this post was submitted on 05 Dec 2023
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The question is if Game Pass is profitable enough (especially considering it's increasingly the bread and butter of Xbox), or if Microsoft is keeping an unsustainable pricing strategy to try kill competition and will enshittify the service later (like YouTube for example)
They're making just under $3B/yr on Game Pass. It seems absolutely obvious that the vast majority of their costs will be game licensing. That's why they rotate games in and out so often.
For what it's worth, the same announcement about spending $1b/yr included a confirmation that the Game Pass is currently turning a profit.
Declaring Game Pass profitable right after they reclassified every Xbox Live user as a Game Pass user smells like creative accounting to me.
I mean, it could be. But Microsoft does not have a background of operating at a loss.
That said, months ago there was mention that Game Pass revenue was topping $200M/mo ($230M for an example month) and that a majority of Game Pass users were paying for the highest tier. That puts us at $2.7B/yr revenue. I can question whether their CLOUD service is profitable yet, but Microsoft is not going to get $1B in download and bandwidth costs in 2023. That still leaves $700M for employees, incidental servers, and "necessary expenses" to stay profitable.
I am convinced they're making money off their customers. Which I guess is a good thing because they can't use "we're losing money left and right" as an excuse to raise prices. Like they've ever needed an excuse, though.
It's not even a question anymore. Even if every single subscriber is on the highest tier, they're not even close to making back their third-party costs to run the service, let alone server costs, cannibalized first-party game sales, and whatever else they pay to run it.
They pull in $between $2.7B and $3B of revenue. Actually the question is what their profit margin is, not whether they're pulling one.