Ex-Xbox VP says Game Pass creates 'strange internal tensions' among first-party developers

Another former higher-up Xbox executive speaks out about the risk of subscriptions, especially those like Xbox Game Pass that launch high-value products into a Netflix-for-gaming business model.

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Just a bit ago, ex-Bethesda VP Pete Hines criticized subscriptions like Game Pass for not properly valuing games and compensating developers. Now former Xbox Game Studios VP Shannon Loftis echoes this sentiment, saying that the Game Pass subscription model has caused tensions within internal teams. The reason? Game Pass is volatile and the service adds another layer of uncertainty to an already risk-fraught industry.

"As a longtime first-party Xbox developer, I can attest that Pete is correct. While GP can claim a few victories with games that otherwise would have sunk beneath the waves (Human Fall Flat, e.g.), the majority of game adoption on GP comes at the expense of retail revenue, unless the game is engineered from the ground up for post-release monetization. I could (and may someday) write pages on the weird inner tensions this creates," Loftis said on LinkedIn.

For game developers, Xbox Game Pass can either be a boon or a bane.

Microsoft issues upfront payments to developers when their games show up on Game Pass, but devs may sell fewer copies of their game as a result, and the launch windows can be critical for initial sales. The service is a new business lever that comes with potential risks and uncertainties, especially for developers that are counting on a specific game doing well.

Ultimately, Game Pass is a driver of the Xbox business, and Microsoft is fine with potentially de-valuing its products in the short term for the chance at long-term success. The inclusion of Call of Duty on Game Pass is the clearest example of this in action; former Activision CEO Bobby Kotick refused to launch the franchise into Game Pass on day one because he knew it would significantly decrease the amount of games sold on launch day.

Microsoft isn't concerned about this. It has simply converted Call of Duty from a megaton game-seller into a digital product that melds intuitively with recurring monetization, which is Microsoft's forte.

The main issue is that not every franchise or game series can be aligned in such a way--some games, like Obsidian's Avowed or Outer Worlds, for example--are static singleplayer games that don't necessarily fit well into an all-you-can-access business model. It appears developers are just having trouble properly attaching dollar values to their games, especially via subscriptions, where lifetime value and other determinations can be tough to make.

On a macro level, Game Pass is good for business: Microsoft pulled in nearly $5 billion from Game Pass last fiscal year.