Game Pass’s “only (outside) shot” for sustainability is to get GTA 6 or Call of Duty, says former Microsoft senior PR lead

By admin May12,2024

Former Microsoft senior PR manager Brad Hilderbrand has blogged about the recent closure of Tango Gameworks and Arkane Austin, making a familiar case that Microsoft’s gaming division are now expected “to cut expenses to the bone” in the wake of the wildly expensive acquisition of Activision Blizzard and amid slowing growth of the Game Pass subscription business. In Hilderbrand’s view, Game Pass will likely never be sustainable or profitable. Microsoft’s only chance on this front, he says, is “to put all the world’s biggest games on the service” – namely, Call of Duty, which still earns hundreds of millions annually in direct sales, or GTA 6, which, hahahaha.

Hilderbrand was himself laid off by Microsoft as part of the company’s latest bout of bone-cutting, after four years and eight months at the company during which he worked on Halo: The Master Chief Collection, Halo Infinite and Forza Motorsport. Posting on Linkedin, he begins with a potted analysis of why Game Pass isn’t working for Microsoft – briefly, the returns attributed to individual Game Pass games are no longer satisfactory given slowing subscription sign-ups and Microsoft Gaming’s colossal recent splurging on acquisitions.

“The biggest paradox with Game Pass is that basically every game that launches on the service badly misses its sales goals. Makes sense though, why pay full price to buy a game when you can play it for “free” as part of your subscription? This is accounted for somewhat by attributing portions of revenue to top-performing Game Pass games every month, but there are factors working against games. Namely, the fact that most games don’t stay at the top of the chart for more than a month or two, and also that Game Pass growth has stagnated. So games like Hi-Fi Rush, which is incredible mind you, gets a very small bump in revenue from being the hot Game Pass game for a month, then it falls off a cliff when everyone moves onto the next thing. Poor Redfall had it even worse since it launched so rough, it never had a chance.

“This system was fine for a while when Game Pass was growing like gangbusters, but now it’s slowed way down and the amount of revenue it’s attributing to games isn’t keeping up with the budgets to make them.”

Hilderbrand comments that Xbox “was basically a rounding error on Microsoft’s books” in the past. “Then Xbox went on a buying spree and spent a lot of money on Bethesda, but orders of magnitude more on Activision,” he writes. “Now, the Eye of Sauron has turned, and Xbox is expected to start making that $70B back, or at least cut expenses to the bone (and then some) while they try.”

Microsoft’s “big bets” for driving Game Pass subscriptions haven’t done well enough, he adds, naming Starfield and Redfall as particular disappointments. “The best bet is COD, but do you really risk the guaranteed sales revenue that franchise brings by putting it on Game Pass on Day 1 and potentially lose massive sales? I don’t know what the plans are, but either you put it on Game Pass and lose money, or you don’t and the subscribers revolt because they think that’s what they signed up for.”

Hilderbrand’s post has sprouted a thread of industry comms and producer-level people sharing their own thoughts. There’s one from Douglass Perry, IGN co-founder, about the likelihood of Call Of Duty turfing up on Game Pass, to which Hilderbrand responds: “it definitely seems like a non-starter, but there’s also a constant pressure for Game Pass to be the killer app that you simply can’t live without”, adding that an additional pressure on the service is that “budgets for games keep expanding”.

“I still think Game Pass was the right strategy when it was announced, the world seemed to be moving toward subscriptions and the value prop is through the roof (there are a lot of very good games on the service),” he goes on. “However, with Xbox being perpetually stuck in 3rd place I don’t think they’re ever going to hit the critical mass needed to make it profitable/sustainable.

“The only (outside) shot, is to put all the world’s biggest games on the service and make it an absolute must-have in the eyes of players. Minecraft is there already, Fortnite is there but it’s F2P so you’re not really adding value, the only things left are COD or GTA VI. No chance GTA goes to Game Pass, and I think with COD you’re doing the same math and basically saying it’s too much of a risk to give up the guaranteed sales revenue for the hope of driving enough Game Pass subs.”

Hilderbrand thinks Call of Duty’s future is assured, whatever the outcome. “COD will be fine though, as will the other mega-studios with huge IPs,” he concludes in his original post. “But you’re seeing the impact; all those smaller studios making really interesting games are going to fall away, simply because as good as games like Hi-Fi Rush are, they’re never going to make enough money to make up that $70B hole that Xbox now has to dig itself out of.”

By admin

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