Reportedly, some third-party video game publishers aren’t sure why they should keep making and supporting games for Xbox consoles due to poor sales in Europe.

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[–] [email protected] 3 points 7 months ago (1 children)

Other way around: consoles are there to sell Game Pass. Microsoft wanted to put it on PlayStation, in fact, but Sony wouldn't allow it. It's been clear for quite a few years that MS has been prioritising software over hardware.

There's barely any profit to be made in console sales themselves. They often start out the console generation as loss-leaders, in fact, and then as the manufacturing scales and becomes cheaper they'll see small profits per console. But making $50 profit on a console sale is nothing compared to the cut they take on software (game) sales and subscriptions. A $70 game where the storefront takes a 30% cut means they take $21 per game sale. Not all of that will be pure profit, of course - there are some infrastructure costs and such - but let's assume the average person buys three games per year; that's ~$60 per year, rather than the one-off $50 from the console sale. And obviously that number goes up the more games someone buys, whereas the profit on the console is static.

Microsoft has stated that Game Pass is profitable in its own right.

[–] [email protected] 0 points 7 months ago

The benefit of selling consoles is not making money from the sale, but having a large install base that will give you leverage over developers.

I agree that the money is in software, no doubt about that. The fact that Sony doesn't want Game Pass is simply that it would weaken their position: people just using Game Pass have no need to buy the games where Sony would be taking the cut. The Steam Deck on the other hand doesn't really compete with the others, Valve to my knowledge is making money on every device sold (though this seemed close for the 64 GB model), sure it broadens their Steam base but I don't think it made a huge impact. Noticable yes.

There's another issue with Game Pass. As a publisher, Game Pass is kind of a looking threat to your early sales. People might be waiting out before buying in case it becomes free later.

Lastly, I don't think Microsoft is completely honest about Game Pass profitability. Subscription fees might cover the licensing costs, yes. But on the other hand, Microsoft paid $7.5 billion for Bethesda, and all their games came to Game Pass immediately, meaning the direct sales of these games won't cover the investment. So if they were honest, they'd put that expense partially against Game Pass.

To combine these last two points, it's said that Microsoft bought Bethesda also to prevent them from publishing for PlayStation 5 exclusively. I'd guess Game Pass played a role there - but obviously this is all speculation.