Report: Game Pass day one releases were controversial behind the scenes at Xbox

A new report from Bloomberg says that multiple people pushed back against launching new AAA games day-and-date into Xbox Game Pass.

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Game Pass was always a controversial topic from the get-go. How could a service that launches games for effectively half of the purchase price actually make money for Xbox? The service introduced a new replacement effect, also called cannibalization, wherein gamers would just buy a month of Game Pass for $25 (then $30, now $20) instead of paying the more expensive $60-$70 purchase price for new games. The idea was to convert Xbox's user base to the higher-margin business model of subscriptions, which are all-digital and delivered in a more controlled way, and then (hopefully) entice subscriber growth through must-have value propositions.

The model wasn't entirely popular behind the scenes, though. Five sources that used to work at Microsoft tell Bloomberg's Cecilia D'Anastasio that Game Pass' core day-one value strategy faced criticism and push-back. We've already heard former Bethesda comms VP Pete Hines voice his apprehension of Game Pass, and former Xbox Game Studios VP Shannon Loftis said that the Game Pass model created "weird inner tensions" due to its replacive effect.

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For years, Microsoft affirmed that Xbox Game Pass was profitable, going so far to say that Game Pass made nearly $5 billion in revenue in one year.

The service carries weight in the Xbox ecosystem, and the recent drop in subscribers was disastrous for Microsoft--the service had as many as 35 million subscribers when Black Ops 6 released (including the fold-in of Xbox LIVE numbers), and recently dropped down to 30 million following a +50% price increase shortly before Black Ops 7's release on to the service.

Subscribers have since stabilized now that Game Pass has dropped down to $22.99 per month from the previous high of $29.99, but this came at the cost of releasing new Call of Duty games into the service. It's believed that Black Ops 6's launch into Game Pass helped greatly catalyze subscriber counts, however it's unclear whether or not this effect actually stuck or not.

Frequently Asked Questions

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Question #1

What internal objections did Xbox leaders raise about cannibalization before deciding on day-one Game Pass launches?

They worried Game Pass would create a replacement effect or cannibalization where players would subscribe for a month at roughly half the price instead of buying new $60-$70 games, reducing full-price sales. Internal critics said the day-one strategy created "weird inner tensions" among first-party developers and questioned whether a subscription-based, variable model could be a sustainable foundation for interactive entertainment.

Answered

Question #2

How did Game Pass subscriber numbers change specifically around the Black Ops 6 and Black Ops 7 releases?

Click to reveal answer

Question #3

Which Xbox or Bethesda executives publicly criticized Game Pass and what were their main concerns?

Former Bethesda communications VP Pete Hines voiced apprehension about Game Pass, suggesting it was not authentic or genuine. Former Xbox Game Studios VP Shannon Loftis said Game Pass created "weird inner tensions" among first-party developers due to its replacive, cannibalization effects.

Answered

Question #4

What changes to Game Pass pricing and packaging were made after subscriber drops, and how did those changes tie to day-one releases?

After subscriber drops following a roughly 50% price hike, Game Pass pricing was cut from a high of $29.99 to $22.99 per month (related reports note a $7 reduction). That rollback coincided with Microsoft putting new Call of Duty releases, including Black Ops 6, into Game Pass day one, which helped catalyze subscriber counts. (Related article: Game Pass price drop is a 'good first step,' CEO says subscribers are up and churn is down after $7 reduction)

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Since it is based on such variable metrics and so vulnerable to churn effects, a subscription doesn't seem to be the best foundational bedrock for a business that's based on interactive entertainment. We've seen passive entertainment-based content benefit the most from subscriptions due to their native advertising opportunities; such things don't really exist in dedicated interactive entertainment because the ads require pockets of interruptions, which is counter-intuitive for the interactive pull of the medium itself.