9 things we just learned about Xbox, Game Pass, and Microsoft’s future of gaming

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An Xbox Series S and X sit in front of a neon green grille.

Image: Microsoft/Kotaku

Microsoft is making great strides and Game pass is just one piece of the puzzle. The subscription service has kept the Xbox Series X/S relevant despite the lack of recent conversation-stealing exclusives, but the company appears to be looking to the mobile space for its next big gaming push. ps5 console warriors discuss Call of Duty exclusivityMicrosoft positions Apple and Google as its real rivals.

It may just be a convenient pivot amid unprecedented antitrust scrutiny as it tries to get its $69 billion buyout of Activision Blizzard through regulatory agencies in the United States and abroad. But that’s compelling considering that Apple’s total revenue from games overtook both Microsoft and Nintendo last year despite the fact that the iPhone maker doesn’t make games. Here are nine interesting takeaways from recent earnings calls, regulatory filings, and interviews that begin to paint a picture of Xbox’s present and future.

Game Pass is growing a ton on PC

While Game Pass’s best game library is on console, it’s actually the PC side of the service that’s gaining momentum. Microsoft CEO Satya Nadella has confirmed the most recent earnings call that PC Game Pass subscribers are up 159% from a year ago. The PC version’s library of games has certainly improved in recent months, but the larger install base is probably an even bigger factor. “We’re seeing incredible growth on PC, which is really where we’re focused,” Spencer told WSJ Tech Live.

Game Pass reaches its limit on console

Although it has reached 25 million total subscribers, Game Pass’s overall growth is still well below Microsoft’s initial expectations. As Axios reportsthe company was targeting 73% growth for the year ending June 2022, and only achieved 28%.

On Xbox Series X/S, Spencer seems pretty confident that Game Pass will never represent more than 15% of Microsoft’s total content and services revenue. “I don’t think it gets any bigger than that,” Spencer told WSJ Tech Live. “At some point, you just hit everyone on console who wants to subscribe.”

Microsoft knows it’s overdue for a big first-party exclusive

Part of the reason for Game Pass being blocked on console could be the lack of major exclusives. Spencer recently admitted that they have recently been absent from the company’s lineup. “One thing we’ve heard loud and clear is that it’s been too long since we released what people would say was a big first-party game,” he said on the Podcast from the same brain. “We can have our apologies on covid and stuff, but ultimately I know people are investing in our platform and they want to have great games.”

At the same time, he suggested that the era of covid-related game delays was over, at least for Microsoft’s first-party studios. In other words, don’t expect the Great Holiday Drought of 2022 to persist into next year. Whereas star field and red fall both slated for release in the first half of next year, major releases like Fable, Forza Motorsport 8, Declaredand others are still waiting in the wings.

The Supposed Streaming Device for TVs Has Been Shelved (Literally)

Project Keystone was supposed to be a dongle for TVs that would let you stream Game Pass in the living room without needing an Xbox. It was rumored to be coming around the corner, but Spencer confirmed that it was in fact canceled in favor of more limited solutions through smart TV makers like Samsung. This Keystone prototype he keeps on his shelf? Does not go into production. “Are we going to do a streaming device at some point?” he told WSJ Tech Live. “I suspect we will, but I think it’s years away.”

The company is serious about an Xbox store on mobile

Microsoft hinted at its ambitions to start competing in the smartphone space earlier this year, but a recent regulatory filing in the UK lays out the plans more clearly. “[Buying Activision Blizzard] will enhance Microsoft’s ability to build a next-generation game store that works across a range of devices, including mobile, with the addition of content from Activision Blizzard,” the company said. wrote in October.

Spencer doubled down on that view at WSJ Tech Live, criticizing the 30% cut Apple and Google are taking in-app purchases on their platforms, and saying the $69 billion acquisition is a game to make mobile more mobile. competitive rather than taking over the console market. “We need to break this duopoly of only two storefronts available on large [mobile] platforms,” he said. It’s unclear how the company plans to do this, but further acquisitions, potentially in the mobile space, aren’t off the table.

Xbox Series X and S consoles are selling at a loss

While it’s understood that console makers often sell devices at a loss, especially at the start of a new release cycle, we’ve never known the exact extent of those losses. Put bluntly, Spencer recently gave in to Xbox Series X and S losing to Microsoft between $100 and $200 on average.

It’s the company’s defense of charging the same 30% fee on Xbox that it complains about charging Apple and Google on mobile, where smartphones are sold for a profit. At the same time, it also made the Xbox Series S a huge success. The company announced on its last earnings call that half of all $300 Xbox users are completely new to the ecosystem.

Prices will increase in the future

Don’t expect this level of discount forever. Although Spencer was not specific, he hinted during WSJ Tech Live that price hikes are coming. “We held the price on the console, we held the price of the games for us and our subscription,” he said. “I don’t think we can do this forever, I think at some point we will have to raise the prices of certain things.”

While he didn’t say what those things would be, Game Pass and individual game prices seem like the obvious bets. Subscription services at all levels have been recently increasing their renewal costsand Spencer pointed out that the $60 price, which Microsoft held for Infinite Halois outdated and does not reflect the rising development costs or overtime that many gamers get from modern games.

Call of Duty stay on playstation

Microsoft has been clearer than ever in recent weeks that he does not plan to do Call of Duty an Xbox exclusive. “It’s not a plan of, okay, we’re going to bait and trade somebody to where they have to play on the cloud or in two or three years we’re going to fire [Call of Duty]”, Spencer told WSJ Tech Live. “As long as there is a PlayStation to ship, our intention is to continue to ship Call of Duty on PlayStation,” he said on Same Brain. He compared it to Minecraft which continues to be supported on PlayStation, and said he would even like to see Call of Duty on Switch in one form or another.

Don’t expect a Microsoft VR metaverse anytime soon

“For me, I’m building a metaverse that feels like a meeting room — I just find that’s not where I want to spend most of my time,” Spencer told WSJ Tech Live, though her boss has announced the integration of Microsoft Meetings with Meta Horizons’ VR Dystopia a few weeks ago. The veteran gaming executive said he thinks companies should work on refining 2D gaming metaverses before moving them to virtual reality.

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