Editorials Xbox

Why Xbox Game Pass Isn’t Growing Like Other Subscription Services

Updated 9/14/2020: This article has been updated to include more accurate depiction of Xbox Live Gold subscriptions in context with Game Pass subscriptions.

The July 23rd Xbox Series X Reveal Event served its purpose as our monthly industry stimulation, sparking excitement, speculation, disappointment, and a wide range of other emotions from industry-watchers, gamers, fan boys, and all other interested parties. When Xbox’s home run game service – Xbox Game Pass – was dubbed the winner of the showcase instead of a specific title, questions started to form about why its reach was still so limited with the gaming public. The service that made its debut in 2017 has become a tremendous value for subscribers and a shining beacon of hope for the Xbox platform. Surely this service can attract gamers from all walks of life, regardless of console affiliation, with the allure of value and convenience never-before-seen in the video game market. It’s a slam dunk, right?

Well, not exactly.

This topic was discussed on Throwdown Podcast—(mature content warning)—and it’s as robust and entertaining as any other topic that gets discussed on the show. It’s also a topic I’ve been brainstorming on for months. And as usual the Throwdown crew provides the perfect jump-off point for my personal gaming musings.

The discussion goes beautifully off the rails, as Throwdown discussions usually do, but a lot of good points get brought up. In the midst of it, Adam does some quick research to find that there are currently 90 million Xbox Live users coupled with 10 million Game Pass subscribers. And that really sets the backdrop for the discussion. Even among XBL members, the Game Pass adoption rate is really low at 11%. Why aren’t people jumping at the chance to pay a low monthly subscription to have access to – potentially – all of their gaming needs in one neat package?

The panel fields reasons for Xbox Game Pass’s underwhelming adoption: poor advertising, a lackluster first-party catalog, and even general marketing confusion over what Game Pass is. But when Brian pulls up the numbers for Netflix’s staggering first 3 year streaming subscription numbers in comparison to Game Pass, it really starts to sink in. Game Pass, with its incredible value, is under-performing. And what’s worse, it’s under-performing with its core demographic: current Xbox ecosystem members.

With that as a premise, I’m going to go into some of the biggest reasons – some stated in the days since the reveal and some not – why I think Xbox Game Pass has failed to take truly take off in the 3 years since it was launched.

Before we get started

It’s best to preface this discussion with my personal view: Game Pass is an objectively fantastic deal, and the best one of its kind. The selection that Game Pass offers is phenomenal. It has no equal on console or PC, and it should be considered an indispensable service akin to Netflix for video content or Amazon Prime for…well, everything it offers. Game Pass uniquely fits my gaming habits because there are multiple games on the service that I want to play. Because I wait to experience about 95% of games I play, the service brings incredible value with the action/adventure, open world, and RPG selection it provides.

If I missed a title that everybody raved about, no worries. Game Pass would likely bring that title in the future, and I would have it available to me without having to make a purchase. At $10/month, I could rotate games in as they became available, capitalizing on the selection of games that fall within my specific wheelhouse, or venture out to new titles that had piqued my interest. That monthly price tag works out to $120 a year, and at present, I spend at least double that amount on games yearly. It’s a fantastic deal for gamers like me who game at their own pace.

Now that we’ve gotten that out of the way…

Game Pass isn’t actually a great deal for everybody

There’s a dichotomy that exists in the general public and gaming public that drives more trends than we realize: haves and have-nots. There are plenty of people who will own both next-gen consoles and will maintain a PS Plus and Game Pass Ultimate subscription simultaneously. These people don’t really have to make choices about how to rank their gaming priorities because they have enough disposable income to do it all. They are the upper-class kids whose parents just reload their artificially capped credit card every month. They are the people covering, discussing, and proliferating gaming news and information to the masses. They are hardcore gamers that turned games into careers operate with full knowledge of what’s coming down the pipeline, what their preferences will cost them, or how to reconcile their gaming wants with their gaming needs. In short: they’re the haves. They understand how great a value Game Pass is. The irony? They also don’t really need it.

Then there are the have-nots. They are the lower middle class and poor kids who only get a console when they can save up the money for it. They beg their parents for a new console every Christmas, but usually only get one after it’s been out for several years. They scrimp and save money for one game purchase every six months or so, with any spare change in between funding the purchase of DLC or microtransactions. Their decisions on which console to buy usually depends on what their friends are playing. They have become overwhelmingly drawn to free-to-play games like Fortnite, Apex Legends, Destiny, and Call of Duty: Modern Warfare.

The multiplayer action keeps them playing for hours on end with no cost outside of their console purchase. Their semi-annual game purchases are usually games that also allow for extensive multiplayer hours, like the most recent sports installments or GTAV. And when a can’t-miss single player game sets their social circles on fire, they have a hard decision to make: spend 6 months of their gaming budget on one game that will last them for 2 weekends, or simply invest further in the free or multiplayer experiences that have given them so much time and satisfaction already? For them, it’s a no-brainer: They invest in the games that have been making them happy. That $60 for 6 months is much better spent on NBA 2K than a Game Pass service that doesn’t offer their favorite and most current sports title until it’s been out for 8 months.

I was one of those kids. I got enough allowance to buy a game every so often. A monthly subscription wouldn’t have been possible for me if it were available, so I know it’s not possible for many kids in that position. And even if that subscription had been available, the games that drive the bulk of the console market for people who aren’t hardcore users are free-to-play, constantly online, or yearly sports installments. Those games don’t come to Game Pass until they are well out of date and gearing up for their next release or they don’t come at all. Game Pass doesn’t provide value to these gamers because its game selection doesn’t appeal to mass market gamers.

Halo on Game Pass

Xbox’s weak first-party catalog significantly diminishes Game Pass’s value

Xbox’s first-party catalog being available day 1 on Xbox Game Pass is only a benefit to subscribers if they actually want to play Xbox’s first-party games. And so far, the only offerings since Game Pass’s conception have been titles that are universally panned, receive a consensus review of “meh,” or rehash Xbox glory days. Plainly stated: Xbox doesn’t give their console owners or PC Game Pass gamers any games to get excited about on Day 1. So why is a Day 1 Xbox games service even valuable?

Better question: If Xbox Game Pass didn’t include Xbox’s first-party titles on Day 1, would it be worth any less?

Let’s take it one step further: If Game Pass were split into 2 services with one only offering Xbox first-party titles (still called “Xbox Game Pass”) and the other offering just third-party titles (we’ll simply call it “Game Pass”), what would you be willing to pay for each one of these?

With the one exception being Ori and the Will of The Wisp (I cannot wait to get my hands on that game) there have been no Xbox first-party games to receive even a consensus of “good” across the board. This can be traced back to some choices made at the beginning of the console generation for sure. You could even throw in some suspect cancellations of games that were generating interest. But the biggest nail in the coffin of Xbox’s software offerings this generation has been their stubborn adherence to their greatest titles of yore as if they were strong enough to carry the console forward on their own merit. In reality, they have just been living off of the memory of yesteryear.

Of all the hype surrounding their July 23rd reveal, Halo: Infinite was generating the most anticipation. Gameplay was a given, and impressive gameplay was expected. And before we pin our satisfaction or disappointment in the footage on that expectation, I want you to ask yourself one question: Why were you excited about a Halo game in 2020?

Bungie left the Xbox stable after the release of Halo: Reach in 2010. Since then, Microsoft and 343 studios have struggled to find the formula to recreate or even maintain the magic that Halo had provided for the Xbox platform. Some of the problem was simple: the people who made it the classic gaming franchise that it had become were not there anymore to oversee it. People sometimes think IPs just make themselves, but those with visions and original ideas can be far more essential to a product than just kicking it into motion. The best IPs don’t sustain themselves, they are purposely re-imagined, re-engineered, and reworked to make sure they meet the standard of the people who first dreamed them up and brought from a shapeless idea in the ether into the realm of tangibility. Losing the founding visionaries can be a death sentence for a franchise.

Aside from that, the first person shooter genre had been constantly getting revamped every year by franchises like Call of Duty, Battlefield, Tom Clancy, Doom, Titanfall and even Bungie’s Destiny. Halo has repeatedly been left behind in terms of in gameplay, story, multiplayer, and graphics and hasn’t led the pack in any form since Bungie abandoned it and left it with Microsoft like the break-up box of stuff that your ex-girlfriend left on your kitchen table while you were at work.

Take a whiff of that t-shirt. Still smells like her apartment, doesn’t it? *Deep inhale* Ahhh…memories.

And that’s what’s been fueling the still-remaining love for the Halo series: memories. While Microsoft has given 343 Studios free rein to throw Halo’s lore around, other developers have zeroed in on mastering their gameplay loops and made Halo a relic.

Without any innovation or true ingenuity being put into the franchise, all that’s left is a series of callbacks to the golden years when Halo was the best FPS, the only FPS with online multiplayer, and the shotgun/melee combo reined supreme. That clinging to nostalgia is evident in the seemingly obvious Halo CE callback in the Halo: Infinite gameplay trailer. Under its current stewardship, Halo has no path forward. It can only tread old ground. And the ugly truth is that the Halo franchise has not been good enough to sell Xbox consoles or to sell Xbox Game Pass since Bungie left for greener pastures.

Gears of War has fared much better, with its story evolving in ways that have been entertaining and interesting. The biggest problem is that the gameplay hasn’t, so it fails to draw new players. Similar to Halo, if you were a fan, you’re still a fan. If you weren’t a fan, you likely still aren’t. And Gears still wasn’t enough to sell Xbox consoles this time around.

Other Xbox tentpoles like Fable or Crackdown either didn’t come forward into the 8th console generation or they outright shouldn’t have. New IPs like ReCore or Sunset Overdrive didn’t generate much interest at all. Rare’s Sea of Thieves started drawing attention for its refined gameplay systems months after launch, but by then interest had dried up under the burning lights of justified scrutiny that plagued its release. And the constantly impressive Forza and Flight Simulator – Microsoft’s two most outstanding series – remain niche in their appeal rather than widespread.

It’s not all good news

Even though Game Pass is especially well-suited for gamers like me, there are some drawbacks to the service that can give people pause.

The biggest drawback? Timed availability.

As a PlayStation 4 owner, I’ve made a habit of buying older games as they go on sale. I just browse the PlayStation Store every week as new games go on sale, picking up the ones that catch my eye or pulling the trigger on the games I had been watching for a while. Slowly, I’ve built up a huge library of games and done so at quite a discount. Full games with all of their DLC for $20 became my personal threshold for when to buy. I’ve managed to snag Assassin’s Creed Odyssey, Spider-Man PS4, Kingdom Come: Deliverance and many more, with all DLC included, for right around $20. What’s resulted is quite the collection of games suited to my tastes that I can come around to playing at any time I’m ready.

Game Pass appeals to me for much of the same reason. For $9.99 per month, I’d have access to a vast array of older games that I had been watching for quite some time and can start playing at a moment’s notice. And at only $120 per year, it saves me at least $150 on what I usually spend on software over the course of a year. The problem is…the games aren’t always there when you get around to them.

In the month of August, Game Pass is losing Devil May Cry 5 and Kingdom Come: Deliverance. Both these games are titles that encapsulate my main gaming preferences: single player experiences in the action/adventure or open world genres that I can play at my own pace. These types of games are the reasons I would have a Game Pass subscription in the first place. But it’s completely possible that I could power up my brand new Cyberpunk 2077 Xbox One X – *chef’s kiss* – start up Game Pass, and not be able to find a game I bookmarked to play at a later date. After all, the value in Game Pass exists only if I can have all the experiences that I crave at a lower price than I could buy them for individually. If the games aren’t really there at my beck and call, the service loses some of its value.

The sweet Cyberpunk 2077 Xbox Series X – yeah boy!

Not having a game’s DLC included with the service also reduces Game Pass’s value. Kingdom Come: Deliverance Royal Edition, Witcher 3 Complete Edition, and Assassin’s Creed: Odyssey Gold Edition all offer an average of 30 additional hours of gameplay through their DLC. Those complete game experiences cost me an average of $20 each when purchased separately, with The Witcher 3 CE alone providing me 3 months of gameplay. If I were to have played that game on Game Pass, it would have cost me $29.97 for 3 months of the base subscription. If I wanted to purchase the DLC, I would have had to lay down an additional $22.49 as a Game Pass subscriber. That’s $52.46 I would have paid for 3 months of Witcher 3 when I banked the exact same experience for $20 without Game Pass. This is where the value gets muddied quite a bit. For Game Pass to truly be the value it wants to be for all gamers, it needs to have its content available indefinitely (or at least for an extremely long period and with the length of availability known up front) and it needs to offer the complete game experience for all titles offered.

The Obstacles to Getting It Right

Microsoft’s challenge going forward is to maximize Game Pass’s saturation among several different groups. First, their console owners have got to adopt at a higher rate. 10 million Game Pass subscribers out of 90 million Xbox Live account users is paltry considering those players already have all the incentives necessary to enjoy Game Pass. If the early rumors regarding the rebranding of their gaming services is any clue, Microsoft may very well be looking to combine Xbox Live Gold and Game Pass services into one package. This could incentivize current Xbox Live Gold members into adopting Game Pass if they had been on the fence.

The biggest hurdle here, though, is price. Since its inception, you could purchase an Xbox Live Gold membership at $60 for 12 months, which works out to just $5 per month. You can find a 12-month membership even cheaper on periodic sales, making the monthly cost even lower. Game Pass, however, cannot be so affordable on a regular basis. Microsoft has publishers to pay for the games being offered on the service, according to Aaron Greenberg in late July. That means that the $9.99 subscription price needs to go up, or the number of subscribers needs to increase. Getting rid of the $9.99 base subscription and instead offering only Game Pass Ultimate may be in the cards.

The point is, Microsoft needs the service to generate more revenue. Like other subscription services, Game Pass is too good to be true unless somebody gets shorted. And yes, somebody is definitely getting shorted.

Taking a look at the Spotify model

Spotify puts millions of songs at subscribers’ fingertips for $10/month. The selection is incredible, the interface is pure gold with an unmatched recommendation algorithm, and the service is accessible from almost any internet-enabled device with a screen. So who’s catching the short end of the stick? In this case, it’s the content creators (the music publishers and artists). Spotify doesn’t even pay out an entire penny for a song stream on its service, opting instead to maximize their own profit. In fact, it takes 229 streams to earn $1 through Spotify. That number varies from service to service, but Spotify is the biggest streaming service by far. This underwhelming compensation model is why some notable artists have boycotted the service in lieu of sales or other platforms that offer more money per stream.

Netflix is perhaps the gold standard of streaming services, with their TV & movie streaming launch marking the start of the content streaming generation back in 2007. And Netflix maintains a very unique business model: overpay for everything. In this model, the customer gets a great deal with access to thousands of shows and movies for a low monthly rate. The content creators get fantastic deals if they’re even remotely in demand, with Netflix paying top dollar for streaming rights to popular older TV shows and movies. In fact, deals for Friends, The Office, and the Marvel Cinematic Universe in different time increments all cost Netflix more than a combined $1 Billion. And those deals expire every 4-5 years. Similarly, Netflix has been reported to pay more than top Hollywood studios for would-be Hollywood blockbusters. Most recently, they landed exclusive rights to new movies from Chris Hemsworth and Charlize Theron.

So who catches the short end of the stick in this deal? Netflix does. Netflix pays so much money to secure exclusive rights to old content and buy original content that they are carrying over $14 billion in debt. That’s billion: nine zeroes worth of money they don’t have. The only way to ever be cash-positive paying a generous price for content is to carry a ridiculous number of monthly subscribers. Currently sitting around 150 Million monthly subscribers worldwide, stock-watchers have estimated that it would take more than 200 million monthly subscribers in order for Netflix to actually make the kind of money necessary to not have a net-loss year after year.

They’ll continue to gain new subscriptions as they roll out the service to new territories while simultaneously cutting costs by letting go of pricier content deals (Friends, The Office, and the MCU are all scheduled to leave Netflix by 2022). Still, it’s a pricey business to run. My condolences to all the leeches who will be left out in the cold once Netflix inevitably locks down sign-ins to your “home” subscription network. It’s going to be the last step Netflix takes to force the last 50 million or so people who aren’t paying for it to start ponying up.

And we all remember the ill-fated MoviePass. It managed to last just over a year before it folded under the weight of its own value. Turns out offering an extremely lopsided value of hundreds of dollars worth of movie tickets per month at a $9.99 price tag wasn’t an economically viable sales model.

Final Fantasy 7 Coming to Game Pass
Final Fantasy 7 hits Game Pass during August 2020 btw

So where does Game Pass fall? Well, somewhere in the middle. Though details are hard to come by, it’s reported that the Game Pass model pays publishers based on how much their game is downloaded. Some are paid up front based on the individual game’s reputation or expected popularity, while others are paid exclusively on a per-download basis. There isn’t one universal pay model like Spotify, so it’s hard to say how well it’s benefiting each individual publisher. For the most part it seems to be mostly positively received, even by those who don’t think it works well for their specific games. So Microsoft is doing enough to get publishers to willingly come to the table and put their games on the service. The problem currently is that the 10 million subscribers don’t create enough engagement to maximize the profits over other methods. That leads to the aforementioned withdrawal of games from the service within months instead of having them stay on Game Pass indefinitely, leaving gamers missing out on some games they had intended to play.

Whether through downloads or DLC purchases, the Game Pass subscriber base needs to be extremely active in order for the service to be as financially beneficial to publishers as the outright game purchases on Xbox consoles and PCs that are lost once the game is available on subscription. Because logically, gamers are no longer waiting to purchase a game once it’s available on Game Pass. What’s worse is that some gamers may even be holding off on buying a game specifically because it may be available on Game Pass in the future. But since publishers generate much more revenue when their game is purchased at full price, it creates a very interesting dynamic for publishers where they must decide how and when to offer their games on subscription services without cannibalizing purchases in the process. This is why many publishers wait until a game’s sales slow down significantly before offering it on Game Pass or PS Now. Another 10 million active Game Pass subscribers may be just what the doctor ordered to stimulate engagement and make Game Pass revenues rival outright purchases in a way that lets publishers bring their content to Game Pass much sooner and for much longer.

Who is Game Pass really for?

Game Pass isn’t for gamers who primarily play the newly released major multiplayer franchises and free-to-play games that get yearly refreshes and regular updates, because those games don’t make it to Game Pass until they’re well past their prime. It doesn’t serve the needs of the “haves” who will inevitably purchase any game of note that Game Pass will have to offer. But that won’t stop them from subscribing out of appreciation for the effort that Microsoft has put into the service and the value it provides for the gaming public.

Game Pass in its current form instead serves two unique subsets of gamers. Firstly, it’s for the Microsoft faithful who want to stay up to date with their camp’s offerings and the 1st party titles provided. They’ll get their fix of nostalgia when some of their old favorite games receive mediocre or uninspired sequels and earn the right to receive their “Optimized For Series X” jacket patches and bumper stickers in the mail.

Secondly, and most importantly, it’s for the gamers like me whose buying habits aren’t driven by Fear of Missing Out. They don’t have to play the most recent FIFA, NBA 2K, or Madden as soon as it’s released. They aren’t enamored with the latest free-to-play game because their gaming circle isn’t playing it incessantly. They may not focus on multiplayer games at all, really, save for the rare beat ‘em up that reminds them and their friends of childhood. They have gaming interests curious enough to try the different genres of games that Game Pass offers. They play when they have time and don’t mind waiting to get around to a great gaming experience. They find some time between work and family obligations to spend on worthwhile experiences, and Game Pass can supply those in spades for the small price of a monthly subscription akin to what they would spend for other entertainment (Netflix, HBO Maxx, etc). They don’t spend indiscriminately, but they do spend willingly, and having them in the eco-system is the biggest win Microsoft could hope for.

This is Game Pass’s most appropriate demographic, and it should be their biggest target as they look to expand going into the next console generation.

Hire me, Microsoft. I’ve got ideas.

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