Jim Ryan claims publishers reject Xbox Game Pass as "value destructive"

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

In the ongoing clash between gaming titans Microsoft and Sony, PlayStation boss Jim Ryan has made a bold claim, stating that video game publishers are far from thrilled with the Xbox Game Pass. During a pre-recorded testimony for an evidentiary hearing between the Federal Trade Commission (FTC) and Microsoft, Ryan asserted that publishers view the subscription service as “value destructive.”

Ryan’s testimony shed light on an intriguing perspective, revealing the discontent among publishers towards Microsoft’s gaming subscription service. “I talked to all the publishers, and they unanimously do not like Game Pass because it is value destructive,” Ryan stated with conviction during his testimony.

Before addressing the publishers’ concerns, Ryan also suggested that Game Pass is proving to be unprofitable for Microsoft. Casting doubt on the service’s sustainability, he remarked, “The Game Pass business model appears to have some challenges, and Microsoft appears to be losing a lot of money on it.”

Curious to hear Microsoft’s response, inquiries were made, but no direct statement was provided by Xbox. Instead, they referred to an Xbox Wire blog post, highlighting that every Game Pass title announced at the recent Xbox Games Showcase came from creators who had previously released games through the service.

While Ryan’s claims present a negative stance on Game Pass, Xbox CEO Phil Spencer has been transparent about the profitability and long-term viability of the subscription model. In an interview with Axios last year, Spencer emphasized that Game Pass was not burning cash and described it as “very, very sustainable.”

However, the UK Competition and Markets Authority’s provisional report unveiled an intriguing detail: Microsoft acknowledged that its video game subscription service had led to a notable decline in base sales. This revelation raises questions about the impact of Game Pass on the wider gaming market.

Diverging from Microsoft’s approach, Sony has adopted a different strategy for its video game subscription service, PlayStation Plus. Sony refrains from releasing its first-party games on competing platforms simultaneously, with titles like “Horizon: Forbidden West” launching on PlayStation Plus a year later. Earlier this month, Sony’s vice president and global head of subscriptions, Nick Maguire, affirmed that Sony would not replicate the Game Pass exclusivity model, despite the rise of $70 games, as their current strategy is deemed successful.

Among the skeptics of Game Pass is Take-Two CEO Strauss Zelnick. During a financial call in November, Zelnick expressed his doubts about releasing major titles simultaneously on Microsoft’s subscription service. He stated, “I still don’t think it makes sense. And I believe that it’s now becoming obvious that it doesn’t make sense. It’s just a lost opportunity for the publisher.”

In a recent development, Microsoft announced a price increase for Xbox Game Pass and Game Pass Ultimate (excluding PC Game Pass). Starting July 6, 2023, Xbox Game Pass Ultimate will cost $16.99 per month (up from the previous rate of $14.99/mo.), while regular Xbox Game Pass will be priced at $10.99 per month (up from the previous rate of $9.99/mo.).

Jim Ryan’s testimony serves as just one piece of evidence in the ongoing battle between Microsoft and the FTC, as Microsoft defends its proposed $68.7 billion acquisition of Activision Blizzard. As the conflict continues, the gaming industry eagerly awaits the outcome and its potential implications for the future of gaming subscription services.