Xbox Game Pass always sounded like a model that was too good to be true, and now, it turns out that it might have been just that. It’s being claimed that Xbox’s insistence that Game Pass is profitable doesn’t exactly give us the full picture, and that the calculations were not taking the cost of developing first-party games into account.
This comes courtesy of Christopher Dring, editor-in-chief of The Game Business. He says that he asked Xbox for clarification on its claims that Game Pass was profitable, and was told that “no first-party costs are included” in these calculations.
Xbox Might Not Be Giving Us The Full Picture When It Comes To Game Pass
In a thread spotted by ResetEra user Smitch, Dring adds his analysis of Xbox’s Game Pass model and explains what he has been told about how it operates.
“So costs associated with the Game Pass business is fees paid to third-parties, marketing, service costs… and by that measure, it’s profitable,” he writes. “What they don’t count is the lost revenue that Xbox’s first-party studios are seeing as a result of the service. I have to imagine if first-party studios received similar compensation, that profitability might not be correct.”
Basically, this means that if you only count the cost of getting third-party games on the service, as well as marketing and actually keeping Game Pass operational, then it does make money. However, if you factor in how much money Xbox put down to make games like Starfield and Avowed – and how much money it may have lost in sales by having them on Game Pass from day one – then there’s a chance that it does bleed money.
Of course, this would be difficult to estimate. You cannot count every time a title is played through Game Pass as a lost sale, since there’s a chance that the player would never have given that particular game a try otherwise. But undoubtedly, there have to be many cases where someone plays a title through Game Pass that they would have happily purchased if it weren’t available on the service.
With all that said, we don’t know for sure if Game Pass isn’t profitable, only that Xbox hasn’t given us the full breakdown that would include first-party costs. Even with that in mind, there is a chance that Game Pass was worth the gamble, but given the continued layoffs from Xbox, that does seem unlikely.
We’re also starting to see some within the gaming industry turn on Game Pass. One of these figures critical of its business model is the founder of Arkane, who argues that it’s damaging the industry.
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