Xbox is in a slump. Sales are solid, but hype and critical attention are behind rivals Sony and Nintendo. It has reached the point where Microsoft could pull out of consoles altogether over the long run with the Xbox One X their final release. But the recent announcement of an improved Xbox Game Pass subscription service (what I’m terming here “Game Pass 2.0”) changes my outlook.
Going forward, all Xbox new release first-party games (e.g. Sea of Thieves, Forza, Halo) will join the subscription service. Previously Microsoft limited Game Pass subscribers to mostly older titles from previous Xbox generations. Seen generously, this is like Netflix offering select first-run movies as they open in movie theaters, while still maintaining a flat $10 a month price. It’s a huge change from what came before.
By focusing on its subscription service, Xbox could sidestep the fragmented game landscape that they’ve faltered on for years. Console hardware sellers have always been exclusives, but Microsoft’s fall well short of the competition. Big budget moneymakers like sports and multiplayer shooters were a sure thing for Microsoft in the Xbox 360 era. Today they are a dicey investment. Budgets are out of control. Gamers are increasingly turning against loot boxes and other questionable microtransactions. Indies can grow to be a phenomenon (PlayerUnknown’s Battlegrounds, Cuphead, Stardew Valley), yet the market is getting oversaturated.
Simply put, Microsoft sees a gaming landscape stacked against them; subscriptions form an alternative path. The subscription model flips the usual pay-per-play economic model on its head. It’s no longer about how many console boxes or $60 games you’re selling; the focus is on retaining and expanding the subscriber base at any cost.
Under this criteria, Xbox diehards should be a straightforward audience to hook. The cost of two games a year to get every future Xbox first party game and many legacy titles is a no-brainer for them. The real test will be signing up gamers elsewhere: casual Xbox One owners, or more serious players from Sony, Nintendo, and Steam that have purchased an Xbox as a second console.
Microsoft has an open playbook to hook this potential audience. The traditional, expected route – huge first party blockbusters – can help, but it’s not the only path to success. Looking at examples set by other services like Netflix and Spotify, Microsoft can take a shotgun approach. They can fire off many smaller bets across different genres to appeal to dedicated niche audiences. An individual title might flop on its own at retail, but if it keeps a committed subset of subscribers signed up, it can work for Game Pass.
Microsoft can also push unorthodox games that would otherwise be a hard sell at retail. Game Pass members have already paid their subscription fee; little risk comes with taking a chance on something new. Sea of Thieves may match this classification; it’s a multiplayer-only “hang out” game that’s an oddball, rarely seen genre (pirates) but potentially ideal for Game Pass subscribers to try. In this way subscriptions introduce a new type of game, the “service seller”, that doesn’t have to play by the same rulebook as traditional retail.
Microsoft still has its work cut out for it to make Game Pass a smash hit. Xbox’s back catalog doesn’t have huge appeal beyond longtime Microsoft loyalists. Subscriptions are unproven territory for AAA gaming. But Game Pass meshes with Microsoft’s platform agnostic business model; if the service catches fire on Xbox I could see the service spreading to PCs or even rival consoles.
And given larger technology trends, Microsoft has reason to be bullish on Game Pass. Subscription services are reshaping how we consume TV, music, film, and applications. Games feel like an inevitable next step. Microsoft, more than any other gaming company, is in a prime position to capitalize on this.