How Xbox Game Pass Affects the Future of Microsoft's Console

With the addition of first-party games, does Microsoft's subscription service highlight the industry's future?

Early last year, Microsoft first revealed its Xbox Game Pass subscription program. Like the previously-released EA Access subscription service, Xbox Game Pass offers players access to a limited catalog of games as long as you pay the monthly fee. The service launched on June 2017, offering a limited catalog of around 100 games from the Xbox One and Xbox 360 game libraries. The initial list included Microsoft-published titles like Halo 5, Gears of War, and Sunset Overdrive, alongside older classics like the Bioshock Trilogy, Lego Batman, or Saints Row IV.

Like EA Access, Xbox Game Pass subscribers gain access to a 20 percent discount on digital games and a 10 percent discount on add-on content. Like the Games With Gold and PlayStation Plus Free Games program, players retain access to the games as long as they're subscribed. The catalog of available titles is comprised mostly of older releases and currently includes 87 Xbox One games, 29 backward-compatible Xbox 360 games, 53 Xbox Live Arcade titles, and a single backward-compatible game for the original Xbox. Xbox Game Pass settled into a nice space and everyone was happy.

Will Microsoft first-parties improve the fortunes of Xbox Game Pass?

Last month, Microsoft surprised the community by announcing that all first-party Xbox One titles would be coming to Xbox Game Pass on launch day. Every single one. The first game in the program will be Rare's Sea of Thieves, which launches on Xbox One on March 20, 2018. Further titles will include Crackdown 3, State of Decay 2, and future games in series like Forza, Halo, and Gears of War.

"Moving forward, we plan to release all new Xbox One exclusive games from Microsoft Studios into Xbox Game Pass on the same date as their global release. This means that when Sea of Thieves launches on March 20, it will be included in Xbox Game Pass to all members," said Xbox boss and Microsoft Executive Vice President of Gaming Phil Spencer at the time of the announcement.

It's a fairly major change to Xbox Game Pass and one that turns the service into another platform for Microsoft. The addition also patches over a fairly large problem for Microsoft: a lack of major exclusives for the Xbox One. With the addition of first-run games, Xbox Game Pass deserves reconsidering. What does it mean for the future of Microsoft and for the future of gaming?

For Consumers

On paper, this ends up being a great deal for consumers, especially those who are deep into the Microsoft ecosystem already. If you're buying Sea of Thieves and another Microsoft first-party game like State of Decay 2, you come out ahead by picking up Xbox Game Pass. Those two games would cost you $119.98 plus requisite taxes, while a whole year of Xbox Game Pass comes to $119.88 and you get access to the rest of the Game Pass catalog. Yes, Microsoft has a games problem overall, but you only need to two first-party games on Xbox One for the service to be worthwhile.

That's a win for consumers, unless Microsoft somehow misses the threshold of two first-party games you want in a single year. For the thrifty consumer who tends to pick up games on Redbox, Xbox Game Pass is a no-brainer, especially if the catalog keeps growing.

Microsoft wants to know how much you care about State of Decay 2.

The biggest problem with Xbox Game Pass is one that's been growing in the background of the industry for some time: game ownership. See, you don't actually own any of the Game Pass titles; once you stop paying for the subscription, all Game Pass-related titles deactivate in 30 days. Without the subscription, you have little, even if you've made additional purchases on top of the base game.

See, downloadable content (DLC) isn't included with Xbox Game Pass. The games on the service are the standard editions of most titles, without the additional content you'd get from pre-ordering or buying premium editions. Take Sea of Thieves, which offers the Black Dog Pack for a pre-order on the Xbox Store; on Game Pass, you're technically not pre-ordering, so you'll miss out on that extra stuff. If an upgrade or expansion is available for game, you can purchase it through the Xbox Store and you retain the rights to any DLC or microtransactions. Bioshock Infinite on Xbox Game Pass is only the core game, but you can purchase Burial at Sea separately. Without the base game though, the DLC is kind of moot.

If you're a fairly avid player who loves a good deal of downloadable content, the cost benefits of Xbox Game Pass begin to weaken. And if you're the type of consumer who likes to own your games, Game Pass is a complete non-starter. The latter is likely the biggest problem faced by Game Pass in regards to consumers; will gamers be as willing to give up game ownership as we were with films (Netflix) or music (Spotify and Apple Music)?

Halo Wars 2 just launched on Xbox Game Pass.

For Microsoft

Sure, Microsoft has a problem with exclusives overall, but the platform holder is more than ready to offer a handful of desired first-party titles each year. The release-day games turn Xbox Game Pass into the skeleton of the fabled "Netflix of Gaming", a service that everyone picks up to have access to a wide variety of new and old content.

Surprisingly, it works because Microsoft's first-party offerings aren't as robust as Sony or Nintendo. When you have a lineup that includes God of War, Spider-Man, Days Gone, Detroit: Become Human, and The Last of Us Part 2, a subscription offering access to all of those games becomes less profitable. The more titles available in terms of first-party, the better something like Game Pass is for consumers, while the platform holder with a host of titles only benefits if the subs cross a certain higher threshold. If one consumer would've bought four first-party titles in a year, that hypothetical total would be $239.96 versus the $119.88 a year for Game Pass. That's lost revenue.

Of course, Microsoft can make that up on the back end. The magic of something like Xbox Game Pass is it opens the pool of consumers. Two million folks may buy Sea of Thieves, but if Microsoft has five million Xbox Game Pass subscribers, some chunk of that will download the game to try it out. Many of those players might buy an upgrade or some microtransactions.

For Microsoft's first-party offerings, Xbox Game Pass works as sort of a "free-to-play" badge to subscribers. The barrier to entry is much lower, especially if the player just thinks of the Game Pass sub as an invisible recurring cost, similar to how many see their Xbox Live or Netflix subscriptions. And that lower barrier to entry means more potential in terms of add-on sales.

Sea of Thieves developer Rare sees Xbox Game Pass as a way to allow players to try out the game.

"Our ambition has always been about building a game with as far reach as possible. It’s all worked in our favor when you think about what Game Pass can offer. Let’s say someone’s on the fence about Sea of Thieves, or they don’t have the finances to pay for the game, then Game Pass allows them to jump in for a month and try it out," Sea of Thieves Cross Play Director Ted Timmins told USgamer's Hirun Cryer in an interview.

Rare is looking forward to Sea of Thieves on Xbox Game Pass.

"The feeling was that we can’t see anything other than positive opportunity," said Sea of Thieves design director Mike Chapman when asked about Xbox Game Pass. "Game Pass means that if Sea of Thieves passes people by, more people get to try it. I think not everyone is going to buy the game that way, I think people are still going to go out and buy it physically or digitally. The main opportunity with Game Pass is that more people get exposed to Sea of Thieves, which is especially important since it’s a new IP."

Putting games like Forza and Halo on Xbox Game Pass means that not only is Microsoft seeing a boost in subscriptions, they're also seeing a rise in the number of players trying its smaller titles. A rising tide lifts all boats: bigger games on Xbox Game Pass leads to more subscribers, which leads to bigger chances to stand out for Microsoft's other, smaller titles.

A service is only as good as its games.

For The Rest Of the Industry

The financial situation surrounding a game is different for the platform holder than a third-party publisher. A platform holder wants exclusive offerings so that you buy the hardware. Once you have the hardware, they make money on additional accessories, a cut of game sales, and subscription services like Xbox Live and Xbox Game Pass. Microsoft, Nintendo, and Sony can skip the extras because they're already getting that additional revenue elsewhere. The same isn't true of other publishers, who make money on their cut of the game sales and any additional purchases players make in-game.

For major publishers like Activision Blizzard, Ubisoft, and Electronic Arts there's little to no reason to jump onboard with Xbox Game Pass outside of older back catalog titles. They all see a significant amount of money from the actual sales of their games and they prefer to have a lot more control over their back catalog. (Ubisoft just pointed to back catalog sales as a major driver of its current fiscal year.) All three publishers are largely missing from the current list of available Xbox Game Pass titles. In Electronic Arts' case, the publisher has its own subscription service, EA Access, to offer its games through, something that was noted by an EA spokesperson when we reached out for questions.

EA has its own subscription program.

2K Games is another major publisher that is onboard with Xbox Game Pass, but only for older titles. The Bioshock games launched with Xbox Game Pass, while older sports titles like WWE 2K17 and NBA 2K17 only came to the service a few months after the next entries dropped. The latter two sports titles are good fits for Game Pass, as they can make money on microtransactions while allowing players a chance to try out the series; I'd expect to see more live service games like this on Xbox Game Pass in the future.

Smaller publishers with lower-tier titles can really make a home on Game Pass. Anchor titles from Microsoft can raise the number of Game Pass subscriptions, which improves the visibility on new and featured games on the service. Publishers like Focus Home Interactive, Deep Silver, THQ Nordic, and Grey Box have already released some of their titles on Game Pass. Grey Box' RiME just launched on the service, only seven months after the game's original launch on Xbox One. Many of these games may see similar schedules: not launch releases, but six months+ out from launch, following a few months of regular sales. At that point, it's about word of mouth, which may increase sales elsewhere.

In terms of independent developers, Xbox Game Pass also makes Microsoft's indie program, ID @ Xbox, look a bit more enticing. Indies have a chance to get a featured slot on the latest Xbox Game Pass update, meaning more eyeballs on their game. Again, the point here is increasing word of mouth, which is something indies live and die by.

RiME just launched on Xbox Game Pass.

The industry as a whole is still feeling out the subscription idea as whole, let alone Microsoft's specific implementation. Electronic Arts is offering games through its own subscription. Sony has free games through PlayStation Plus and the PlayStation Now cloud-based streaming service. Nintendo has plans to offer classic titles as part of its Nintendo Switch Online service.

The current name of the game is "engagement" and part of that is keeping players locked in. One day to do that with recurring subscriptions. Microsoft's Xbox Game Pass might be the scaffold of a potential Netflix of Gaming, but it's clear that it's not there yet. Consumers and Microsoft may be ready, but without more first-party games and a bit more love from third-party publishers, Xbox Game Pass might not reach that potential.

Tagged with Analyses, Microsoft, Xbox Game Pass, Xbox One.

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