Phil Spencer discusses the profitability and growth slowdown of the Xbox Game Pass, hinting at possible price increases

Jun 28, 2023, 11:38 AM UTC
2 mins read
Phil Spencer discusses the profitability and growth slowdown of the Xbox Game Pass, hinting at possible price increases
(Image credit: Xbox/Microsoft)

Editor’s note: This article is part of Day 3 (June 27, 2023) of the FTC vs. Microsoft and Activision Blizzard trial.

Xbox Game Pass, the popular subscription service offered by Microsoft, has proven to be a profitable venture, according to Xbox boss Phil Spencer. In a recent interview, Spencer revealed that Game Pass contributes around “10 to 15 percent” of Microsoft’s gaming revenue. However, despite its profitability, there are signs that the growth of Game Pass is slowing, prompting discussions about potential price increases in the future.

During a Wall Street Journal‘s Live segment, journalist Tom Warren reported on Spencer’s insights into the subscription service (via The Verge). While acknowledging the current profitability of Game Pass, Spencer expressed concerns about reaching a saturation point with users, particularly on the console. He noted that the growth of subscribers on PC [PC Game Pass] has been significant, but on console [Xbox Game Pass for Console], it has started to slow down. Spencer believes that there may come a time when the console market becomes saturated with potential subscribers.

Related // Jim Ryan claims publishers reject Xbox Game Pass as “value destructive”

In addition to the growth concerns, Spencer hinted at the possibility of price increases, either for Xbox Game Pass or for the consoles themselves. In contrast to Sony’s recent price hikes on the PS5 in several territories, Xbox has thus far refrained from implementing similar increases. However, Spencer admitted that price adjustments might be necessary in the future. He emphasized that maintaining current prices was important for the holiday season, but the company might not be able to sustain this indefinitely. At some point, certain prices might need to be raised to support ongoing investments and services.

Spencer’s comments came as part of a wide-ranging discussion, covering various topics such as the future of the popular gaming franchise Call of Duty and Microsoft’s vision for the Metaverse. These insights followed Microsoft’s recent earnings report, which showcased healthy sales for Xbox, despite challenges posed by supply chain issues. While specific subscription numbers and revenue figures for Game Pass remain undisclosed by Xbox, reports from reputable sources suggest that the service could be generating as much as $3 billion in revenue.

These developments occur within the context of Xbox’s ongoing efforts to secure regulatory approval for its proposed acquisition of Activision Blizzard. The deal is currently being scrutinized by regulatory bodies worldwide, most notably the United Kingdom’s Competition and Markets Authority (CMA). If the acquisition is successfully completed, it is expected to finalize sometime in 2023.

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