In my opinion this is false thinking, though. Most people subsribe to get a big library of games. I think 100 AA games will push the service way more as like 20 AAA games which probably cost the same. I don't need Gamepass for a much smaller library when I don't even care about the majority of games. A smaller library means it's cheaper just to buy the games you care about.

Yes, games like Hi-Fi Rush fall of a cliff after some of weeks, that's why you need a constant flow of AA games. Something Xbox simply didn't manage the last years. They had not enough games overall and not enough for Gamepass to let more people subsribe to it.

Now they will release even less games and will wonder why even less pay for Gamepass while game sales will still not be profitable enough because most AAA games are just too expensive now to develop. Meanwhile you can get awesome results with smaller budgets because of all the great tools you have nowadays

Game Pass saved Xbox but even if they shut it down 2 years ago we would be going through the exact same issues as we are right now, issues which aren't even exclusive to Xbox, the entire industry is a mess right now, Game Pass has nothing to do with the current issues and Hi-Fi Rush would have underperformed with or without it, as it did on PlayStation and Steam.

Activision just made Microsoft desire more, if you see Activision with 30-40% profit margins then you look at XGS/Bethesda with less than 10%, as a money dude you're going to think "Why can ABK do it but we can't? What do we need to change?" and they'd be asking those questions even if Game Pass didn't exist because even without Game Pass, XGS/Zenimax won't have anywhere close to ABK's profit margins.

Not even Sony does who have like double the amount of consoles sold as Xbox and multi-million selling IPs on the regular.

I bet the CFO of Xbox, Tim Stuart, was salivating when he saw ABK's profit margins lol

I was never a fan of the Activision deal to be honest, not only do they not make many games I care about, but I always suspected that gigantic ass price tag would screw them over, one way or another. Seems I was right. I wish that Xbox had gone for a much cheaper publisher acquisition instead like buying WB Interactive when the owner was looking to sell, or one of the JP pubs. Instead they bought an overpriced double edged sword that seems to have screwed the whole Xbox division over by causing the bean counters like Amy Hood to start penny pinching the division.

Idas comment is closer to reality I reckon so yeah.

If you're a financial dude and see Activision has basically killed everything and focused solely on COD but have profit margins of 30%+ while XGS+Zenimax have below 10% then you're going to start asking questions as to why we bother with all these smaller IPs instead of turning Bethesda into a Fallout factory like Activision did with COD and get these big money makers out faster.

We straight up heard from Phil in the trial that Microsoft is starting to demand that Xbox gets its profit margins closer to Microsoft's core businesses, things like Windows, Azure, Office, etc. Those things likely have a profit margin of 20%+ at minimum. Another thing, ABK has these profit margins by being fully multiplatform so yeah they'll take that too.

Sony's profit margins are below 10% and I think Nintendo's are between 10-20% 

And again, none of these issues are exclusive to Xbox.

She responds to 3 main points in this video:

1. "If a studio doesn't want layoffs or to shut down, they should just make good games." Her response: the quality of a game no longer matters. You can have a Hogwarts Legacy that sells gangbusters, but all Warner Bros. sees is a potential risk if it fails. Live service games can also fail, they often do, but the overall cost-benefit analysis actually makes them less risky.

2. As an addendum to 1, the biggest focus right now for most entertainment companies isn't even necessarily money, it's time. Because the more time you spend on a platform, the more you're likely to spend money, view ads, and have all your info mined and sold. A one-and-done experience is fundamentally not aligned with that goal.

3. "More studios should just go indie so they aren't beholden to these awful practices." Her response: the indie space is just as volatile and doing pretty bad right now, studios are closing all the time, they just aren't all big news like a AAA studio closing. Indies are having increasing trouble getting publishing support or just funding for projects in general, specifically because they're often more niche, less focused on monetization, and therefore more risky, even if they're generally smaller scale. But whereas a flop at a big studio might result in layoffs or maybe a closure at worst, an indie flop is probably just going to tank the whole company immediately and it might not even release if the stars don't align.

Now, there are still big games, Tears of the Kingdom, Baldur's Gate 3, Elden Ring, Cyberpunk. But she feels these will increasingly become the exception in the industry, not the rule. Companies like Fromsoft and Nintendo will become the go-to companies you go to for your single-player experiences, while 90% of the rest of the industry chases what they see as the bigger cheese, and even if 10+ more live services fail, a company is going to keep trying because the cost-benefit is still conceivably more attractive than any single player game could ever be. If that crashes a company, pull your losses and move on to the next company and hope they succeed.

Source

Another perspective from the Xbox OT in ResetEra which got some praise.

I do agree on certain aspect but he's view is limited to Xbox and MS in a post Activision buyout without factoring in the broader industry wide contraction that's happening.

His assumption on gamepass is also a tad contradictory.

Like "every game badly misses it sales goals" which sales goals is he referring to?

"Why pay full price when you can play the game for "free" as part of your subscription" but if this was on everyone minds Steam sales of Xbox software would be abysmal and on the contrary they are quite good.

It also would make no sense for MS to attribute revenue only to top-performing title, they have all the data so they can attribute revenue share on the prorata of title time played / overall time played on every title not just top performers.

Also, yes a game like Hi-Fi rush would see a revenue spike first month and quickly drop on the following but it would not be any different in a traditional scenario.

"Gamepass growth slowed way down and it's revenue is not keeping up with budget requirement"

But it should be a good thing considering he just identified Gamepass cannibalising game sale as an issue. If gamepass growth stagnate so should its adverse effect. This point to a wider growth issue than just a gamepass one.

I agree that MS have increase scrutiny on Xbox after the ABK acquisition but considering it's also happening industry wide make the cause to effect not as direct as it seems. IMO, in early 2022 when MS announced the ABK buyout, the industry was in full acquisition/investment mode due to covid and it's effect on the market. Early 2023 investor completely changed stance as the effect of covid did not linger but MS needed to pursue an acquisition which they would not necessarly pursue in this context(ask elon musk why it's a bad thing to try rescind an offer XD). That's what increase MS scrutiny, over-investment on a context that did not materialize.

Alanah's #1 point is a perspective I didn't think of before, it's not that Hogwarts Legacy isn't successful, it's the fear of if it wasn't and that basically 1 successful live-service would be worth more than multiple failures although I said that about Sony, people were saying how they have like 10 live services in development and I said it doesn't matter, they probably know half of them will fail but all they need is one hit, Helldivers 2 covers multiple failures.

Alanah's #3 point is something I've seen too, people like to say indies are fine but they really aren't, I've seen multiple indie developers say the industry is rough for them too, investment is drying up, they're struggling to get support, funding and indie developers are dying too but you don't hear about them because the AAAs take all the spotlight and interest in the media but there's thousands of indies released every year, how many actually make it big?