Xbox Series X (coming 10 Nov 2020)

[Macalicious2011]

In what way is Game Pass unsustainable? You have huge numbers of people shelling out a decent chunk of cash every month, and probably having a higher annual spend from each of them than they would have made on game purchases, and it also acts as an extended demo service for people who might buy games later.

New games cost £59-80 on launch day. 2 of those purchases + a DLC purchase are enough to equal 12 months of a game pass. For consumers, it's good value. Sure, not all games are 10/10 but that's no different to Netflix or Apple TV+ shows.

For game studios, gamepass changes the dynamic a lot. From what I have observed, games that launch on gamepass on day one, generate more comments and content about how the game is to play vs fud from those who are on the offence.

Instead of watching 5-10 YouTube reviews and scrolling through comments on whether to buy the game, you can just download it on gamepass and start playing. I think that multiplayer games benefit most from gamepass. Wider access = more players = greater network effect. Palworld is a great example of that.

 

[mattspace]

New games cost £59-80 on launch day. 2 of those purchases + a DLC purchase are enough to equal 12 months of a game pass. For consumers, it's good value. Sure, not all games are 10/10 but that's no different to Netflix or Apple TV+ shows.

For game studios, gamepass changes the dynamic a lot. From what I have observed, games that launch on gamepass on day one, generate more comments and content about how the game is to play vs fud from those who are on the offence.

Instead of watching 5-10 YouTube reviews and scrolling through comments on whether to buy the game, you can just download it on gamepass and start playing. I think that multiplayer games benefit most from gamepass. Wider access = more players = greater network effect. Palworld is a great example of that.

Yup, Gamepass is all upside as far as I can see. Personally, I've used it as an extended demo service - most of the games I play are games I own, but all the games I own (apart from Stray) I played on Gamepass.

And yeah, you're no doubt right about the change to the commentary - Gamepass takes away the emotional investment of needing to justify spending upwards of AU$110 on a new game.

 

[Macalicious2011]

Yup, Gamepass is all upside as far as I can see. Personally, I've used it as an extended demo service - most of the games I play are games I own, but all the games I own (apart from Stray) I played on Gamepass.

And yeah, you're no doubt right about the change to the commentary - Gamepass takes away the emotional investment of needing to justify spending upwards of AU$110 on a new game.

Agree. My GF's three kids are gamers. In the past two weeks they have played Peppa Pigs World and Goat Simulator which are games that I would otherwise not have purchased. They have played them sociality whilst giggling and having fun.

My only concerns about Gamepass is if it becomes the launch platform for games, we would see a big change. e.g basic game launched but with lots of DLC for the developer to recoup potential lost revenue from millions of people not buying a £50-70 game.

 

[mattspace]

My only concerns about Gamepass is if it becomes the launch platform for games, we would see a big change. e.g basic game launched but with lots of DLC for the developer to recoup potential lost revenue from millions of people not buying a £50-70 game.

Do we know how well Microsoft pays companies for Gamepass time? There's pleny of games that have been, gone, and then come back again, or been with DLC as a paid add-on, gone, then come back with DLC - WWZ for example.

If gamepass starts commissioning games, the way Apple Arcade does, I can see devs getting more interested for the stable revenue during development, rather than having to live off comapny credit cards for a couple of years.

 

[Macalicious2011]

Do we know how well Microsoft pays companies for Gamepass time? There's pleny of games that have been, gone, and then come back again, or been with DLC as a paid add-on, gone, then come back with DLC - WWZ for example.

If gamepass starts commissioning games, the way Apple Arcade does, I can see devs getting more interested for the stable revenue during development, rather than having to live off comapny credit cards for a couple of years.

I don't know what MS pays publishers nor how this might change in the future. Fees might include up front payment by MS + revenue share from xbox store, user installs and hours played.

Terms might be favourable now but might be adverse in 3-5 years if Gamepass is more successful and dominant.

Taylor Swift Eras tour will launch on disney plus next month. Disney must have paid several hundred million dollars for that privilage. I wouldn't rule out similar blockbuster content deals by Xbox.

 

[Macalicious2011]

Sony has announced that PS5 sales have missed recent targets by a few millions. Xbox being the rubber up is also likely to miss their targets.

No wonder Xbox wants to extend exclusives to PS5 and other platforms. Look at apple, revenue from services make up for stagnant or falling hardware sales.

 

[Pezimak]

Watching this evenings ‘business update’, I think it’s obvious Xbox are in a little bit of trouble, people need to listen to the ’fluff’ as that is the most important talk. They were also nervous during the interview. I believe they will increase ads and change Game Pass subscriptions and content and pricing. But ALL games will be on Game Pass, and new hardware will be launched at Christmas time. Diablo 4 is on Game Pass end of March.
For me I’m only interested in the next Nintendo console which will hopefully be an updated Switch.

 

[Pezimak]

Do we know how well Microsoft pays companies for Gamepass time? There's pleny of games that have been, gone, and then come back again, or been with DLC as a paid add-on, gone, then come back with DLC - WWZ for example.

If gamepass starts commissioning games, the way Apple Arcade does, I can see devs getting more interested for the stable revenue during development, rather than having to live off comapny credit cards for a couple of years.

For big title AAA games they have been paying 200 to 300 million per game! Hence why Sony and Nintendo aren’t following the same model.

 

[mattspace]

For big title AAA games they have been paying 200 to 300 million per game! Hence why Sony and Nintendo aren’t following the same model.

They'e not paying 300 million to a developer to make their existing game available on Gamepass. I'm talking about how much did they pay to the developers of Outer Wilds for it to be on Gamepass, or WWZ Aftermath, or Generation Zero, etc.

 

[Pezimak]

They'e not paying 300 million to a developer to make their existing game available on Gamepass. I'm talking about how much did they pay to the developers of Outer Wilds for it to be on Gamepass, or WWZ Aftermath, or Generation Zero, etc.

They are paying that much, as for those other games it's costing them millions, in December they were spending a billion annually on games on GP which I imagine excludes their own studios. Otherwise it would be much higher.

Xbox leak reveals estimated costs of AAA games on Game Pass

Leaked Microsoft documents have revealed the estimated costs of putting third-party games on Xbox Game Pass. As reporte…

www.gamesindustry.biz

 

[mattspace]

They are paying that much, as for those other games it's costing them millions, in December they were spending a billion annually on games on GP which I imagine excludes their own studios. Otherwise it would be much higher.

Sure, and they're making 3 billion a year revenue on Gamepass subscriptions. Gamepass seems a pretty comfortable business on its own merits. I don't see what there is to be pessimistic about.

Microsoft arguably has a stickier games ecosystem story than Sony does with Playstation, or Apple does with Arcade (which is really competing with Nintendo).

 

[Pezimak]

Sure, and they're making 3 billion a year revenue on Gamepass subscriptions. Gamepass seems a pretty comfortable business on its own merits. I don't see what there is to be pessimistic about.

Microsoft arguably has a stickier games ecosystem story than Sony does with Playstation, or Apple does with Arcade (which is really competing with Nintendo).

That three billion isn't profit, it doesn't work like that. You watch how the year progresses and you'll see changes occur and as Phil said yesterday, everything they do is for long term Xbox growth and profitability which currently it's not doing. Tens of billions as I said have been spent on the department, expect more cuts may offs and price increases this year.

 

[Heat_Fan89]

That three billion isn't profit, it doesn't work like that. You watch how the year progresses and you'll see changes occur and as Phil said yesterday, everything they do is for long term Xbox growth and profitability which currently it's not doing. Tens of billions as I said have been spent on the department, expect more cuts may offs and price increases this year.

Agreed! I'll add to that as I picked up on something that has been happening the last 9-12 months. In the past the XBOX division was incentivizing Game Pass subscribers via the Microsoft Rewards program where you earned generous Rewards points which could be used to purchase hardware, games or even XBOX Game Pass subscriptions. It was so generous that you could earn each month 2-3 times in Rewards points the amount of a Game Pass Ultimate monthly pass.

That has all dried up and has declined even further with the acquisition of Activision. Now you can only earn enough to cover just one month of a Game Pass sub. I expect this to decline even further. I believe that Game Pass is unsustainable with the cost of first party games when they are now in some cases north of 200-300 million dollars to create.

 

[mattspace]

That three billion isn't profit, it doesn't work like that. You watch how the year progresses and you'll see changes occur and as Phil said yesterday, everything they do is for long term Xbox growth and profitability which currently it's not doing. Tens of billions as I said have been spent on the department, expect more cuts may offs and price increases this year.

Yes, that's why I said revenue. Two billion a year is a pretty sizeable hunk of money to spend running a business, once your content is paid for, and you're buying all the hardware and ancillary services from yourself.

 

[diamond.g]

Yes, that's why I said revenue. Two billion a year is a pretty sizeable hunk of money to spend running a business, once your content is paid for, and you're buying all the hardware and ancillary services from yourself.

Something that just occured to me, does MS lump legacy XBL subs in with GP subs? You have to have XBL to play online and IIRC the "basic" XBL is now Game Pass Core.


GP without the cloud streaming side seems like a sunk cost since MS already has to provide a storefront (for the Series S since it has no disc drive). Building data centers with XBSX just for cloud streaming, which probably isn't even that popular, seems like a lot of overhead.

 

[Pezimak]

Something that just occured to me, does MS lump legacy XBL subs in with GP subs? You have to have XBL to play online and IIRC the "basic" XBL is now Game Pass Core.


GP without the cloud streaming side seems like a sunk cost since MS already has to provide a storefront (for the Series S since it has no disc drive). Building data centers with XBSX just for cloud streaming, which probably isn't even that popular, seems like a lot of overhead.

It runs off the back of their Azure network which runs everything cloud for MS, even so they run it by installing actual Xbox hardware in blades in racks. So they are taking up space in their data centres at the end of the day paying to run it all. So if they don't get many streaming are they making a loss on that even?

 

[Pezimak]

Yes, that's why I said revenue. Two billion a year is a pretty sizeable hunk of money to spend running a business, once your content is paid for, and you're buying all the hardware and ancillary services from yourself.

No it's not, to have a dollar you need to make 3 dollars... I believe that's how it works in business. Also that billion dollars is ONLY for the purchasing of the games, it doesn't include the overheads.
It's not enough end off, at present I'd state Xbox is losing money, if you take into account the billions they've spent on acquisitions alone, they need to massively increase profits.
Sony missed its sales targets for PS5 by around 4 million and as a direct result Sonys share price dropped 8 percent, MS are being clever with their words as they know if Xbox doesn't start creating wealth soon, investors will get itchy feet.... you need look beyond the smoke and mirrors and Spencer's words. Read between the lines.

It's a tough market, I think Xbox is getting pressure from the board. We need all 3 or at least 3 of them to make the market viable, so Xbox better start delivering the goods.

 

[diamond.g]

It runs off the back of their Azure network which runs everything cloud for MS, even so they run it by installing actual Xbox hardware in blades in racks. So they are taking up space in their data centres at the end of the day paying to run it all. So if they don't get many streaming are they making a loss on that even?

It would be a loss if Azure could sell that capacity (that isn't in use) for something else. Clearly this is supposition.

Do we think GamePass could survive without dedicated hardware (XB) to run it on?

 

[Macalicious2011]

Watching this evenings ‘business update’, I think it’s obvious Xbox are in a little bit of trouble, people need to listen to the ’fluff’ as that is the most important talk. They were also nervous during the interview. I believe they will increase ads and change Game Pass subscriptions and content and pricing. But ALL games will be on Game Pass, and new hardware will be launched at Christmas time. Diablo 4 is on Game Pass end of March.
For me I’m only interested in the next Nintendo console which will hopefully be an updated Switch.

The entire update could have been summarised in a single tweet. I think Satya might have given Phil a hard talk. Hardware sales are on a decline and gamepass growth is slowing. The year ahead will be tough. An updated console won’t make a difference for the following reasons:
-A 10-15% bump in raw performance will not be exploited by gaming studios. They develop for the lowest common denominator which mean locked 30 or 60FPS.
-By Christmas, Sony will likely have dropped the price of the PS5 slim which will make the Xbox console look expensive is sold at full retail price.
-Nintendo’s console could swallow substantial market spare if it can run COD, the Finals and other popular titles.

Do we think GamePass could survive without dedicated hardware (XB) to run it on?

Yes. The Steam deck and its rivals are interesting. If MS can create an Xbox/gamepass OS for this category of hardware the reach of Xbox could widen without MS being burdened with hardware R&D and distribution. I wouldn’t rule out wounding down the Surface brand too.

 

[Pezimak]

The entire update could have been summarised in a single tweet. I think Satya might have given Phil a hard talk. Hardware sales are on a decline and gamepass growth is slowing. The year ahead will be tough. An updated console won’t make a difference for the following reasons:
-A 10-15% bump in raw performance will not be exploited by gaming studios. They develop for the lowest common denominator which mean locked 30 or 60FPS.
-By Christmas, Sony will likely have dropped the price of the PS5 slim which will make the Xbox console look expensive is sold at full retail price.
-Nintendo’s console could swallow substantial market spare if it can run COD, the Finals and other popular titles.


Yes. The Steam deck and its rivals are interesting. If MS can create an Xbox/gamepass OS for this category of hardware the reach of Xbox could widen without MS being burdened with hardware R&D and distribution. I wouldn’t rule out wounding down the Surface brand too.

Christmas sales will be VERY interesting, we will have new Xbox hardware in whatever form it is, a PS5 Pro, and Nintendos new console. If all the rumours are true bar the Xbox one as they confirmed it yesterday, granted Xbox could just release a new controller rather then console though. Still if all three have new machines out, it’ll be a good battle but I feel Nintendo will win as it will be a brand new machine.

 

[Macalicious2011]

Christmas sales will be VERY interesting, we will have new Xbox hardware in whatever form it is, a PS5 Pro, and Nintendos new console. If all the rumours are true bar the Xbox one as they confirmed it yesterday, granted Xbox could just release a new controller rather then console though. Still if all three have new machines out, it’ll be a good battle but I feel Nintendo will win as it will be a brand new machine.

Do you think that Sony has a PS5 in development but are simply playing poker right now and will reveal it in time for GTA6?

 

[AlumaMac]

….An updated console won’t make a difference for the following reasons:…

As a current Xbox Series X owner I can’t think of any reason to upgrade at this point. It’s the lack of compelling games, not hardware limitations. I’ve spent way more time playing older re-released games on Gamepass than anything new.

 

[Macalicious2011]

As a current Xbox Series X owner I can’t think of any reason to upgrade at this point. It’s the lack of compelling games, not hardware limitations. I’ve spent way more time playing older re-released games on Gamepass than anything new.

Agree. I also have no interest in buying a slightly more powerful console but wait 2-3 years for existing and future titles to be optimised for it.

 

[Pezimak]

Do you think that Sony has a PS5 in development but are simply playing poker right now and will reveal it in time for GTA6?

Could very well be, it would make sense. I think next gen Xbox and PS will be in 2028. So 3 years for a PS5 Pro to get sales.

 

[mattspace]

Agree. I also have no interest in buying a slightly more powerful console but wait 2-3 years for existing and future titles to be optimised for it.

The era of New Console, and New Games specific to new Console with distinct generations between is over.

Looking at Gamepass now, it's everything from original XBox games, through to Series X optimised. Companies are still releasing new games for Xbone.

The reason to buy the new console, is because you're in the market for a console, and the "new" one is the one Microsoft is selling now. Xbox is a subsidised, turnkey gaming PC, and just like your next gaming PC is just a better specced version of your old gaming PC, that's what (microsoft's) consoles are evolving into.

"Generations" are done, just like "console wars".

If you don't buy a console, but keep using Gamepass on your existing console, you're probably a more profitble customer for Microsoft, than someone who buys every console, but never subscribes.