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Phil Spencer Says Game Pass Is Sustainable, Not Burning Cash

"No. Game Pass is very, very sustainable right now."

44 Comments

Xbox boss Phil Spencer has said Xbox Game Pass is not burning cash and is a sustainable business for Microsoft. Speaking to Axios, Spencer said plainly, "Game Pass is doing very well from a business perspective and a creative and engagement perspective."

He said Game Pass is a "real differentiator" for Xbox in the competitive landscape. Still, some people wonder about the economic realities of the service and if it is really a sustainable business and one that is an overall positive for gaming. After all, there have been plenty of high-profile gaming executives who have expressed their worries and concerns about subscription-based models.

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But Spencer doesn't agree. "It's not the only thing that's growing in Xbox. It's not the only focus of the organization, and it, as a standalone thing, is very sustainable as it sits today, just like today. It's sustainable," Spencer said. "I know there are a lot of people that like to write, 'We're burning cash right now for some future pot of gold at the end.' No. Game Pass is very, very sustainable right now as it sits and continues to grow."

"Yeah. I mean, you could do the math on Game Pass. I guess you don't know how many subscribers or how much each subscriber is paying," he added. "But you can make some fairly informed decisions and literally just do the math on what we think Game Pass could eventually be--you could do that on any part of the business. But absolutely, Game Pass is sustainable."

Spencer said Game Pass is great because it has led to a greater diversity of game experiences being available to people.

In other news, Spencer recently discussed how Xbox will continue to make "bold bets" like it did with Game Pass in the next decade because that's what gamers demand.

November 15 was the 20th anniversary of Xbox and Microsoft celebrated by launching Halo Infinite's multiplayer beta early.

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Thanatos2k

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Because if it weren't true, he would definitely admit that, right?

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VampireLord123

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Microsoft is taking advantage of in game purchases. Gamepass gives you access to the game, then the developers has to figure a way to get money out of you through season passes, expansions, cosmetic, items, etc. Once you are in with season pass and DLC at some point you may think to buy the game because otherwise you are just spending money on something that is not even yours.

It is a good strategy if players are willing to spent money in-game purchases.

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Warlord_Irochi

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@VampireLord123: It's know that each dev has a different deal, like in Steam or Netflix. Both MS and specific dev talked about this.

Don't make s*it up.

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larrybelafonte

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Thanks Phil, but my concern would be less about if it is sustainable for microsoft and more about how sustainable it is for developers, and the long term impact services like this would have on the games industry as a whole. Spotify sure makes plenty of profit itself, but the artists you say...? Sure this model is great for consumers, but I'm struggling to see how a yearly subscription that costs less than 2/3 full price games actually adds up for the game makers.

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MigGui

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@larrybelafonte: that boils down to how many people are playing the game and how much Microsoft is paying them, which we'll possibly never know, although we eventually did find out in the case of Spotify. The bet with Game Pass is that more people are playing the game than they would without the pass - which is certainly true for a lot of games, I don't know if for all of them. But with 20 million people paying $10 a month for this, there is a lot of money available to pay game creators...

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larrybelafonte

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Edited By larrybelafonte

@MigGui: Probably works well for some types of games, but not so well for others. Hopefully MS arn't being hoardy money grabbers about it like other streaming services as obviously GP is massively driving building the brand for them, but its hard to imagine a company of that magnitude not being that way. Just kinda seems like you might expect to start seeing a tonne more yearly repeatathon titles that hold your attention for as long as possible with sporadic quality content and a tonne of filler a bit like the average ubislog or the later seasons of the walking dead (lol), just to milk that GP revenue.

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GamerBum

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Its's sustainable alright, this is Microsoft we are talking about here. They are a trillion dollar company and if 'Im not mistaken are one of the richest companies in the world. The resources at their disposal must be immense. They dwarf sony that's for sure.

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dmblum1799

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I have an X box series x (even though my first console preference is PS5 because I prefer their exclusives). I also have, for many years, invested in Microsoft stock as well as Apple stock. This is a similar strategy for both companies: you create an ecosystem where people feel at home with your products. It's a long term commitment to your customers. If you treat them well, they will keep coming back. Not a complicated business strategy.

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AhReQueNoMori

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"Yeah. I mean, you could do the math on Game Pass. I guess you don't know how many subscribers or how much each subscriber is paying," he added. "But you can make some fairly informed decisions and literally just do the math on what we think Game Pass could eventually be--you could do that on any part of the business. But absolutely, Game Pass is sustainable."

W-what...? Hahahaha

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Atzenkiller

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It's in fact so sustainable and profitable, he doesn't even need to show any numbers to back up that claim. How absurd to even assume that a service costing 10 bucks per month could not pay for dozens of hundreds of games, many of which cost full price and are available at launch.

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blueoasis

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@Atzenkiller: Notice that he only used the word sustainable, not profitable. If it were currently profitable, he would have used that word very prominently. They are most likely losing money at the moment, but the losses are in line with their long term strategy.

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Atzenkiller

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@blueoasis: If they are losing money right now, then it is obviously not sustainable. That's his quote in case you overread it: "No. Game Pass is very, very sustainable right now."

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blueoasis

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@Atzenkiller: It's sustainable because Microsoft has billions of dollars to throw at it and a long term plan toward profitability. This is very common in the business world. Sustainability is not profitability.

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dmblum1799

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@Atzenkiller: I pay 14.99 a month.

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Atzenkiller

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@dmblum1799: Well, that makes all the difference.

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deactivated-64a3ced8b46b8

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@dmblum1799: Standard Gamepass is $10. You're paying extra for Live and EA access.

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scirocco7

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For me gamepass is great because i play a good game for a long period and i can buy it later when the price drops. So i dont waste time.

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deactivated-64a3ced8b46b8

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Even Netflix was burning cash for at least 6 years before it finally became profitable. Not sure I believe that GamePass isn't still burning cash after only 4 years.

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illegal_peanut

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@thecupidstunts: Well they did have to pay insane licensing prices to get certain movies and shows on there in the beginning. While gamepass is easy to get people on. Since game studios are more desperate. And games love cheap games. And the top games on Game pass are owned by Microsoft.

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deactivated-64a3ced8b46b8

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@illegal_peanut: "Since game studios are more desperate".

More desperate than what? And since when are game studios desperate?

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YukoAsho

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@thecupidstunts: Problem is that Netflix has a much lower barrier to entry. They probably have many, many more subs than GamePass ever will.

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deactivated-64a3ced8b46b8

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@YukoAsho: So knowing all that, and knowing that it still took Netflix that long to become profitable, there's no way I believe MS isn't still hemorrhaging cash on GamePass at the 4 year mark.

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YukoAsho

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@thecupidstunts: Yeah, that's kind of my point. Damn near anyone can at least use Netflix SD streaming, and it took them ages to get away from DVD by mail. Gamepass is burning a hole in MS' pocket, but does it really convince anyone that isn't already in the Xbox ecosystem? I have my doubts.

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sladakrobot

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Its said that there is a "waiting" line of publishers and devs (big and small) who want their games to launch on Gamepass.
I take it,its also popular in gamemakers space aswell

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GunsBlazing777

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If we are to assume that Game Pass currently has 20 million subsribers who are spending $120-180 a year, thats $2.4-$3.6 Billion annually. Im willing to bet the subscription numbers are higher than 20 million also. Seems pretty healthy to me.

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PsychoMantisIII

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@gunsblazing777: now factor in the costs to put games on their permanently, indefinitely, or temporarily. The profits drop significantly. I don't think it's as healthy as Phil makes it seem

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GunsBlazing777

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Edited By GunsBlazing777

@psychomantisiii: Very good point. Xbox has said that they see people buy more games this way. Like I have the thought of "if I don't have to buy this game but its great...Ill buy the season pass or the add on bundle." I think we will see more early access deals and such going forward.

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jenovaschilld

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Burningcashsayswhat? ....

Hey, when a new console launches it sales its hardware at a loss or 'subsidizes' sometimes for years. But they make it back in licensing fees. Same with Gamepass, as it is gonna take some pain before it pays off. And Xbox is not afraid of a little billion or two loss, just look at their sophomore jump into the water. We all know that a subscription model, like a Netflix, is the future... maybe not the 9th gen future, but the future for sure , and what xbox is building now will pay off.

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Atzenkiller

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@jenovaschilld: Why do people even mention Netflix? It's just replaced cable tv and you always had to pay for that. And cable tv never let you watch the latest movies that are currently running in cinemas. Does Netflix do that? If not then their costs are similar to cable providers.

Not that there's any comparison between a movie you might have to pay $10 for in a cinema and a new game costing $70 or 80€.

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jenovaschilld

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Edited By jenovaschilld

@Atzenkiller:

Oh I have no problem with gamepass or netflix, I do not see them as bad or good, just a change in how we consume multimedia entertainment.

I mean I started out laying quarters on arcade machines for my turn, what ever comes I think the best advice for us all is- carefully pay for what you actually consume and be an informed consumer.

Physical is the best option for consumers in value... but it is going away, whether I like it or not. I do not see gaming's future as bleak though, I see things are only getting better.

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BeefoTheBold

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@jenovaschilld:

Ehhh...maybe, maybe not. I think it is a YMMV thing based on how badly you want to actually OWN the games you play. The advantage of Game Pass is, of course, that you get access to a giant library of games for a monthly fee.

The disadvantage, like Netflix, is that games don't necessarily stay forever and you don't really own them. For me personally, while I subscribe to Netflix and it does supplement things, I still do actually BUY movies and shows that I want to be able to rewatch years from now.

Games I think are even moreso for me. There are games that I own that are quite old that I don't want to have to have to "wonder" if they'll be available a few years from now to go back and replay. Similarly, if the service (or the price) changes, I don't want to lose all of my games if I decide that a subscription no longer works for me.

Gamepass is great for a lot of people and I don't begrudge them. It is a worthy addition to the industry ecosystem. But I don't necessarily think it's a one sized fits all thing, and I do think that the traditional model will stick around for a long time to come.

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YukoAsho

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@BeefoTheBold: Indeed. Netflix (and for that matter, services like Tubi) are a great supplement, but they're more a replacement for rental than for purchase. Problem with Gamepass is that MS seems to want it to REPLACE game ownership, or at least replace having to make exclusives.

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jenovaschilld

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Edited By jenovaschilld

@BeefoTheBold: Oh I have no problem with gamepass or netflix, I do not see them as bad or good, just a change in how we consume multimedia entertainment.

I mean I started out laying quarters on arcade machines for my turn, what ever comes I think the best advice for us all is- carefully pay for what you actually consume and be an informed consumer.

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theduckofdeath

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Edited By theduckofdeath

@BeefoTheBold: I have boxes full of games/DVDs/Blu-Rays, in closets full of...boxes. Not to mention books -- college text books and every technical book purchased over the last 20+ years. To have all that reduced to something with the dimensions of a hard drive would be fantastic.

People expressed concern about with digital games, and now sales of the format has climbed. PC players were way ahead of console users. I expect game services like Game Pass with be more readily adopted with each passing year.

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BeefoTheBold

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@theduckofdeath:

The difference between between Steam and Game Pass is not the same as the difference between physical and digital.

1. Games leave Game Pass. They are not permanent. A few years later there is no guarantee that you can go back and play a game when the sequel is about to come out.

2. The moment you stop subscribing, you lose your entire library.

I'm not arguing that digital takes up way less space and is far less clutter, but subscription and Steam are not identical. One you own. The other you rent and the selection changes each month.

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sealionact

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@BeefoTheBold: You’re forgetting you can buy the games on Gamepass. You could say Steam is like Gamepass but without the option to rent.

Of course, there’s a difference. Gp only gets a selection of games, Steam gets way more.

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theduckofdeath

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@BeefoTheBold: Yes. I'm not worried about them shutting down the service. It is not very likely to happen anytime soon. Some people make the same argument about Steam and other digital storefronts. Questioning the idea of true ownership. My point is that subscription services will become more popular/acceptable, not that they will become the first choice in a single generation, necessarily.

I did the XBL conversion to 3 years of Game Pass, so there won't be any membership interruptions. My sub is good until 2023-11-27. MS gives you some many points for using Bing or playing GP games, you can extend the duration significantly. Maybe that will change.

And what if a portion of my library did disappear? The physical bulk of it, I may not miss. The older stuff is sitting in the closet. Some I sold, which I regret on principle. Some I gave away. None of that lot is doing me any good now. I got my utility out of them, though the money invested is still difficult to let go of when the object is physical.

The rest of my library is digital and spread about a number of services. Game Pass removes the perceived need to buy $100 Ultimate Editions. Simply by the upgrade if you must. If a game is going to leave, GP, there is the option to buy a digital or cheaper physical copy.

I wonder if Steam had a GP equivalent, how many would subscribe. My backlog is so deep, was there really a point to buying those games years ago?

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blaznwiipspman1

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@jenovaschilld said:

Burningcashsayswhat? ....

Hey, when a new console launches it sales its hardware at a loss or 'subsidizes' sometimes for years. But they make it back in licensing fees. Same with Gamepass, as it is gonna take some pain before it pays off. And Xbox is not afraid of a little billion or two loss, just look at their sophomore jump into the water. We all know that a subscription model, like a Netflix, is the future... maybe not the 9th gen future, but the future for sure , and what xbox is building now will pay off.

yes, MS has always been bold about these things, and ahead of the curve. They see where things are headed and aren't afraid to go there first. Remember, they were the first ones to launch a console with a HDD, and even the first ones to bring online service to the table.

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jenovaschilld

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@blaznwiipspman1: I was there for midnight sale at a Babbages for that first console. I was the first to have network hubs and 4-8 consoles and 16 player Halo around my area or state. While xbox has stumbled 8th gen, I appreciate their bold moves. I also give credit to Sony - who has without a doubt taken some of the biggest chances as well.

From what I have seen in the gaming industry over these last 40 yrs.... you either go big or go home.

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