Microsoft has faced criticism this week due to poor messaging and behind-the-scenes problems with its top games. One recurring point of discussion is the heavy emphasis placed on Xbox/PC/Ultimate Game Pass. The subscription service offers all first-party Xbox games for free, along with a vast catalog of other games, making it a compelling option for Xbox owners.
During the COVID era, Game Pass saw a significant increase in subscriptions as lockdowns led to surges in boredom and game spending. However, the reported numbers plateaued at 25 million subscribers in January 2022. It took Microsoft two years to report new numbers, revealing 34 million subscribers. The growth figure comes with caveats, including the unclear classification of Xbox Game Pass Core members and the breakdown of new subscribers.
Microsoft previously expected 110 million Game Pass subscribers by 2030, while analyst Michael Pachter predicts 200 million by 2034. However, the question remains: where will these new subscribers come from? The math and Microsoft’s gaming model suggest that Game Pass growth has slowed or stalled, and finding new subscribers is becoming increasingly challenging.
The primary source of Game Pass subscribers is Xbox console owners. However, Xbox sales have declined compared to PlayStation, limiting the potential for growth in this area. Game Pass is also available on PC, but dedicated PC gamers primarily purchase games on platforms like Steam, limiting the subscription’s appeal on PC. Cloud gaming is touted as a potential source of growth, but its current limitations and the lack of evidence for its expansion raise doubts.
There is an assumption that there is a large untapped market of non-gamers who would play Xbox games if hardware costs were eliminated. However, the lack of evidence for this market’s existence and the differences in gaming preferences suggest that this may not be a significant source of new subscribers. Microsoft’s consideration of offering major titles like Call of Duty on Game Pass could potentially generate subscribers, but it also risks losing sales revenue and may not be sustainable in the long term.
The idea of offering Game Pass on rival hardware like PlayStation or Switch raises further questions, as it could potentially benefit competitors while undermining Microsoft’s own offerings. With uncertainties surrounding Game Pass growth and its sustainability, Microsoft may need to reassess its strategy to attract new subscribers and ensure the service’s long-term success.
