In terms of how the console market is structured, typically these platform holders well hardware at a loss and generates revenue through software like games as a return. However, this was not the end result for Microsoft. According to a previous report from the Apple v. Epic Games lawsuit, it was discovered that Xbox never showed any marginal growth. Instead, its subscription/service business model is where the firm outperformed.
Elsewhere, Sony & Nintendo illustrated capital results with the original business model. So far from 2021, Xbox Game Pass is reported to generate more than $2 billion in revenue alone. However, how long will that hold? With inflation, we already witnessed select regions increasing pricing for the PlayStation 5. But, at least for this holiday so far, Xbox Series units are still static with its pricing.
According to The Verge which transcribed the recent Wall Street Journal Live event, Microsoft Gaming CEO Phil Spencer said Xbox Game Pass is turning profit by roughly 10 to 15 percent.
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, but we don’t have this future where I think 50–70 percent of our revenue comes from subscriptions.
He adds, “We’re seeing incredible growth on PC … On console, I’ve seen growth slow down, mainly because at some point you’ve reached everybody on console that wants to subscribe.” However, despite original comments, Spencer does elaborate that the stationary price tags for Xbox Series X|S will not be ‘forever’ in his own words.
“We’ve held price on our console, we’ve held price on games and our subscription. I don’t think we’ll be able to do that forever. I do think at some point we’ll have to raise some prices on certain things, but going into this holiday we thought it was really important that we maintain the prices that we have.”
Looking ahead, Microsoft’s plan to further capitalize on the subscription business model with Xbox Game Pass with multiple accounts under one user i.e. family plans. It was reported this fall that the Xbox Game Pass Friends & Family plan is on the horizon. You can read the full report by heading here.
Are you surprised by the turn of events for Xbox?
Source: The Verge
