For years, the sustainability of Xbox Game Pass has been the subject of intense debate. Now, a bombshell report from Bloomberg has pulled back the curtain, revealing the staggering financial trade-off at the heart of Microsoft’s strategy. According to the report, which cites current and former Xbox employees, the decision to put major titles like Call of Duty on Game Pass day-one is significantly cannibalizing direct sales, to the tune of over $300 million in lost Call of Duty sales last year alone.
A Price Hike Explained
This revelation provides crucial context for the chaotic and deeply unpopular changes Microsoft has rolled out over the past week. The sudden 50% price hike for Game Pass Ultimate, the devaluation of the Microsoft Rewards program, and the quiet removal of the Call of Duty DLC discount all make sense in light of this massive revenue shortfall. The report suggests that Game Pass has not delivered the “explosive growth” Microsoft anticipated, especially after the Activision acquisition, and the company is now scrambling to make the economics work.
The numbers are stark. Last year’s Call of Duty: Black Ops 6 was the first title in the franchise to launch day-one on the service. While Microsoft touted it as the “biggest Call of Duty release ever” in terms of player numbers, the sales figures tell a different story. According to Bloomberg, a staggering 82% of full-price launch sales for the game came from PlayStation platforms, where players had no choice but to buy the game outright.
The Subscription Service Dilemma
This situation perfectly illustrates the core dilemma of subscription services in gaming. While Game Pass is a fantastic value for consumers and drives engagement, it directly undermines the traditional model of selling high-margin, full-price games. For a franchise as massive as Call of Duty, which historically generates billions in sales, the impact of shifting those sales to a subscription model is immense.
Analyst Joost Van Dreunen, quoted in the report, observed, “Game Pass hasn’t delivered the explosive growth Microsoft anticipated post-Activision, and they’ve realised their infrastructure costs don’t align with their pricing model”. This suggests that the recent price hikes are not just a simple adjustment but a fundamental correction to a business model that was proving to be unsustainable at its previous price point.
Is Game Pass Still Profitable?
Despite this report, Microsoft maintains that the service is successful. In a recent interview at Tokyo Game Show, Xbox President Sarah Bond stated that Game Pass sales reached a record high of $5 billion in the last fiscal year and that it remains a “profitable business”. This creates a complex picture: Game Pass is generating huge revenue, but it is also costing the company hundreds of millions in lost high-margin sales from its biggest franchise. The recent price increases are clearly an attempt to close that gap and make the overall strategy more financially sound.
Frequently Asked Questions
What did the Bloomberg report reveal about Game Pass?
The report claims that putting major titles like Call of Duty on Game Pass is significantly cutting into their direct sales, costing Microsoft substantial revenue.
How much money did Xbox lose in Call of Duty sales?
According to a former employee cited in the report, Microsoft gave up over $300 million in potential sales from Call of Duty last year by including it in Game Pass.
How does this relate to the recent Game Pass price increase?
The massive loss in high-margin sales helps explain why Microsoft implemented a 50% price hike for Game Pass Ultimate. The company is trying to make the service more profitable to offset the lost revenue from direct game sales.
Why is this a big deal?
It provides the first concrete evidence that the Game Pass model, while great for consumers, presents a major financial challenge for publishers, even one as large as Microsoft. It suggests that the era of low-priced, high-value subscriptions may be unsustainable for AAA games.
Is Game Pass still profitable for Microsoft?
According to Xbox President Sarah Bond, the service generated $5 billion in revenue last year and is profitable. However, the recent price hikes indicate a need to improve its profitability in light of lost sales from major franchises.
Conclusion
The Bloomberg report has finally put a number on the central tension of the Game Pass model. The strategy of using blockbuster games to drive subscriptions comes at a direct and massive cost to traditional game sales. The recent series of unpopular price hikes and service devaluations are a clear consequence of this financial reality. The “best deal in gaming” is being recalibrated, and the days of getting multi-billion dollar franchises for a low monthly fee without some significant trade-offs appear to be over.