Subscription services such as Xbox Game Pass and PlayStation Plus were created with the purpose of bringing in more passive revenue for the companies. This way, they didn’t have to bank on studios and exclusives entirely to ensure they met their bottom lines.
However, it seems this strategy is not working out as well for Microsoft. While there are hundreds of games on offer, the service has not been meeting expectations as far as revenue is concerned. This could be the reason behind the sudden shutting down of several subsidiaries under Microsoft.
Xbox Game Pass Revenue Markers Not Meeting Expectations
Any tier above the most basic allows players to access a vast game library. Xbox Game Pass offers more new games than PlayStation Plus, with several day-one releases found on the list. However, even this has not been able to keep the service lucrative.
Mat Piscatella, executive director of analysis firm Circana, said in April 2023 that the growth of video game subscription service spending had stalled. The growth throughout 2022 had seen only a 2% increase. That has further dropped.
And it's still stalled. March 2024 non-mobile video game subscription spending was only up 1% vs the April 2023 figures that got me to post the below last year. https://t.co/O0WQhQX023
— Mat Piscatella (@MatPiscatella) May 7, 2024
Piscatella updated the figures for the current financial year, and the spending has stalled even more. The yearly increase, as of March 2024, has been only 1% when compared to the April 2023 numbers. It seems even adding new games to the service is not helping to turn the tide in its favor. When asked if he believes any game could shift the needle, Piscatella claims he does not believe any game can do that.
Not sure that any game could, at least for now. Consumers have held pretty firm in their preferences for a few years now. We'll see.
— Mat Piscatella (@MatPiscatella) May 8, 2024
Even with the likes of Call of Duty on the market, consumers have stuck to their preferences. However, he does state that this is the current scenario, and it could be subject to change. Another response states very explicitly that subscription services are just not wanted by the community.
Failing Game Pass Revenue Could Be a Possible Reason Behind Studio Shutdowns
Xbox has recently shut down three Bethesda Softworks subsidiary studios and absorbed a fourth one, citing reasons for reallocating resources. Tango Gameworks (Hi-Fi RUSH) and Arkane Austin (Prey) are two studios that have now been shuttered. This decision could be due to the low revenue from the Game Pass service.
Microsoft’s acquisition spree can be looked at as a way to bolster the Game Pass library with more titles. However, this doesn’t seem to be working, which could have prompted Xbox to shift the teams into other, more successful projects.
This could mean fans of games from these studios might be left high and dry if they were expecting a sequel. Tango Gameworks was in the process of pitching a sequel for Hi-Fi RUSH when this shuttering was announced, and it could mean the sequel will never be picked up. The other side of the coin is that Xbox-first party titles will receive more attention.
Microsoft has made it clear that it is focusing on bumping the bottom line and is willing to drop any avenues that do not help achieve this goal. Do you think the company is shooting itself in the foot with such a strategy? Let us know in the comments below!
