Microsoft has two subscription services under Xbox Live, Xbox Live Gold and Xbox Game Pass. On Xbox consoles, in order to play a video game online, you must have a subscription called Xbox Live Gold which nets a consumer that online play ability and what Microsoft calls Games with Gold and Deals with Gold. GWG gives a user two Xbox One games and two Xbox 360 per month, the xbox 360 games you keep forever while the Xbox One games still need your subscription in order to play. DWG gives discounts on various games or downloadable content. The cost of Xbox Live Gold is $5/mo or $60/yr. Xbox Game Pass is a subscription service that gives an Xbox One user access to play over 100 Xbox One games or Xbox Play Anywhere titles for $10/mo or $120/yr.
Microsoft started the console policy of users paying for online privileges. Sony has adopted that policy, and now Nintendo has joined with their service coming late 2018. Microsoft tried to enforce this policy with the ill fated Games for Windows Live on PC. The PC gamer market refused this policy and Microsoft ultimately dropped GFWL. Microsoft has re-entered the PC gaming market but the games on PC don’t need to have Xbox Live Gold in order to play online. What Microsoft wanted was the same thing that they had on console, to put on PC. They want subscribers.
Subscriptions tend to be a highly profitable market for businesses and as anyone following Microsoft can see that their model for selling software has been subscriptions over the past couple of years, but for a very long time with businesses. Office was like gaming once, only distributed by a single payment, and now Microsoft is pushing for it to be a subscription for everyone to use. Microsoft wants the same thing with gamers. Xbox Live Gold is their way to get subscribers. There’s only one issue with that, it has peaked.
Microsoft’s Xbox One console is in second place (while profitable) but small comparative to its biggest competitor Sony’s Playstation 4. It has been recently been revealed that there are around 35 million consoles on the platform. We don’t know the exact number but a large portion of those users are Xbox Live Gold subscribers. It’s obvious that Microsoft can’t get 100% of those users to subscribe to their service as different gamers have different wants and needs. They can only maximize their profits to a certain percentage of their users. Then we have Xbox Play Anywhere and the Microsoft Store on PC where users can play certain games on that platform. Microsoft isn’t putting Xbox Live Gold on that platform as those users refused to pay that “online tax.” Then we have mobile where there is a small portion of games that use the Xbox Live API but those games aren’t using Xbox Live Gold either.
So how does Microsoft get this large number of users to get on a subscription? My answer to that is Xbox Game Pass and its future. Currently XGP is only for the Xbox One console (even though when it first was announced it had PC but has to be taken down) though you can play Xbox Play Anywhere games on PC that lie on the service. So if you were a PC user and there were games that were XPA and on XGP, you could subscribe. Microsoft recently announced that all of their first party games will be put on Xbox Game Pass going forward and that includes Sea of Thieves, State of Decay II, Crackdown 3, and all future Halos, Gears, Forzas. Basically, think of XGP as the Netflix of games where the first party titles are like “Netflix Originals.” The future of Xbox Game Pass will eventually be game streaming. Phil Spencer has been on record stating that we could see the technology for it within the next 3 years. Playstation Now already does this, albeit poorly.
What does this have to do with Xbox Live Gold and its multiplayer paywall? Well, I believe that Game Pass is the reason why that paywall goes away. The future of Xbox will lie in two things, Xbox Game Pass subscriptions and downloadable content/microtransactions from games on the Xbox platform. What XGP gives is the ability to lower the barrier of entry to purchase high margin DLC/MTX. In order for that to be highly profitable, the service will need a large number of users. In order to have a large number of users, you need to lower the barrier for users to play said game. That’s where Xbox Live Gold multiplayer paywall comes in.
Xbox Live Gold blocks off a section of games that can be played by a larger number of players who don’t subscribe to it. If your business is only selling to a subset of users, you can’t maximize your profits. What Microsoft can do is get rid of Xbox Live Gold multiplayer paywall, still keep the service for the four free games, and deals with gold and start pushing for Game Pass. This is a more enticing value to a gamer that normally doesn’t play online nor paid for Xbox Live Gold. What they have proven is that they don’t need to play online and they aren’t willing to pay for it. But now there’s a service that offers hundreds of games, free online, you’ll be more open to playing online than you weren’t.
From a business standpoint, if you can turn every user who was a Xbox Live Gold subscriber to a Xbox Game Pass subscriber, you have just doubled your earnings per year as XGP is double the price. But because you drop the multiplayer being apart of another subscription, you can potentially add more users who weren’t on XBLG. Also, for Microsoft, every transaction for a 3rd party game selling DLC/MTX, you get a piece of. So increasing the amount of users, increases the chance of 3rd parties selling DLC (and 1st party), and increases the amount of profit the business was having.
Let’s also look at the fact that people don’t like having multiple subscriptions within one “thing” It’s a turn off for a lot of folks. How can you tell a mother, you have to buy this console and then a xbox live subscription to play online, and then xbox game pass so he/she can play games? The parent wouldn’t be please. But if you say that you just have to buy a console for X dollars and pay $10/mo for 100s of games and new games that come out, that seems like (and is) a bargain. I also can’t stress enough that having 1 simple subscription is better for marketing purposes. Microsoft will soon be marketing their games like Netflix markets their movies but for Game Pass.
This also helps with the streaming and PC future that Microsoft has. Microsoft is working on Backwards Compatibility of OG Xbox and Xbox 360 games for PC. Phil Spencer has asked his team for it. I believe it will eventually happen. Once that happens, and more and more Xbox Play Anywhere titles on Game Pass occur, then the PC market is open for Microsoft (once they fix their Microsoft Store issues). This also goes for their streaming future where the console or PC isn’t the entryway to playing games. It’s if you have a screen (mobile or not) and a controller you can play. This also goes hand in hand with what Brad Sams was talking about with Microsoft coming out with a streaming stick. But that discussion is for another time.
I believe that Microsoft will officially get rid of the multiplayer paywall at the beginning of the next generation of consoles. It is a easy way to make a clear message about it going away and maximizing profits on users of the current generation while Microsoft fixes their PC issues and the game streaming tech becomes available. Thought they can do it early, but next gen seems right. Having all of your 1st party games available + 100s of 3rd party games on day one of buying a console for $499 and just add $10…it seems like a very enticing proposition. That’s what Microsoft is setting up for. The digital future and the subscription future (which sounds a lot like Office 365…I do think that they’ll have tiers to Game Pass like Office for the amount of users on the subscription).