Xbox Reportedly Spends $1 Billion Per Year on Game Pass Deals

Microsoft reportedly spends one billion dollars a year to bring third-party games on Game Pass. Bloomberg revealed the number in a detailed profile of Sarah Bond, the current President of Xbox at Microsoft.

Microsoft launched its Game Pass subscription service back in June 2017, promising access to hundreds of games at a low monthly price. The company managed to get several big publishers on board including Ubisoft, Sega, and EA (The EA Play library is included for free with Xbox Game Pass Ultimate and PC Game Pass), and subscribers can also see several games (mostly indie titles) launching on the service on day one.

Over the years, the Game Pass model has been a recurring source of concern in the video games industry. The subscription service has been accused of cannibalizing game sales, something Microsoft has repeatedly denied: According to the company, Game Pass subscribers spend 50% more on games than non-subscribers.

Still, even if a game may sell fewer copies because gamers prefer to “rent” it via Game Pass, the Game Pass model may still make sense for indie studios. “The largesse has been more than enough to win over small publishers, to whom it offers flat fees of millions of dollars upfront to include their titles, along with a portion of subscription revenue and the promise of exposure they couldn’t count on getting otherwise,” the Bloomberg report explained.

One billion dollars per year may still look like a lot of money for a service that’s often perceived as an unsustainable business. Microsoft announced back in February that Game Pass had crossed 34 million subscribers, up from 22 million customers in January 2022. However,  that 12 million delta includes Xbox Game Pass Core (formerly Xbox Live Gold) members.

To increase its Game Pass revenue, Microsoft recently raised the price of Game Pass subscriptions and launched a new $14.99/month Xbox Game Pass Standard tier that doesn’t include new first-party games on day one. The company has also teamed up with Samsung and Amazon to make Xbox Cloud Gaming available on TVs.

After Microsoft spent $68 billion on Activision Blizzard and laid off over 2;600 employees in its gaming division this year, it still looks like the company’s Xbox business is going to be scrutinized like never before. The Bloomberg report mentioned that Microsoft’s gaming unit is “operating under a challenging set of revenue and profit goals,” citing people familiar with the Xbox business.