MS will never tell us the real costs of Gamepass. Any profitable/not profitable discussion is moot. It is also not a simple question.

From all the articles:
"The costs from Game Pass includes fees paid to third-parties, marketing, and service cost".
One of the major costs of game hosting is server costs. It costs a lot to build/rent/maintain servers world-wide to ensure all your games are on-line 24/7, world wide. I have seen crude estimates for having PSN, they usually range in the $1billion environment.

MS has never told anyone anything about what they pay for their game servers (which would be Azure-based, obviously). My hunch is XBox has always freeloaded on Azure to "save costs".

The fact that MS is now selling its first party titles on Playstation is a sure sign Gamepass things are not as positive as one might think or Gamepass day one titles are eating way too much into first party revenue..

Yeah, you *could* argue that without gamepass selling the games would be more profitable. But that is really a hard calculation to do, is it? Gamepass may or may not less profitable, but it is profitable and it is also more stable than the risky game business is overall. I think if your goal is a sustainable system for developing games for players, than Gamepass can work. Not that I trust MS to not muck it up, especially seeing the recent layoffs. But that said: the reasons for the layoffs isn't Gamepass, it is the greed to have more than just line go up, the line must go up *faster*.

You would need to factor in the cost of running the service as well.
Also if you spend 1bn on 3rd party new content pr year.... what about the older content that remains on the service?
Same is true for 1st party games, even if the profits, can support like 4 gigantic 1st party games made, what about the cost of keeping older titles there?

Also is it enough to just be profitable?
How much more profitable is this, than say just selling the games the normal way?

Lets say if they just sold their 1st party, didn't spend 1bn on 3rd party, and made say ~2.5bn that way.....
Does this mean Gamepass is loseing them potential profits? they could have had just selling the games instead? Is that still profit? when its costing them money, they otherwise would have had?

Its not as dry and cut, as just saying it made 3bn in profits (I have no idea where that nr is from, I'm just running with it, since you used it).

That's not what all the continued layoffs are suggesting...

But indeed, profitable and sustainable are two different things when the goals are "line must go up faster" (and chase the next trend, AI) 

Gamepass is simply not doing good enough to keep the XBox business safe. The game business side is less stable now...

It's rather that Satya Nadella doesn't care about gaming. Xbox downfall is the acquisition of Activision, because CoD is a profit monster, which makes the people at MS wonder: why support games that have 5% profit, if there is one that has 15% (or whatever are the numbers).

Gamepass is profitable and sustainable. It is just not as crazy money generating. Instead MS wants to bet everything on AI.

The 1billion figure was given as a reference from Phil Spence in 2023 for third party spend annually/ It doesn't specify new games etc. This can also be in maintaining the gamepass library but ultimately we don't know. Same goes for service costs. 

The 3bn figure was just a crude lowball based off subscriptions numbers. Turns out there is more concrete evidence it's higher than this since it has grown since 2021

"CADE stated that the data had been provided directly by Microsoft, and in terms of Xbox Game Pass earnings on console, in 2021 the service generated a lofty $2.9 billion"

Gamepass was predicted to earn 5.5bn in 2025 by amphere, regardless of the accuracy of that analysis I think all evidence points towards them making a fair bit more than 3bn.

We know Xbox content and services revenue was around $17.5bn last year.


The teams securing games and maintaining servers etc could be 20m or 50m annually or even more? That'd make them either significantly bigger than any dev team or significantly higher paid but its still only a drop in the water. The servers and mainatainace, that is honestly anyones guess. But the point was that even lowballing revenue at 3billion, there is not an indication it is making a loss so the circle jerk of conversation of it not being sustainable should really wait on actual evidence of that and I think that is the wider point. Once you finally factor in that Xbox first party cost is not a "gamepass cost" since these games make their own revenue (at a varying amounts), I think the whole discussion falls flat and any sensible guess points towards it being e profitable endeavour.  

A huge conglomerate that just axed 4% of its global staff after a record-breaking annual profit won't be the same one accepting a service or platform barely paying for itself in a space that's approaching 520-530 billion dollars yearly revenue. So, yeah, I agree with this sentiment. 

For how much longer though. Gamepass has benefited immensely from the back catalog, games that had already paid for themselves and went on gamepass for some extra revenue.

That back catalog is only getting older and further exhausted. We see it in the rising prices for gamepass. Where it will balance out remains to be seen. Fact is the 69 billion acquisition isn't providing the boost to gamepass that MS wanted. Continued layoffs and publishing games on competing platforms shows that. 

And the ultimate problem with MS is, it's not sustainable for MS if it's not growing fast enough. They simply pivot to something else, which is AI today.

I think it's a fair question to ask but it's also very separate from the layoffs. If Gamepass was majority driven by back catalogue I think we would start to see the dip now, 5 years into the gen but it seems clear new game releases are preventing that. PC growth is the highest it's been in the last year and Doom, Elder scrolls, Indiana Jones and COD in the last months are likely the cause.

When Sony closed Evolution, Japan studios, Firewall studios etc you don't suddenly question the sustainability of their whole game development division when they're clearly having success and growing teams elsewhere.

For me, this is the biggest misreading of this recent rounds of layoff. Everyone is talking gamepass like the vast majority of MS' 9000 cuts were game related, and that those that were game related belonged to teams which recently had big gamepass releases.

Gamepass doesnt magically make Perfect Darks' 8 year Dev Cycle healthy, it doesn't make Everwilds absense for sfor 5 years explainable... There's clearly been a lot of mismanagement at Xbox and it is not at all related to gamepass. MS cutting the weak links in favour of AI or other technology is not a gamepass specific issue imo but everyone is treating it like it is, mostly because of the words of one developer who has no insight into the topic.

While I understand why some may not be happy with the ABK merger completely shifting Xbox's strategy, I believe there was a very real possibility of Xbox being shut down or sold if the ABK merger didn't go through. We already know Sayta was wanting to pull the plug on several occasions. It might be why Phil and all the team were so insisten on getting the acquisition through.