Since its debut way back in June 2017, Xbox Game Pass, Microsoft’s primary gaming subscription, has managed to pull in more than 30 million members globally. Over the years, Microsoft has brought some of the most popular titles across all genres to the service, establishing Game Pass as the ultimate deal for gamers.
While Game Pass might be a good deal for gamers, it hasn’t been kind to game developers. While it’s supposed to pull in new audiences for gaming studios, it’s proving to be a massive loss for publishers. New reports suggest even SEGA couldn’t escape Game Pass’ wrath.
SEGA’s Revenue Loss Could Be Blamed on Xbox Game Pass
Recently, SEGA reported a substantial net loss of over $41 million USD for the fiscal year of May 31, 2024. This loss represents an 86.7% decline in the company’s operating compared to the previous year. While SEGA attributes these losses to the restructuring of SEGA Europe and the sale of Relic Entertainment, gamers believe it’s all due to Xbox Game Pass.
One of the most significant issues with Xbox Game Pass is that it can hurt gaming publishers by reducing their individual title sales, as players favor the subscription model instead of purchasing games outright. While it’s a smart move for gamers, this shift leads to lower revenue for publishers, especially for smaller ones who rely on game sales for suitability.
SEGA is one of the top studios that has fully embraced the Game Pass model. The publisher has released a number of its hits on the service, which everyone has appreciated. However, it looks like it has negatively impacted SEGA’s growth.
Some in the community hope SEGA will reconsider their decision and skip the Game Pass service altogether.
Few gamers also believe that it’s a conspiracy by Microsoft to make SEGA drop hard so they can be easily acquired, just like Activision Blizzard and Bethesda.
It’s clear that the Game Pass service has been a disaster for gaming publishers. However, it’s time for them to rethink their strategy. Publishers can leverage Game Pass to increase exposure and drive player engagement, which will obviously lead to higher sales. Publishers must network with Microsoft to create better-revenue-sharing deals and focus on diversifying their revenue sources.
Microsoft Knows About Game Pass’s Negative Impact
For a while now, Xbox and Microsoft have maintained that launching titles on Xbox Game Pass doesn’t mean it will face lower sales as a result. In fact, even Phil Spencer claimed back in 2018 that launching a title on Game Pass results in higher sales.
Back in 2023, in a report from the UK’s Competition and Markets Authority (CMA), an admission from Microsoft can be found which stated that a title’s launch on their service leads to “a [redacted]% decline in base game sales twelve months following their addition.” The exact percentage has been censored in the report; it’s impossible to figure out whether it’s a small or large decline, but it runs against Microsoft’s argument.
It’s not a surprise, and the percentage might differ when it comes to an Xbox-first-party title or a small indie one, but it does confirm that Xbox is losing out massively on sales when games hit Game Pass service.
Do you think SEGA’s failures come from Game Pass? Let us know in the comments!
