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.

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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.

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."

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Cikatriz_ESP

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In other words, if they can’t offer consumers must-play games, they can at least offer them Game Pass.

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sladakrobot

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Edited By sladakrobot

@Cikatriz_ESP: No game is a must have game.

Even the "best must have"-game is bought only buy a 10% of the total userbase on a specific plattform.

90% dont care and continue to play Fortnite

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Cikatriz_ESP

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Edited By Cikatriz_ESP

@sladakrobot: So do you have an alternative theory for why Xbox One isn’t selling or are you here to argue semantics?

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sladakrobot

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@Cikatriz_ESP: Aye,you dont like the fact that out of 120 millions PS4 owners,only 10 millions bought God of War 4?
110 millions dont care about an "must-have" game and just play COD, Fortnite, Overwatch, Madden, Fifa!
So...not so much a "must have" game?

Why the way better sales of the PS4?

How about the disaster Xbox launch coz of the draconian always online policies before launch? Their reactional reversal? The higher price of 100$? Bad stage show(TV,TV,TV)? Kinect? Technically inferior to the PS4?
Years after launch casuals at stores didnt knew that the Xbox can play used games?!

Lets go back to the X360/PS3 era,shall we? Why was the X360 so popular?
The X360 was cheaper and easier to make games on it.

Semantics,eh?

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nNFL2K

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@sladakrobot: "Only" 10 million? What? It's hard to sell 1 million copies let alone 10 million? 10 million is not a low number, that's considered a MASSIVE success in the industry, even more massive for a game only available on one platform. You also have to consider other factors:

- It's not common for the average game to sell 10 million or more copies. The majority of games don't reach those kinds of numbers or even half for that matter.

- No single game appeals to an entire install base and usually not even a majority. By your logic, GTA (the 2nd highest selling game of all-time) isn't selling that great because it doesn't sell over 100 million units every release since it's on so many platforms.

- PS4 has over 4,000 games. The more games on a platform, the more choices consumers have. The more choices they have, the more sales get spread out over a larger catalog of games. This is why in the reverse, Wii U had poor console sales but a HIGH attach rate for games: they had a much smaller available catalog.

Btw, Uncharted 4 has sold over 16 million units, and at the moment is one of the highest selling exclusives on the planet only topped by some Nintendo Switch exclusives which proves my earlier point: like the Wii U had, Switch has a far smaller install base than PS4 and fewer games = higher attach rate for Switch game sales.

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sladakrobot

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Edited By sladakrobot

@nNFL2K: the point is that gta 5 or Uncharted or Halo are NOT MUST HAVE GAMES as 85-90% of the userbase ignores them.

Ones cannot say this or that game is a must have game unless you break it down to a specific genre.
You are a jrpg-fan?There are few must have games i can recommend.
You like simmish racing games? There are few i can recommend.
In a grand scheme of things these games are not must have games

There is an user base of 120 millions,only 10% of them bought a specific game...it may be a financial success but the fact remains that 90% of the user base doesnt care.

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nNFL2K

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Edited By nNFL2K

@sladakrobot: The MUST HAVE GAME point is not mine, and it's subjective anyway. No one has a concrete scale for what that even means. For instance, the person who said it has no scale for it. The problem with your rebuttal is that you're using an arbitrary percentage as a counter scale, but 90% or more of gamers didn't buy GTA (2nd highest selling game of all time), you said it yourself, or Minecraft (highest selling game of all time), so that means the two highest selling games of all-time still wouldn't qualify as MUST HAVE GAMES in your view. You could even run down the entire list of top selling games of all-time and none would qualify based on the concept you mentioned.

Further, would we say Wii U games that sold to 80%-90% of its tiny 13 million unit install base were "MUST HAVE GAMES"? I don't know if that even applies there either, because if they were MUST HAVE GAMES Wii U would've sold a lot more units and had a much bigger fanbase as everyone would've wanted their games. In reality, The high attach rate percentage on Wii U wasn't a product of them having MUST HAVE GAMES, it was a product of a small fanbase starved with very few (and very few good) games buying whatever they could when it was available.

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sladakrobot

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@nNFL2K: no offense but your point is not relevant here coz my reply was to a post about must have games

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nNFL2K

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@sladakrobot: I don't know how you can say that when my post speaks directly to the percentage concept you brought up, but okay... I'm not offended though, instead I'm amused.

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andrewsqual

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Its over 3 years old. Microsoft investors aren't going to put up with a money gouger forever.

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masonshoemocker

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@andrewsqual: Well how long has Xbox been out? 20 years. Sounds like forever to me.

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deth420

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"Greenberg confirmed it's "not a big profit play" right now, as Microsoft is just starting the program"

Gotta get them hooked, before you can start the nickel and diming.

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andrewsqual

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@deth420: The 3 year old program ???

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deth420

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@andrewsqual:

well like they say, they are just starting (3 years or not) rest assured they wouldnt be doing this if it wasnt going to benefit them in some way. they are here to make money.

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yugabe

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Game Pass also drives purchases beyond the subscription fees. Profits from game, DLC, microtransactions purchases aren't attributed to Game Pass directly, but Game Pass drives these purchases very much. That is why you have to look at the whole Xbox ecosystem as a whole, because everything is connected, even financially, so the whole business' profitability is the only relevant measure you can have.

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Smokin105

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@yugabe: Sounds like the smartest comment made to me :)

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