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Shoot

Member
Oct 25, 2017
4,512
www.cnbc.com

Microsoft exec says gaming is 'somewhat resilient' to economic weakness

In the Global Financial Crisis, Microsoft's Xbox console business had the best calendar year to date, and Xbox content and services got a pandemic bump in 2020.
Today, Spencer said, Microsoft gives people choice in how much they'd like to spend if they want consoles. The company offers the $499 Xbox Series X and the less powerful $299 Xbox Series S. Microsoft subsidizes the cost to the tune of $100 to $200 per console, with the expectation that it will make the money back on sales of accessories and storefront purchases, he said. It's up to gamers if they'd like to pay $10 or $15 per month for Game Pass subscriptions. They can also buy games outright, or play certain games for free.

Spencer said he doesn't think Microsoft will be able to keep the prices of games constant forever. But they can provide impressive amounts of entertainment in comparison with other pursuits. "People can play video games for hundreds of hours," he said.
Thanks to vixolus for the tip.
 

Deleted member 93062

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Spencer said he doesn't think Microsoft will be able to keep the prices of games constant forever.
Is this just a misquote of what he said that everyone is talking about? Because if it isn't, then it seems like there was a lot of overreaction in that other thread.
 

Bessy67

Member
Oct 29, 2017
11,557
That's more of a loss than I thought. I figured they were at least close to break even. Maybe without inflation/chip shortage they would be...
 

Deleted member 93062

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24,767
You mean the saying nothing thread? Something will at sometime raise in piece.
I feel like the obvious one is $70 games, then it's closing the gold conversion "loophole" for Game Pass before ever raising Game Pass' price. However, it seems like a lot of people think they're going to raise the prices on everything.
 

Gay Bowser

Member
Oct 30, 2017
17,557
I feel like the obvious one is $70 games, then it's closing the gold conversion "loophole" for Game Pass before ever raising Game Pass' price. However, it seems like a lot of people think they're going to raise the prices on everything.
Haven't you heard? Game Pass is a trap. They get everybody on board with an artificially low price and then they double it and everybody is just stuck and can't stop paying, with no way to switch to any other platform or go back to buying games.

I think Microsoft will close the gold conversion loophole, adjust Live Gold pricing, and potentially scale back or discontinue the Microsoft Rewards program before making a substantial change to Game Pass pricing. Bribing rewarding people for using Bing is exactly the sort of thing that is easier to justify in good economic times than in a recession. I think their main focus is going to be getting Live Gold subscribers to get Game Pass, and getting Game Pass subscribers to get Game Pass Ultimate.
 

TimPV3

Member
Oct 30, 2017
631
Haven't you heard? Game Pass is a trap. They get everybody on board with an artificially low price and then they double it and everybody is just stuck and can't stop paying, with no way to switch to any other platform or go back to buying games.
It's Microsoft. It is a valid concern that once they buy Activision and other publishers and make games Game Pass exclusive, you really won't be able to go somewhere else to play them.

This would be YEARS in the future, but there IS precedent. I can't just cancel Netflix when the price goes up and suddenly buy their new shows on bluray or watch them on Disney+.
 

Piggsy

Banned
Oct 28, 2017
640
Haven't you heard? Game Pass is a trap. They get everybody on board with an artificially low price and then they double it and everybody is just stuck and can't stop paying, with no way to switch to any other platform or go back to buying games.

I think Microsoft will close the gold conversion loophole, adjust Live Gold pricing, and potentially scale back or discontinue the Microsoft Rewards program before making a substantial change to Game Pass pricing. Bribing rewarding people for using Bing is exactly the sort of thing that is easier to justify in good economic times than in a recession. I think their main focus is going to be getting Live Gold subscribers to get Game Pass, and getting Game Pass subscribers to get Game Pass Ultimate.
A trap would be expecting people that already stacked months of subcriptions to pay the difference when they hike prices... oh wait, nevermind.
 

AstronaughtE

Member
Nov 26, 2017
10,187
It's Microsoft. It is a valid concern that once they buy Activision and other publishers and make games Game Pass exclusive, you really won't be able to go somewhere else to play them.

This would be YEARS in the future, but there IS precedent. I can't just cancel Netflix when the price goes up and suddenly buy their new shows on bluray or watch them on Disney+.
You can buy some Netflix show on bluray.
 

Nolbertos

Member
Dec 9, 2017
3,309
I had a feeling they were taking a loss per console. Sony did the same strategy with the PS4. Didn't expect $100-$200 though, but millions in the red for xbox, seems like a small drop in the bucket of expenses MS as a company incurs
 

Noog

â–˛ Legend â–˛
Member
May 1, 2018
2,856
That's more of a loss than I thought. I figured they were at least close to break even. Maybe without inflation/chip shortage they would be...
They absolutely would without the chip shortage. Sony and Microsoft always sell their consoles at a loss initially, but usually a year or two into the generation, they're manufacturing the consoles in such large numbers with now "older" chips, so they sell them for a reasonable amount. With the chip shortage and the rapid inflation since the launch of these consoles, they're probably still taking losses much longer that they had expected. This is why you see Sony raising the price slightly in regions other than the US, as well as the rumors that they're simplifying to one SKU with the detachable disc drive to help simplify manufacturing. I imagine we will see Microsoft raise the prices outside the US as well if inflation doesn't improve, and potentially even revise the consoles to make their cheaper to manufacture.
 

Deleted member 93062

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24,767
It's Microsoft. It is a valid concern that once they buy Activision and other publishers and make games Game Pass exclusive, you really won't be able to go somewhere else to play them.

This would be YEARS in the future, but there IS precedent. I can't just cancel Netflix when the price goes up and suddenly buy their new shows on bluray or watch them on Disney+.
Microsoft makes and will continue to make too much money selling games individually to ever make them Game Pass exclusive. One of the reasons Game Pass can even exist is because they sell games individually which subsidizes Game Pass.

If Microsoft ever starts making games "Game Pass exclusive", it's because consumers have decided they don't care to directly own games anymore but even then, I doubt they will because it cost them nothing to continue to sell them separately especially in a digital-only future.
 
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The Lord of Cereal

#REFANTAZIO SWEEP
Member
Jan 9, 2020
9,584
Not really all that crazy. They confirmed during the Apple V. Epic (I think??) that they've never actually turned a profit on their systems before.

That being said, I do think it's a bit crazy that the PS5 was (and presumably still is) profitable and has been for like a year or so now considering the relatively small differences between the systems.
 

Gay Bowser

Member
Oct 30, 2017
17,557
It's Microsoft. It is a valid concern that once they buy Activision and other publishers and make games Game Pass exclusive, you really won't be able to go somewhere else to play them.

There aren't any Game Pass exclusive games. Nintendo has released more exclusive games on their subscription service than Microsoft has, but nobody seems convinced that packaged Nintendo software is going anywhere anytime soon.

Is it also a "valid concern" that Microsoft is going to double the price of purchased Call of Duty games and it'll be $140 to buy Black Ops 5? After all, they could do that.

This would be YEARS in the future, but there IS precedent. I can't just cancel Netflix when the price goes up and suddenly buy their new shows on bluray or watch them on Disney+.

Unlike Game Pass, Disney+ had exclusives from day one. And Disney still releases movies on Blu-ray. Heck, even Apple partners with companies to enable releases of Apple TV+ series on Blu-ray. And the retail game space is significantly healthier than the Blu-ray space is.
 

slider

Member
Nov 10, 2020
2,707
Something I'm pretty unfamiliar with but that's more than I would have guessed as a layperson.

Still, as an owner I guess I appreciate it.
 

Zok310

Member
Oct 25, 2017
4,620
Just charge people the price the product is worth to break even, while at it charge $25 a month for game pass and $69 per game, if they cant afford it oh well. If it's worth it folks will pay.
 

Bonfires Down

Member
Nov 2, 2017
2,813
That is surprising to me. Sony was breaking even on the disc PS5 in 2021, though inflation may have changed that.
 

Kolx

Member
Oct 25, 2017
8,505
I'd assume this is more related to the series S and how you can find it for even less than mrsp and not the X.
 

Warukyure

Banned
Feb 23, 2019
599
I wonder if AMD chips are just more expensive for Xbox due to lower volume purchases as well as exotica?

The Xbox Series X chip is more customized compared to the PS5 chip, as well as they have two different chips to power the Series S and the X.

Since Sony a) only has to purchase 1 chip SKU and b) has been a very good customer to AMD, I wonder if Sony gets a way better deal on their chips.

I don't think Microsoft is even going to AMD this time for any chips for their surface division for this generation.
 

Bessy67

Member
Oct 29, 2017
11,557
I wonder if AMD chips are just more expensive for Xbox due to lower volume purchases as well as exotica?

The Xbox Series X chip is more customized compared to the PS5 chip, as well as they have two different chips to power the Series S and the X.

Since Sony a) only has to purchase 1 chip SKU and b) has been a very good customer to AMD, I wonder if Sony gets a way better deal on their chips.

I don't think Microsoft is even going to AMD this time for any chips for their surface division for this generation.
MS likely does higher volume. They put a lot of their Xbox chips into datacenters for cloud too.
 

Deleted member 93062

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I wonder if AMD chips are just more expensive for Xbox due to lower volume purchases as well as exotica?

The Xbox Series X chip is more customized compared to the PS5 chip, as well as they have two different chips to power the Series S and the X.

Since Sony a) only has to purchase 1 chip SKU and b) has been a very good customer to AMD, I wonder if Sony gets a way better deal on their chips.

I don't think Microsoft is even going to AMD this time for any chips for their surface division for this generation.
My guess is they just lose quite a bit of money on Series S, but locking people into digital and selling overpriced storage expansion makes up for it.
 

Deleted member 93062

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Some*

I still can't buy Daredevil S3 on Blu-ray despite having S1-2.
Isn't that up to Marvel at this point? You can buy Season 3 on Prime Video and iTunes. If we're comparing it to video games, I doubt physical games (Blu-ray) would even exist in this hypothetical future where Xbox releases all their games only on Game Pass.
 

Kuro

Member
Oct 25, 2017
20,531
I wonder if AMD chips are just more expensive for Xbox due to lower volume purchases as well as exotica?

The Xbox Series X chip is more customized compared to the PS5 chip, as well as they have two different chips to power the Series S and the X.

Since Sony a) only has to purchase 1 chip SKU and b) has been a very good customer to AMD, I wonder if Sony gets a way better deal on their chips.

I don't think Microsoft is even going to AMD this time for any chips for their surface division for this generation.

Not really all that crazy. They confirmed during the Apple V. Epic (I think??) that they've never actually turned a profit on their systems before.

That being said, I do think it's a bit crazy that the PS5 was (and presumably still is) profitable and has been for like a year or so now considering the relatively small differences between the systems.

There is a significant difference in the chip per wafer Sony can produce (I think it was 50% more or something?). Its less about custom stuff and more about how big and how many transistors the X SoC is since MS went wide and Sony went more narrow with a higher clock speed. Sony also has pretty exotic set up with their SSD and memory controller but it seems they were able to keep that cost reasonable. The cooling solution of vapor chamber is more expensive than the liquid metal (Sony also significantly cut down on heatsink size in iterations thanks to that liquid solution I believe). I'm assuming the unique motherboard configuration the X is using also increases costs.

I'm not sure about S but its probably an economies of scale thing.
 

Dr.Osiris

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Oct 14, 2018
892
Imo xbox has never been profitable (except maybe 360). Any other company would've declared bankruptcy a long time ago.
 

AstronaughtE

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Nov 26, 2017
10,187
Some*

I still can't buy Daredevil S3 on Blu-ray despite having S1-2.
Okay, but that's not just a Netflix problem. Halt and Catch Fire has a single season on bluray despite running for four, and Aqua Teen Hunger Force have all of their previous seasons on dvd but never released their final season. The middle seasons of Better Call Saul are pretty hard to find bluray as well.
 

Gay Bowser

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Oct 30, 2017
17,557
Okay, but that's not just a Netflix problem. Halt and Catch Fire has a single season on bluray despite running for four, and Aqua Teen Hunger Force have all of their previous seasons on dvd but never released their final season. The middle seasons of Better Call Saul are pretty hard to find bluray as well.
Right. The market for physical disc releases of TV shows collapsed faster than even the market for films on Blu-ray. It's weird to attribute that to some sort of weird refusal by studios to market their titles in that way when, frankly, studios stopped due to declining interest.
 

Iron Eddie

Banned
Nov 25, 2019
9,812
It's Microsoft. It is a valid concern that once they buy Activision and other publishers and make games Game Pass exclusive, you really won't be able to go somewhere else to play them.

This would be YEARS in the future, but there IS precedent. I can't just cancel Netflix when the price goes up and suddenly buy their new shows on bluray or watch them on Disney+.
Why would they now want to sell you the game?

I find it very odd behavour to always focus on the most extreme situations that have no actual data or proof of ever happening. All it smells like is I don't like the model, therefore everyone else should think like me.
 

OldBritBloke

Member
Oct 28, 2017
1,231
Microsoft makes and will continue to make too much money selling games individually to ever make them Game Pass exclusive. One of the reasons Game Pass can even exist is because they sell games individually which subsidizes Game Pass.

If Microsoft ever starts making games "Game Pass exclusive", it's because consumers have decided they don't care to directly own games anymore but even then, I doubt they will because it cost them nothing to continue to sell them separately especially in a digital-only future.

I hope you're right, but Microsoft is all about services. It would have been unthinkable a decade ago that Microsoft would stop selling Windows or Office, yet we've entered an age where they effectively give Windows away whilst the standalone version of Office is stripped of features and given a sky high price in order to push consumers onto Microsoft 365 instead. It's very apparent that they would far rather people have to rent their stuff rather than own their stuff.
 

pswii60

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Oct 27, 2017
26,645
The Milky Way
It's Microsoft. It is a valid concern that once they buy Activision and other publishers and make games Game Pass exclusive, you really won't be able to go somewhere else to play them.

This would be YEARS in the future, but there IS precedent. I can't just cancel Netflix when the price goes up and suddenly buy their new shows on bluray or watch them on Disney+.
But that's the whole reason why Disney is investing so much money in new content for Disney+. Indeed it's why we have content overload coming from everywhere. Likewise if CoD ever did become Xbox Game Pass exclusive, which doesn't make any financial sense whatsoever by the way, then it simply leaves a huge opportunity elsewhere in the market.
 
Not suprised that the Xbox Series S especially loses quite a lot of money, 10 GB of GDDR6 + 193mm² 6nm die + enclosure + power supply + other costs isn't cheap once it gets sold to the customer.

I honestly wonder if they'll be anything resembling an Xbox Series S next-gen and MS (and Sony) will just end up releasing consoles like that rumoured PS5 Slim with a detachable disc drive. Like sure GamePass and it's potential growth makes up for the losses but once GP Subscribers/Revenue starts to Plateau probably in a decade's time that'll have to be taken into account. Sure MS can subisidse but it's not wise to subisidse indefintely, divisions do need to show their returns.
 

DixieDean82

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Oct 27, 2017
11,837
My takeaway from the interview is that GamePass is nowhere near as integral to Xbox future business as I thought.

Not only does he talk about mobile being the key to the Activison deal and it's not all about getting COD in GP, he also talks about GP not ever being over 15-20% of their gaming business. Empathizing, how important options are to consumers. And reminded us that Free to play titles are the biggest earner for XBox.
 
Oct 27, 2017
20,745
Wasn't ps5 profitable mid 2021? I know that can change but somehow I don't believe they're taking a $100+ loss on series x. Series S, maybe yeah it's so low priced.
 

OCL

Banned
Jun 17, 2022
99
Haven't you heard? Game Pass is a trap. They get everybody on board with an artificially low price and then they double it and everybody is just stuck and can't stop paying, with no way to switch to any other platform or go back to buying games.

I think Microsoft will close the gold conversion loophole, adjust Live Gold pricing, and potentially scale back or discontinue the Microsoft Rewards program before making a substantial change to Game Pass pricing. Bribing rewarding people for using Bing is exactly the sort of thing that is easier to justify in good economic times than in a recession. I think their main focus is going to be getting Live Gold subscribers to get Game Pass, and getting Game Pass subscribers to get Game Pass Ultimate.
"Haven't you heard? Game Pass is a trap. They get everybody on board with an artificially low price and then they double it and everybody is just stuck and can't stop paying, with no way to switch to any other platform or go back to buying games."

Tell me you know nothing about business without telling me you know nothing about business
 

Dekim

Member
Oct 28, 2017
4,297
The PS5's chip is smaller than the Series X's, so Sony can produce more usable chips per wafer. This is the benefit of Sony going "fast and narrow" with the PS5's design. MS going "slow and wide" gave them the power advantage, but at the price of having higher manufacturing costs for a longer period of time. Also, Sony has decades of experience making revisions to their consoles to make them smaller, cheaper, and more cost effective.
 
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jroc74

Member
Oct 27, 2017
28,985
That's more of a loss than I thought. I figured they were at least close to break even. Maybe without inflation/chip shortage they would be...

I had a feeling they were taking a loss per console. Sony did the same strategy with the PS4. Didn't expect $100-$200 though, but millions in the red for xbox, seems like a small drop in the bucket of expenses MS as a company incurs

That is surprising to me. Sony was breaking even on the disc PS5 in 2021, though inflation may have changed that.
Yeah, that's alot more than I thought too. I think most knew it was at a loss but damn..

Agree about the Sony part. I guess we won't get a BOM leak, breakdown like in previous generations.
 

Trup1aya

Literally a train safety expert
Member
Oct 25, 2017
21,308
It's Microsoft. It is a valid concern that once they buy Activision and other publishers and make games Game Pass exclusive, you really won't be able to go somewhere else to play them.

This would be YEARS in the future, but there IS precedent. I can't just cancel Netflix when the price goes up and suddenly buy their new shows on bluray or watch them on Disney+.

It being Microsoft doesn't make it a valid concern.

If Netflix stops being worth the price of admission, you can CHOOSE to stop bring their customer. Yes this CHOOSE would mean you lose access to their content, and you would be accessing someone else's content instead. that's how choice works.

Ultimately if the price becomes too high for the value the products offers, customers could leave, and their investments become less fruitful. That's the reality Netflix is dealing was dealing with foot much of this year, and it's the same reality MS would deal with if they took the actions you are concerned about.

Also, the concept of a "Gamepass exclusive " makes 0 sense financially. That's a great way to cut your potential audience by 60-90 percent and decreasing the revenue per user even further.
 
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Jul 22, 2022
1,867
This would be YEARS in the future, but there IS precedent. I can't just cancel Netflix when the price goes up and suddenly buy their new shows on bluray or watch them on Disney+.
Yeah, kinda the ability to watch or play something is not the right no? It's been like this for ages. You are unable to play one game or another depending on the platform you own without or without subscription. And it has always been like this.
 

Seraphs

Banned
Sep 22, 2022
640
It's Microsoft. It is a valid concern that once they buy Activision and other publishers and make games Game Pass exclusive, you really won't be able to go somewhere else to play them.

This would be YEARS in the future, but there IS precedent. I can't just cancel Netflix when the price goes up and suddenly buy their new shows on bluray or watch them on Disney+.

You can cancel netflix, its just a matter of culture. I did it 4 years ago and didnt miss a thing lol. primevideo+hbo+appletv have way better content than netflix.
 

jroc74

Member
Oct 27, 2017
28,985
Its kinda wild seeing that $200 figure...because alot of ppl expected (expects?) that amount for the PS5, the DE at least.

If its mostly coming from the Series S...whew....last time that amount was even in the ballpark for consoles was the PS3. Maybe early days of the XBO? That was probably more like $100 due to Kinect, not sure now.

Wasn't ps5 profitable mid 2021? I know that can change but somehow I don't believe they're taking a $100+ loss on series x. Series S, maybe yeah it's so low priced.

I am really curious about a BOM breakdown now for this gen. I know some questioned the PS5 specs...but trying to balance console specs/power and profits, taking less of a loss is never something to dismiss when it comes to goals, strategies for these businesses.
 

AllBizness

Banned
Mar 22, 2020
2,273
MTX must be why they are profitable because Gamepass isn't enough to offset a 100-200 loss on each console.
 

jett

Community Resettler
Member
Oct 25, 2017
44,646
They're still taking this much of a loss two years later?
 

erlim

Member
Oct 26, 2017
5,502
London
Man, I really have to send my earnest love to Phil and the Xbox team at Microsoft for giving us such a wonderful machine at cost. Quite incredible.