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Analyst: Gears 5 is Game Pass' first "mega hit", leads to great number of Game Pass sign ups

Belthazar90

Member
Jun 3, 2019
95
It's really not hard to see how this would work. This is basic fuzzy math but if you had 10 million subs on in the 9.99 Game Pass that's going to generate 100 million dollars a month in revenue or 1.2 billion dollars per year. Let's say they're selling 1st party games at $60, let's forget for a moment they don't keep all of that from physical sales, they would need to sell 20 million copies of their 1st party games at full price to generate 1.2 billion in revenue.

Now let's say everyone who owns an Xbox stops buying Microsoft games and subs to Game Pass instead. That's 40 millions subs at $10/month which is 4.8 billion dollars a year. That's the equivalent of selling 80 million full priced $60 games.

Then on top of that you have people buying DLC and micro transaction items.

Meanwhile Netflix has 150 million subs. They might never get to that point but it would significantly more money than they would ever make from traditional sales.

The other big thing is you have revenue certainly. They might release a new game that doesn't sell very well and suddenly they've lost money or barely made profits on that game. With subs however they generally know how much money they are making every month and can budget much more easily.

Again, this is all basic fuzzy math and it's more complicated than that but you get the idea.
The thing is... Microsoft doesn't get to keep all the revenue, as they need to pay what I imagine to be hefty amounts of money to keep third party games in the service. There are big games like Metal Gear Solid V (and the rest of the series), Rise/Shadow of the Tomb Raider, Devil May Cry 5, a bunch of Resident Evil Games, PES, Batman Arkham games, Borderlands games, Wolfenstein, etc. It probably adds up to a very large portion of those profits... I mean, even Netflix is always struggling to not bleed money while juggling the costs of maintaining their library of third party content vs. producing original content. While we're at Netflix... They're notorious for putting out one or two nicely produced products and a BUNCH of mediocre to bad things... So idk, but it makes me skeptical to the budget of Microsoft going into the future.
 

Trup1aya

Member
Oct 25, 2017
5,513
$2 does not "lock you into the ecosystem".
The money isn’t what locks someone in. It’s the vested interest accumulated during the trial

If someone plays Gears, and starts caring deeply about their rank in MP, or the experience they’ve been having with the friends they meet, then they might find themselves unwilling to leave the ecosystem.

The thing is... Microsoft doesn't get to keep all the revenue, as they need to pay what I imagine to be hefty amounts of money to keep third party games in the service. There are big games like Metal Gear Solid V (and the rest of the series), Rise/Shadow of the Tomb Raider, Devil May Cry 5, a bunch of Resident Evil Games, PES, Batman Arkham games, Borderlands games, Wolfenstein, etc. It probably adds up to a very large portion of those profits... I mean, even Netflix is always struggling to not bleed money while juggling the costs of maintaining their library of third party content vs. producing original content. While we're at Netflix... They're notorious for putting out one or two nicely produced products and a BUNCH of mediocre to bad things... So idk, but it makes me skeptical to the budget of Microsoft going into the future.
I think you are overestimating how much MS has to pay 3rd parties. The big 3rd parties aren’t typically joining the service at launch- they are coming when sales have already fallen off and people are starting to buy their game used. Being on gamepass can revitalize their revenue streams and they take this in to consideration when negotiating pricing.
 
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bishoptl

Remember
Member
Oct 26, 2017
430
Vancouver
Get Gold first, and then the $1/£1 a month, or $2/£2 for two months, for Game Pass.
Found this and am purchasing 3 years (!!!!!!!!) of Gold then upgrading.


I went this entire gen w/PSN. This is a steal.
 
Oct 25, 2017
2,545
Just out of interest, assuming GP covers off all your gaming needs for the 24 months, how many games would you have normally purchased?
Game pass mostly eliminates indie game purchases, which I average about one game per month. It's also why I'm not interested in buying game pass for full price because I'd rather spend €15 to keep a great game than €10 to rent a bunch for a month.

It won't affect my Triple-A purchasing habits much. I still want to play Doom Eternal and Cyberpunk 2077 and both of these are not gonna be on game pass because one company wants to push Bethesda.net and the other wants to push GOG.
 

StudioTan

Member
Oct 27, 2017
1,168
The thing is... Microsoft doesn't get to keep all the revenue,
Obviously

as they need to pay what I imagine to be hefty amounts of money to keep third party games in the service. There are big games like Metal Gear Solid V (and the rest of the series), Rise/Shadow of the Tomb Raider, Devil May Cry 5, a bunch of Resident Evil Games, PES, Batman Arkham games, Borderlands games, Wolfenstein, etc. It probably adds up to a very large portion of those profits...
You have no idea how much they are paying for those games but you're imagining it's so much that they can't turn a profit. The big 3rd party games are brought in generally after their sales have started to dwindle. Being on the service also means they can get people to buy DLC. It's also a way to promote upcoming games. Like Borderlands 2 was just added and they have ads for Borderlands 3 when you launch it.

I mean, even Netflix is always struggling to not bleed money while juggling the costs of maintaining their library of third party content vs. producing original content.
They don't struggle, they choose to spends all their revenue on new content as a way to build up their library. They don't have to budget 6 billion a year for new content but they want to build up a solid catalogue of content for the future.

While we're at Netflix... They're notorious for putting out one or two nicely produced products and a BUNCH of mediocre to bad things... So idk, but it makes me skeptical to the budget of Microsoft going into the future.
That's your opinion. In my opinion Netflix has WAY more than 1 or 2 good shows. Dark Crystal, Mindhunter, Maniac, Money Heist, Stranger Things, Chilling Adventures of Sabrina, Sex Education, Roma, The Crown, Disenchanted, Dragon Prince.....those are just the ones I've watched recently. In either case, games are not shows. Microsoft is not going to be putting out a new game on a weekly basis. Their aiming for 4 titles a year and they have a lot of talented studios that can make fantastic games, Gears 5 being a good example.
 

Remo Williams

Member
Jan 13, 2018
4,691
Sorry to keep harping in about it but the tweet mentioned dlc to gp games as revenue, so naturally Microsoft would want you playing on their system exclusively to maximise dlc purchases. That’s my reading anyways.
The tweet clearly mentions the DLC revenue coming from a fraction of their subscribers. Not everyone will contribute to their fullest, but if the choice is between them having you "locked in" (the term you misinterpreted as having you playing exclusively in their ecosystem) as a GP subscriber who only plays Xbox first party games, and not having you as a customer at all, of course they would prefer the former option.

Just like with free to play games, it's a business of scale, and they are willing to sacrifice upfront revenue they would get from people outright buying their games in order to reach (many) more customers. When Spencer talks about reaching a billion+ customers, he actually means it. Of course, something like that will take a while, and in the beginning opportunity cost might be high, but Microsoft as a company has the strength to bear the brunt of it, with their eyes on the future.
 

Pryme

Member
Aug 23, 2018
2,002
$2 does not "lock you into the ecosystem".
The common sentiment from Even the jaded, cynical gamers on Era is that Gamepass is a pretty good deal.

For The regular mass market folks, paying $10 monthly to play tons of excellent games is a splendid deal. The people paying $2 to play Gears 5 will also see DMC 5, metro exodus, the outer worlds etc.

I’d be surprised if retention percentage numbers aren’t in the high double digits.
 

Synth

Member
Oct 26, 2017
1,793
$2 does not "lock you into the ecosystem".
Yes, $2 doesn't lock you into an ecosystem, because that will only get you 2 months and then you'll need to subscribe again in the future for the next blockbuster game that releases (and your current account then won't be offered the same deal again).

However, that's not what people are really discussing when talking about this "$2" deal. They're primarily talking about this...

Found this and am purchasing 3 years (!!!!!!!!) of Gold then upgrading.


I went this entire gen w/PSN. This is a steal.
... where that $2 sits on top of a 3 year purchase of Live Gold. So it's 3x the cost a year's XBLG + $2... and that does provide some ecosystem lock in, because you've already paid for it in advance for a substantial amount of time.
 

Couchpotato

Member
Nov 7, 2018
135
Well deserved. This was a fantastic game for the service.

A lot of these discussions always funnel into focusing on the 2$ deals and what not. Netflix/Hulu, Amazon Prime, Spotify/Apple Music, and many others in different tech fields all have had similar 'amazing' deals in the beginning of their product launches and were the subject of extremely similar business/consumer criticisms - and what do ya know, after the deals expired they still became great successes once consumers get a sense of what they are offering.

These tech companies aren't stupid, they've run the numbers from hell and back and these service based moves tend to work out great for them even if they shell out some serious dough up front.
 

JediTimeBoy

Member
Oct 27, 2017
3,059
Yes, $2 doesn't lock you into an ecosystem, because that will only get you 2 months and then you'll need to subscribe again in the future for the next blockbuster game that releases (and your current account then won't be offered the same deal again).

However, that's not what people are really discussing when talking about this "$2" deal. They're primarily talking about this...



... where that $2 sits on top of a 3 year purchase of Live Gold. So it's 3x the cost a year's XBLG + $2... and that does provide some ecosystem lock in, because you've already paid for it in advance for a substantial amount of time.
But isn't that like saying that Netflix locks you in? If they had a yearly sub (do they?), I'd take it, but it doesn't mean that I won't use Prime etc, or even that I'' use my NF sub all the time.
 

Sir Swish

Member
Oct 26, 2017
76
Does any one know if I add my 6 months Ulitmate Game pass to my current 3 month PC game pass subscription will it overwrite the 3 months PC game pass? or will the ultimate game pass start after the 3 months PC pass has ended?
 

Raide

Member
Oct 31, 2017
7,935
First of many hopefully. Halo will be the next big hitter for sure but then we have all the other MGS projects as well.
 

Synth

Member
Oct 26, 2017
1,793
But isn't that like saying that Netflix locks you in? If they had a yearly sub (do they?), I'd take it, but it doesn't mean that I won't use Prime etc, or even that I'' use my NF sub all the time.
When people talk about ecosystem lock-in they don't mean exclusively. It just means you effectively are unable to walk away from the commitment you just made. You're not getting the money for your other two years back if after the first year you decide never to play another Xbox title, so may as well stick around now.
 
Feb 10, 2018
13,428
Echo system lock in a lot of time is the service being good enough and not being bothered to be a part time subscriber.
 

Irrotational

Member
Oct 25, 2017
1,484
How much is gamepass?
There are three, Xbox only, PC only, and Ultimate (which has both plus Xbox live thrown in).

Most people are buying Xbox live for three years (costing around $90 if you get codes/discounts or $120 full price(?)) and then converting to ultimate for $1. So at the moment Ultimate costs around $2.50 to $3 a month.

Full price is $15 I think!

Even if you PC game only it's worth it for most people (IMHO - obviously depends on what games you like and what you've already played).
 

Trup1aya

Member
Oct 25, 2017
5,513
But isn't that like saying that Netflix locks you in? If they had a yearly sub (do they?), I'd take it, but it doesn't mean that I won't use Prime etc, or even that I'' use my NF sub all the time.
"locked in" doesn't mean you use the service exclusively. It simply means that you feel invested in the offering and compelled to continue the relationship.

The $2 initial cost isn't the end of the effort to lock people in. It's the friends list you accumulated , the achievements, that pvp rank you want to achieve, the fact that you aren't done with the game you subscribed for, the games in the service that you wanted to play but didn't get to before your trial runs out, etc.

People presenting the low cost to entry as running counter to the notion of "locking in" customers don't get it. It's the beginning. The low barrier to entry greatly expands the number of people they can potentially lock in.
 
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Mivey

Member
Oct 25, 2017
6,609
Gamepass is pretty good, feels like a great take on a Netflix model on PC.
I feel the client could use a lot of work, though. It doesn't keep track of playtime, it doesn't even have a "current Downloads" section, and when you turn it off during a download, it doesn't resume it automatically. Really barebones.
But the actual idea behind is is great, and it does enough to be functional.

And it's pretty funny that people talking about "locking you in", You know what you get into when you purchase it, and every servce with a "streaming" model (Netflix, Spotify, and so no) has a free trial month so you can see if it works for you. This isn't some nefarious plot on part of MS.
 

JediTimeBoy

Member
Oct 27, 2017
3,059
When people talk about ecosystem lock-in they don't mean exclusively. It just means you effectively are unable to walk away from the commitment you just made. You're not getting the money for your other two years back if after the first year you decide never to play another Xbox title, so may as well stick around now.
"locked in" doesn't mean you use the service exclusively. It simply means that you feel invested in the offering and compelled to continue the relationship.

The $2 initial cost isn't the end of the effort to lock people in. It's the friends list you accumulated , the achievements, that pvp rank you want to achieve, the fact that you aren't done with the game you subscribed for, the games in the service that you wanted to play but didn't get to before your trial tab out, etc.

People presenting the low cost to entry as running counter to the notion of "locking in" customers don't get it. It's the beginning. The low barrier to entry greatly expands the number of people they can potentially lock in.
Thanks for the explanations; comments make more sense to me now.
 
Jan 4, 2018
902
I still find hard to believe that they'll be able to keep pumping money into AAA services if people move away from traditional purchases in favor of this service. Specially considering how much money they probably pay for third party games to be available. We'll see.
Well, Capcom in their financial reports had a 19million payment that didn't specify the concept, and people argued if they sold an IP amongst other things.
A few weeks later DMCV came to Game Pass.
If those 19 millions were to get DMCV for 6 months at least (games tend to stay at least 6-12 months) I don't think it's so expensive for MS given its still pretty new and was well received
 

Terror-Billy

Member
Oct 25, 2017
1,476
Cool! It's a great game with a bit of polish needed, imo. It's my favorite Gears and I was able to play it without paying 60 bucks for it. I'm a GPU subscriber until 2022 so I'm locked into their ecosystem. If it wasn't for Gamepass, I'm not sure I'd invest on Scarlett. Gamepass is the thing that has me happily by the balls.
 

Rumpestump

Member
Dec 8, 2018
183
I just can’t make the math work out at the current price point they have. I bet most of the few million subscribers(?) have payed an average of perhaps 2$ a month for the service some for years in advance. That is 30 months of the service for a regular 60$ game. A game like gears probably cost around 50 million or something similar and that is just one game on the service and with them adding so many new studios with games in the 10-50 million budget coupled with all the third party they must be taking a huge loss right now.

I know they need to be aggressive to get people “hooked” on the service but I just wonder when the free meal will end and how much it will cost them and affect their decisions regarding games going forward. If this service don’t take off and gets people to stick around when they jack the price up I wonder what will happen. The industry every generation talk about how game development is getting more and more expensive but monetization have help them out this gen I just hope this doesn’t lead Xbox in a direction in the future towards heavy into those kinds of games but instead try to offer single player experiences and similar that the other game developers don’t invest into because the risks are to high. Not saying that seems to be what they are currently doing but later on when they need to actually make a profit on this service.
 

Joe White

Member
Oct 27, 2017
177
Finland
I'm a GPU subscriber until 2022 so I'm locked into their ecosystem. If it wasn't for Gamepass, I'm not sure I'd invest on Scarlett. Gamepass is the thing that has me happily by the balls.
Yes. I only have Ultimate until mid-2021, but that is enough to increase my interest on Scarlet. And that will provide MS with many free promotions for Xbox and GB as I stream, tweet and post how the combo is the best deal in gaming.
 

Terror-Billy

Member
Oct 25, 2017
1,476
Yes. I only have Ultimate until mid-2021, but that is enough to increase my interest on Scarlet. And that will provide MS with many free promotions for Xbox and GB as I stream, tweet and post how the combo is the best deal in gaming.
That reminds me that I have 2 friends that are Nintendo fans and are subscribed to Gamepass PC, while I guy I know who's a hardcore Sony fan is seriously considering buying an X and suscribing to GP. People talk about consoles sales and all that, but I'm here, slowly realizing that while me and my friends own different platforms, we are basically all invested (or will be) on the same Microsoft ecosystem. Exciting times ahead.
 

Trup1aya

Member
Oct 25, 2017
5,513
I just can’t make the math work out at the current price point they have. I bet most of the few million subscribers(?) have payed an average of perhaps 2$ a month for the service some for years in advance. That is 30 months of the service for a regular 60$ game. A game like gears probably cost around 50 million or something similar and that is just one game on the service and with them adding so many new studios with games in the 10-50 million budget coupled with all the third party they must be taking a huge loss right now.

I know they need to be aggressive to get people “hooked” on the service but I just wonder when the free meal will end and how much it will cost them and affect their decisions regarding games going forward. If this service don’t take off and gets people to stick around when they jack the price up I wonder what will happen. The industry every generation talk about how game development is getting more and more expensive but monetization have help them out this gen I just hope this doesn’t lead Xbox in a direction in the future towards heavy into those kinds of games but instead try to offer single player experiences and similar that the other game developers don’t invest into because the risks are to high. Not saying that seems to be what they are currently doing but later on when they need to actually make a profit on this service.
Nah, most people don't take are not super-savers. You can be certain that the majority of Gamepass subscribers have gotten on average, one month at a discounted rate. Most are paying $10 a month. They set it and forget it.

Beyond that, first party software sales aren't Xbox's primary source of revenue. By a wide margin, It's Royalties from 3rd party sales + subscriptions and services that pay the bills. Putting a few 1st party titles on Gamepass isn't going to send xbox into the red. Instead, it will drive people Xbox gamepass, who will then be presented with more reasons to spend on DLC, 3rd party software, and services. It seems that presence on Gamepass helps boost a games exposure and thus its sales.

Beyond that, there's little to be an indication that 1st party titles being on gamepass has a negative effect on a sales. Most first party series on the service have seen their software sales increase vs the previous installment.

MS doesn't need gamepass subscriptions to Profit directly from the subscriptions. They've got other revenue streams with better margins and Gamepass will lay into those. the profit comes from the spending behaviors of consumers after they subscribed. Are they buying DLC, are they buying the games that get removed from the services? are they choosing the Xbox version of multiplatform games because of gamepass? Are they Convincing their friends to the take advantage of gamepass?
 
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JediTimeBoy

Member
Oct 27, 2017
3,059
Just in case there's anyone as unenlightened as me out there: if you own a game on disc, that's also on Gamepass, you don't need to use the disc anymore.
 

z1ggy

Member
Oct 25, 2017
1,503
Argentina
No wonder the servers blew up on friday/weekend, great shit overall. I´m loving the game, loving the service on PC and Phil made me a believer.
 

Belthazar90

Member
Jun 3, 2019
95
Well, Capcom in their financial reports had a 19million payment that didn't specify the concept, and people argued if they sold an IP amongst other things.
A few weeks later DMCV came to Game Pass.
If those 19 millions were to get DMCV for 6 months at least (games tend to stay at least 6-12 months) I don't think it's so expensive for MS given its still pretty new and was well received
Well... Netflix used to pay US$ 30 million a year(before Hulu trying to nab it, which raised the price to 100 million) to have Friends, and we can both agree that Friends is a much more valuable asset than DMC... So I think 19 million is quite expensive for a single game in a catalogue of a few dozen. As I said, it adds up quickly with the number of AAA titles available.
 

RankFTW

Member
Oct 28, 2017
23
Game pass on PC is amazing. Signed up for 3 years for only £100 which is unbelievable value and have already had my monies worth with Gears 5, Blair Witch and Forza Horizon 4 with 35 month left before my time ends. Not to mention the wee man now has this on his Xbox too so a double saving. Microsoft are on fire right now imo.
 

Bedameister

Member
Oct 26, 2017
2,443
I also upgraded to ultimate for this game. I'm not sure if I'll stick with that but it's running for one year now. But I'll definitely stick to regular game pass. It's just insane what value you're getting with it.
 

Dantero

Member
Jan 23, 2018
509
I already have 2 years of gamepass ultimate. With that live conversion deal. Can I do it again to add another year. What happens when I buy a year of Xbox live now?
 

pswii60

Member
Oct 27, 2017
10,121
UK
Game pass on PC is amazing. Signed up for 3 years for only £100 which is unbelievable value and have already had my monies worth with Gears 5, Blair Witch and Forza Horizon 4 with 35 month left before my time ends. Not to mention the wee man now has this on his Xbox too so a double saving. Microsoft are on fire right now imo.
I'm guessing, as a PC gamer, that £100 for Game Pass is likely more than you've spent on the Microsoft store since its inception?
 

Trup1aya

Member
Oct 25, 2017
5,513
Well... Netflix used to pay US$ 30 million a year(before Hulu trying to nab it, which raised the price to 100 million) to have Friends, and we can both agree that Friends is a much more valuable asset than DMC... So I think 19 million is quite expensive for a single game in a catalogue of a few dozen. As I said, it adds up quickly with the number of AAA titles available.
19 Million is quite expensive - but I strongly doubt that would be typical. This would be a rare, high-end example.

When negotiating, Publishers would want to be paid enough to offset the loss of potential sales due to gamepass. MS would be highlighting the fact that they are providing additional exposure.

When a relatively new AAA release shows up- yeah, that's going to expensive for MS. Negotiations would favor Capcom in this scenario. For MS it might seem a worthy expense to help market gamepass.

But most of the games that show up on the service are either 1) on the tail end of the sales curve or 2) would be pretty obscure without the marketing boost gamepass provides. Negotiations would favor MS more in these scenarios.
 
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Jan 4, 2018
902
Well... Netflix used to pay US$ 30 million a year(before Hulu trying to nab it, which raised the price to 100 million) to have Friends, and we can both agree that Friends is a much more valuable asset than DMC... So I think 19 million is quite expensive for a single game in a catalogue of a few dozen. As I said, it adds up quickly with the number of AAA titles available.
Yeah but being new, from a belived IP, well received...
I was using it as a "hi-end" scenario
The rest of the games are very likely way less expensive