep adding more and more value [to Xbox Game Pass] so you feel really good about that and you feel like you want to go tell your friends about it. And ultimately, we think long-term that's the right thing for the business and will have long-term benefits for us. In the short-term, yeah, [Xbox Game Pass] is not a big profit play. But we think long-term it works out good for everybody."
To help get Xbox Game Pass growing, Microsoft offered subscriptions for only $1. This helped the subscriber base grow to more than 10 million so far. If Microsoft is indeed losing money on Xbox Game Pass right now, the company can afford to take the hit, it seems.
Analyst Serkan Toto recently pointed out that Microsoft is one of planet Earth's few trillion-dollar companies--they bring in more than $120 million USD in profit every single day. Toto said Microsoft is in a position to "bring cannons to a knife fight" as it builds Xbox Game Pass.
About Game Pass, we should be aware that:— Dr. Serkan Toto / Kantan Games Inc. (@serkantoto) July 25, 2020
🏢 Microsoft is a US$1.5 TRILLION company, one of the biggest on earth
💰US$390 million in revenue DAILY
💸 US$120 million net profit DAILY
As far as "Netflix for gaming" goes, Microsoft overall can bring cannons to a knife fight. https://t.co/rcnkrlyB4n
Xbox boss Phil Spencer has said time and again that he's proud to have the support of Microsoft CEO Satya Nadella and CFO Amy Hood, who control the cheque books at the company.
Even without Xbox Game Pass bringing in much profit, the Xbox division of Microsoft is doing exceptionally well right now.
For lots more on Xbox Game Pass, check out GameSpot's opinion piece, "Microsoft's Secret Weapon For Next-Gen Is Xbox Game Pass."