It is clear that Microsoft is putting a lot of attention into the Xbox Game Pass service when it comes to the next generation. During the recent Xbox Games Showcase event, every game shown would be available on day 1 on their Game Pass subscription service.
With such great value, it is hard not to wonder whether the service is actually profitable for Microsoft. In an interview with What’s Good Games, General Manager of Xbox Games Marketing Aaron Greenberg admitted that, as of right now, the Xbox Game Pass service isn’t making a lot of profit, but that is fine with Microsoft right now:
We always laugh when we hear that. Please don’t worry about us. Microsoft is going to be alright. We’re gonna make it, I think we’re gonna be okay.
With Xbox Game Pass, Microsoft is focusing on over-delivering on value, even if it comes at the cost of profits in the short term. It’s a different mindset. If you do optimize for profit, you can either say ‘How we do get as much profit out of each customer?’ or, do you pivot that and say, ‘How do we add as much value to our fans?’ ‘How can we actually over-deliver on value?’ If you do that, you build fans for life.
When people feel like you’re over-delivering on value, they want to not only continue to use your service but they want to tell their friends about it. The most powerful marketing is word-of-mouth marketing. We can’t create as many advertisements, as many assets as we want, but if both of you go tell one of your closest friends, ‘You have to get Game Pass!’ that’s way more effective than any marketing I can do. For us, we just want to keep adding more and more value to Xbox Game Pass so you feel really good about that and you feel like you want to go tell your friends about it. And ultimately, we think long-term that’s the right thing for the business and will have long-term benefits for us. In the short-term, yeah, Xbox Game Pass is not a big profit play. But we think long-term it works out good for everybody.
With the service being incredible value for money, whether you’re using the regular Xbox Game Pass, Game Pass For PC or Game Pass Ultimate, it is a great service for gamers and, as Aaron said, by over-delivering, they create a buzz around the service which leads to more subscribers, and that will eventually make the service more profitable. On Xbox Game Pass right now, there are some great games such as Red Dead Redemption 2, and with the Xbox Series X there will so many more great games such as Halo Infinite, Avowed, The Medium, Fable & dozens more games. Starting in September Microsoft will be adding the Project xCloud service to the Xbox Game Pass Ultimate subscription, too, allowing gamers to be able to play games directly from the cloud and stream them to many devices, including mobile phones.
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