The Xbox Game Pass is under severe financial pressure due to self-inflicted miscalculations and the integration of Call of Duty. Much was promised, but it's far removed from financial reality.
Reports from industry insider Jez Corden confirm that Microsoft's once-flagship gaming division is failing to live up to its own expectations. Cross-subsidization of other departments is collapsing.
The subscription model as a miscalculation
Microsoft used the stable subscription revenue for years to offset unprofitable areas within the Xbox division. Corden reveals: “Xbox Game Pass has been subsidizing departments that haven't been able to deliver fully yet.” The system worked mathematically as long as user numbers steadily increased. This growth trend ended at the latest after the last price increase for the Xbox. millions of subscribers cost.
The increase in the subscription fee to $30 per month marked a turning point in the strategy. Instead of the projected increase in revenue per customer, a noticeable wave of churn ensued. Players canceled their subscriptions or switched to cheaper plans. The consequences were swift. Corden states matter-of-factly: "As players fled the $30 price tag, there was less money for Xbox Game Pass to subsidize Call of Duty's cannibalized sales." Higher prices mean lower overall revenue in this case.
The cannibalization of the biggest blockbuster
The fundamental mistake was releasing Call of Duty as a day-one title on Game Pass. The merger with Activision Blizzard was intended to strengthen the platform, but in reality, it had the opposite effect. Full-price sales, valued at $80 per unit, plummeted as existing customers downloaded the title at no extra cost.
The new subscriptions were far from sufficient to offset these revenue losses in the balance sheet. “Putting Call of Duty into Xbox Game Pass cannibalized both sides”That is the precise verdict of the report. Traditional game distribution was damaged, and service revenues were unable to offset the deficit.
At the same time, Microsoft relied on Activision Blizzard's profit margins to stabilize the overall Xbox business. A weaker sales year for the shooter series immediately exposed the structural flaws: "...but when Call of Duty had an off year... once again, it compounded the problems." The system cannot tolerate dips in performance.
Structural overload leads to a change in strategy.
The service's foundation was overloaded with tasks that a single monthly subscription couldn't economically sustain. Software financing, hardware subsidies, and the integration of expensive brands exceeded its actual earning potential. Corden succinctly summarizes the result: "The model broke under its own weight." The structure was too complex.
Behind the scenes, this realization is already leading to discussions about adjusting the distribution strategy. Options under consideration include excluding future premium titles from the regular subscription, introducing additional paywalls for blockbusters, or restructuring the pricing plans once again. The day-one guarantee for AAA productions is also up for debate.
Game Pass is losing its status as an unconditional, all-inclusive package for consumers. Market reality has caught up with Microsoft's marketing promises. For gamers, this means higher costs, fewer day-one blockbusters included in the subscription, and the foreseeable end of the unlimited flat-rate mentality. The romance is over; now, numbers rule again.
Put the prices back to normal and simply give Ultimate Game Pass customers a 50% discount on "blockbuster" games like the Call of Duty series.
Maybe you shouldn't focus on video games anymore. Do something else. Stupid article!
Rene, that's nonsense. Prices were massively increased, but not for existing customers; those would have been increased later. Just because you're clueless and don't know anything about it doesn't mean you have to accuse others of it.
Rene, I'm stupid, right? The fact is, prices were increased, just not for existing customers. If the difference between new customers (which this article refers to) and existing customers seems too high to you, that's due to your lack of intelligence...
And I never subscribed to that nonsense; the one or two games from Game Pass that are interesting can be bought for significantly less.
Daniel Torge
For €14,99, which is what I pay for my Ultimate subscription and which I can play on every platform? 🤦🤦
And not with some Windows crutch with Copilot and other AI crap, or a Linux DIY system.
That's why I'm asking if your supposedly cheap games will work with every system.
Rene, you don't have any, huh? And what does that have to do with anything? With that statement alone, you've shown once again that you don't understand anything.
This article is NOT about people like you, is that so hard to understand? It's ONLY about NEW CUSTOMER PRICES that have risen massively, that's a FACT that can't be denied...and you keep saying "no, that's not true, my costs stayed the same." You just don't get it, not even when it's pointed out to you multiple times. And the worst part is, you call others stupid ^^
Intelligence is definitely not your friend 😉
Daniel Torge
I don't think so, the Ultimate one already cost €17 before the price increase... I'm telling you, you're just too stupid, dude 🤣🤣🤦🤦
Rene, I'd rather not tell you that there are price development charts on various keystore websites 😉
And you can clearly see that after the increase by MS, the keystore also went up.
Do you understand now, or do you still think, "I'm stupid and I'll stick to my pointless opinion"?
Daniel Torge
This isn't about you, you're not the world, kid, so just get the hell out of my post and go talk to someone else 🤦
Rene Hab Keinen, there was one, but it was withdrawn shortly afterwards, and if you didn't cancel your subscription during the price increase, you kept the old price anyway 🤷
Dino Antonio Manganelli
I didn't resign, why would I?
Rene, I don't have one, so you didn't get anything from the price increase. I'm still paying €11.99 for the PC Pass 🤷
Especially since GP has become cheaper again.
And the rule was also changed with the COD release... so you guys are like the Bild newspaper of the gaming scene...
You guys talk more crap than I can produce in a month, and all in one article!
Steve Schürmann, what has changed with CoD? Is it back in day one now?
Dino Antonio Manganelli, no, but the article says it's coming on day one... which isn't true.
The fact that CoD is no longer the cash cow it once was is, of course, completely ignored. Microsoft made a lot of promises. I'm pretty sure they did the math back then to see if the business would be profitable. Then came rising hardware prices and later a price increase for Game Pass.
Many gamers have realized that the smallest Game Pass is actually sufficient. You pay a few euros per month to be able to play online and buy the few games you want when they're on sale.
Every kindergarten child already knew that…
And who said it? Me, me, me!