Do developers & publishers make a profit from services like Game Pass?

Game Pass is great and all for the players, but is it actually profitable for publishers and developers? I mean Game Pass is very cheap and for the first month it's only £1 or $1. How on earth can this benefit publishers and developers? When a brand new game comes out, you buy it for around 60 bucks, but on Game Pass if you're paying £1 or $1, how is that £1 or $1 shared, and how much of the £1 or $1 does the developer or publisher recieve?

Let's do the math. A brand new game at 60 bucks sells 10 copies, that's 600 bucks from 10 individual customers. Now on Game Pass let's say the publisher/developer takes the full £1 or $1 (which isn't possible) from 10 individual customers, 10 copies at £1 or $1 is only 10 bucks. Pittance. I used the first month payment of £1 or $1 but even if we took the $10 payment the developer/publisher is still probably going to take less than £1 or $1.

My assumptions may be wrong, and there could be great profit being made but it seems unlikely. Anyone care to shed some light on this?

You pay a game 60 bucks but it's yours to keep, it's quite a big difference. Those subscription services are like Netflix, you only have access to content (which they can arbitrarily add/remove) as long as you pay.

Now, Microsoft or whoever works out a contract with X developer who get paid a fee depending on what they agreed on. In return the developer also gains more exposure (which is huge for small devs) thus more chances to have the players pay for the full game, get dlc's, in-game purchases and whatnot.

The platform holder subsidizes. They (MS) pay the devs/pubs. Not the gamepass customers.

That $1 is basically meaningless. It's just a way for MS to lure in long-term customers at a higher rate and hopefully yield an eventual return for them to offset their purchase of distribution rights to all the games on their service.

Basically, they pay an agreed upon rate for the games to deliver some desired profit margin to the content holder, and they try to make a profit on that investment in turn through their recurring payment customers.

Also, just to be clear, devs make nowhere near 60 per game. In turn, MS is surely expending a very reasonable amount on these games to offer up a desireable income to the content holder for, say, a year of distribution on their service.

So, long story short, both parties make a gamble. The devs/pubs gamble that MS's compensation offer is enough to offset/replace X direct retail sales lost due to Gamepass. MS gambles that the compensation offers are low enough to allow them more customer revenue long term than they put in

They're making Bank on GamePass, umm, Bank on it. lol :P:

But it's a win / win since those like myself who use the awesome service think it's a huge bang for the buck. Best thing to come down the VG pike in a long time.

Yes, otherwise they wouldn't be in it

Nah, they're definitely only on gamepass out of the kindness of their hearts.

Just spotted this... PSA...

https://www.gamespot.com/articles/xbox-one-livestream-recap-halo-convention-crackdow/1100-6464850/

"Game Pass in February

The smallest month is bringing some big games to Xbox One Game Pass, the all-you-can-eat subscription service. The February line-up includes Shadow of the Tomb Raider, The Walking Dead Season 1, and Batman: Return to Arkham, to name a few. The real headliner is Crackdown 3, which is finally really coming out after years of delays. As a Microsoft first-party game, it's included as part of Game Pass, so if you're a subscriber you already as good as own it. Check out the full calendar for when each game will drop on the service."

February Game Pass Games

• Shadow of the Tomb Raider - February 7
• The Walking Dead: The Complete First Season - February 7
• Pumped BMX Pro - February 7
• De Blob - February 14
• Crackdown 3 - February 15
• Batman: Return to Arkham - February 21

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Awesome news, I'll be trying out Crackdown 3, Shadow of the Tomb Raider and Return to Arkham, for certain. I love mah GamePass. :D

Well you’d obviously have to ask them. That $1 for the first month is just for new subscribers. You have to factor in how many people are currently regular subscribers paying the standard fee. You then also have to factor in how many people decide to purchase the game after trying it on Game Pass. Then there’s the whole how much do they get out of it from Microsoft themselves for being on there.

There is no new games from third party developers on game pass, so they still sell their games at full price. Only Microsoft first party studios have their new games on the service. If you want to play all the latest and greatest new games, you still have to buy them at full retail price.

its the "netflix of gaming" according to microsoft

OP asks some very good questions and, it's honestly a bit odd that no one's covered this in more detail.

I think the value proposition is that Microsoft can simply help your game rebound in sales, and/or increase exposure at a low cost; it's honestly not that much different than lets say Games with Gold or PSN+.

Yes. Microsoft probably pay a fix amount to dev or, pay them depending how much users download the game. They also still makes profit off DLC, which personally is one of Microsoft future strategy. Rental games on gamepass and if you like it, pay more for season pass or microtransaction.

Game pass will make you more money in the long run. This is because it will attract a much greater audience. It worked for movies and music. For example: of a group of 1000 people, maybe 100 will see the value in paying for your $60 game (so total revenue is $6000). However, all of them might find something they like in game pass and subscribe for $10 a month (total revenue $10000 per month).

Even if 500 people bought your game for a total revenue of $30000, game pass revenue would reach that in just 3 months and it would keep earning afterwards.

Those are obviously not exact numbers but you get the idea. Feel free to correct me if I'm wrong though. The $1 is just temporary to get people on board. Netflix did the exact same thing, and now that they have their audience they've gradually brought the price up.

Just look at Netflix's business model, and you'll have somewhat of an idea. Games are cycled, and also sold in stores... It's not like MS is just forcing devs/pubs to use Game Pass.

They call it "Netflix of Gaming" for a reason.

Do studios make money from netflix?

Of course!

The whole idea is added revenue stream and exposure, a win-win for developers/publishers and the platform.

MS (or any streaming service) pays the developer or publisher a license fee for their content, which varies based on how new the game is and how long it will be on the service.

The idea is to get a game exposure, people buy the service or subscribe, then when game is removed or people simply want to be untethered.........they buy the game.

Chances are that if you are streaming (or renting) and game, then you werent willing to pay full price anyway.

So the choice is easy, guaranteed revenue stream (but smaller than a full game sale) or spend more on advertising yourself.

The owner of the service is responsible for expanding the subscription base to cover the cost of the licenses and attract more (and better) content.

Its even better for First party titles because there is no risk involved AND you get brand new games on your service.

I suspect Sony will do this next gen, would be crazy not to.

EA has already jumped on board, Ubisoft is next.

You can look at the Netflix model and make assumptions of profitability but the difference in price between a movie and a game seems pretty drastic. Not to mention Netflix is more expensive than gamepass.

So there is something that might not add up or one side might be taking a hit currently. We’ll see how it pans out over the next few years.

Exposure, millions will try your game even tho they wouldn't have for 60 bucks, if they like it, they might buy it.

personally if I try a game and end up really liking it alot, ill buy it.

There have been quite a few third party games that have come to Xbox and GamePass at the same time, just in December there was Absolver, Mutant League Zero, and Below. Sure two of those where out other places first, but they were day and date for the Xbox community.

Movies don't have DLC, that is where the money is made. Plus, when something cycles off, it will be potentially purchased then. When Absolver is going to cycle off, I'll pick it up with the discount as I've put a bunch of time in the game and like it.

@Fuhrer_D: that’s a lot of maybes, I’m sure it works out most of the time but it could also backfire.

I keep seeing people use Netflix as the poster child for how this should work, but I'm not so sure about that. This just doesn't seem sustainable.

https://www-forbes-com.cdn.ampproject.org/v/s/www.forbes.com/sites/greatspeculations/2019/02/05/reality-is-closing-in-on-netflix/amp/?amp_js_v=a2&amp_gsa=1#referrer=https%3A%2F%2Fwww.google.com&amp_tf=From%20%251%24s&ampshare=https%3A%2F%2Fwww.forbes.com%2Fsites%2Fgreatspeculations%2F2019%2F02%2F05%2Freality-is-closing-in-on-netflix%2F

@Fuhrer_D: I’m talking about AAA games that people would pay money for this service to play. Nobody is lining up to play that junk

You think they would offer the service if they didn't?

I don't know how they are compensated, but it is a fairly new service and so I presume it will be adjusted over time based on feedback if required. Also I've seen many devs on the internet put PSN plus and XBLG in the same category as Gamepass, I.e. A subscription service that lets you play a bunch of games without buying them, so this question could have been asked a long time ago.

Only the base game is available through Gamepass, all associated DLC must be purchased but you get a discount, so there are other ways for them to make money. Furthermore, Gamepass apparently changes the way some people play games, in the sense that some people are playing and buying games because it was available on Gamepass, otherwise they would have never tried it in the first place. So there is that aspect to consider as well, devs making more money they would have normally. Lot of different possibilities and no doubt the service will go through some adjustments over time.

All of those games you can play on other platforms, except Crapdown 3 - which is a poo poo game.

Its not the optimal way of making money. For some games with small exposure and games that have already gone through the selling cycle it is. Microsoft pays them makes deals for time period. Microsoft has a limit and rotates games when the time is up. In the long run MS may make alot of money to maybe afford bigger fishes. Right now is just those low, end of cycle games and MS own first party investments. Its kinda similar to psn+ games or GWG which are smaller examples. Take Rocket League ps+ example. They did not make much on ps+ but got the exposure and went to sell in a premium ways. Took of from there.

@general_solo76: Good games are junk? Glad I don't game like that.