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Xbox Game Pass makes a lot less money than we thought, but it's still profitable

Xbox Game Pass generates significantly less revenue that what Brazilian regulators CADE had reported, and instead makes up 10-15% of Xbox services revenue.

Xbox Game Pass makes a lot less money than we thought, but it's still profitable
Published Oct 26, 2022 4:08 PM CDT   |   Updated Mon, Nov 14 2022 11:00 PM CST
1 minute & 51 seconds read time

Xbox Game Pass makes significantly less revenue than we had previously reported, but the service is still profitable.

Xbox Game Pass makes a lot less money than we thought, but it's still profitable 22

Phil Spencer recently confirmed that Xbox Game Pass is not only profitable, but it makes up 10-15% of Xbox content and services revenue. This percentage gives us a baseline range to determine Game Pass revenues, and based on our findings, the earnings are significantly lower than the $2.9 billion figure that Brazilian regulator CADE had included in its report (and that's likely why the figure was removed).

"Game Pass as an overall part of our content and services revenue is probably 15 percent. I don't think it gets bigger than that. I think the overall revenue grows so 15 percent of a bigger number," Phil Spencer said during a Wall Street Journal Tech Live event, as transcribed by The Verge.

Microsoft splits Xbox earnings into two categories: Hardware, which includes sales of Xbox One and Series X/S consoles, and content and services, which is everything like Game Pass subscriptions, in-game purchases, digital and physical game purchases, and advertising.

If Game Pass generates 10-15% of content and services, then the service would have made $1.258 billion - $1.887 billion through calendar year 2021, based on Xbox segment earnings made public by Microsoft.

Here's what these percentage figures look like when weighed against Xbox's fiscal year 2022 revenues and calendar year 2021 revenues:

Xbox Game Pass makes a lot less money than we thought, but it's still profitable 15

15%

  • FY22 C&S rev - $1.878 billion
  • CY21 C&S rev - $1.887 billion
Xbox Game Pass makes a lot less money than we thought, but it's still profitable 10

10%

  • FY22 - $1.252 billion
  • CY21 - $1.258 billion

Conversely, if it turns out there was a transcription error and Phil Spencer actually said (or meant) that Game Pass makes up 10-15% of total Xbox revenues, then the figures would look like this:

Assuming there was no error made, these figures are a lot less than the $2.9 billion figure that was quoted in the CADE report, and that value was supposed to reflect console revenues alone. This appears to be the reason why CADE removed the Game Pass earnings from its Microsoft-Activision merger approval document.

The $2.9 billion figure would mean Game Pass on console alone makes up 23% of content and services revenues for the entirety of 2021...which goes against what Spencer has said here.

Conversely, Sony earned $3.6 billion from its Network Services segment in FY2021, which includes subscriptions like PlayStation Plus.

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NEWS SOURCE:theverge.com

Derek joined the TweakTown team in 2015 and has since reviewed and played 1000s of hours of new games. Derek is absorbed with the intersection of technology and gaming, and is always looking forward to new advancements. With over six years in games journalism under his belt, Derek aims to further engage the gaming sector while taking a peek under the tech that powers it. He hopes to one day explore the stars in No Man's Sky with the magic of VR.

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