The future of Xbox is Game Pass

With Sony MIA, Microsoft had an opportunity to go on the offensive this E3, which made their lack of detail on next-gen hardware, exclusives, and even streaming technology perplexing. But when you looked past console war talking points and read between the lines of their keynote, 2019 marks the most definite sign that Microsoft is splitting away from its competition, with Xbox Game Pass its centerpiece strategy. Other companies have dipped their toe into the subscription market, but given the maturity and boldness of Game Pass, I’m convinced Microsoft is all in.

The evidence of Microsoft’s subscriptions push was all over their E3 presser: onstage speakers and game trailers name-checked Game Pass frequently. The debut of Game Pass on PC and a special “Ultimate” bundle for combined PC and console access got a prominent showing. Two high budget upcoming Game Pass games — The Outer Worlds and Halo Infinite — bookended the show. And there’s no coincidence the first item Microsoft highlights under their E3 page is Game Pass.

A favorable read of Microsoft’s subscriptions-heavy positioning shows them building for the future. But it’s also a risk given what appears to be a lack of a plan B. It’s undeniable how far behind Microsoft are compared to Sony and Nintendo in terms of sales growth and install base, and on that level, the presser felt anemic. Even with several studio acquisitions, we saw few exclusives for the exception of the already announced Gears 5. Halo Infinite had a slick looking cinematic that told us nothing about the game itself nor what it would add to the already crowded shooter genre.

Microsoft’s inevitable next-gen console also felt like an afterthought. Project Scarlett got a teaser filled with Xbox rep speaking to its vague horsepower, but other than the reveal of an SSD, there were few specifics. Nor did Xbox seem interested in going after Google head on over streaming. We got only a few throwaway sentences about a limited xCloud “trial” coming later this year. Compared to Stadia’s repeated boasts of high fps, teraflops, and 4K, it was low-key.

But playing up exclusives and beefy hardware is from a playbook that’s more than a decade old. Consider how pervasive subscription services have become since the Xbox One’s debut in 2013. It goes beyond Netflix into how we pay for our apps, how we listen to music and consume virtually any form of media in the attention economy. And since Satya Nadella’s appointment as CEO in 2014, Microsoft embraced openness across platforms and yes, subscription services as a core revenue generator.

Based on these trends and the Game Pass heavy message this year, I expect Microsoft to upend traditional expectations going forward. Inevitably I can see 2020 opinion pieces already on how Sony’s PS5 will “crush” the Xbox successor thanks to a better game launch lineup and the network effects from the PS4 era. But in the interim, it may not matter. Years from now there’s an endgame where Xbox quietly adds hundreds of more quality games to Game Pass, subscriptions grow exponentially, and Microsoft laughs all the way to the bank.