Internal Microsoft documents and analysis indicate Game Pass cannibalizes sales

[Cal Jeffrey]

In context: Microsoft has been on the defensive since announcing its $69.7 billion Activision Blizzard King (Activision) acquisition. Regulators worldwide have had the buyout under the microscope, tying up Microsoft's timeline and forcing it to offer concessions that it says it was planning to provide all along. Now the CMA indicates that it might not grant its approval because it thinks it is bad for UK consumers.

Last week, the UK's Competition and Markets Authority (CMA) came to a provisional conclusion that Microsoft's Activision acquisition could harm gamers in the UK. Specifically, the government watchdog cited the potential for higher prices, fewer choices, and less innovation.

In its heavily redacted findings report, the CMA said internal Microsoft documents admitted that games on Game Pass tended to cannibalize buy-to-play (B2P) sales. According to Redmond bean counters, games placed on its multi-game subscription (MGS) showed a significant decline in B2P sales during the twelve months following their addition to the service. This correlation is logical but flies in the face of what Microsoft has been telling developers and customers for the last several years.

In a 2018 interview with Levelup, Xbox Boss Phil Spencer said that having titles on Game Pass improved B2P sales (below). He claimed even though GP members got to play the game for free, the extra exposure prompted non-subscriber to buy the game.

"When you put a game like Forza Horizon 4 on Game Pass, you instantly have more players of the game, which is actually leading to more sales of the game," Spencer said. "You say, 'Well, isn't everyone just going to subscribe for $10 and go play this thing?' But no, gamers find things to play based on what everybody else is playing."

His theory now seems to be hogwash, but it's unclear if the company knew this then since the information the CMA discussed was from a more recent earnings analysis. However, Microsoft admits that Activision was hesitant to put its IPs on Game Pass or any other MGS platform for fear that it would "severely cannibalize B2P sales, particularly in the case of newer releases."

As far as the CMA's preliminary report is concerned, the Microsoft/Activision deal is on shaky footing at best. While it has not given its final decision, it sounds like it will advise the parties to cancel the acquisition. Does this mean Microsoft will never have Activision under its umbrella? No, but it would thoroughly wreck any planned timelines affecting Activision's immediate valuation, possibly causing a complete renegotiation of a new deal that regulators will likely scrutinize just as much.

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https://www.techspot.com/news/97594-internal-microsoft-documents-analysis-indicate-game-pass-cannibalizes.html

 

[Kam7r]

No sh!t Sherlock ?!

 

[brucek]

In every area I've tried subscription streaming plans -- music, videos, books, and Game Pass -- it has increased my total spend in that area (while yes also decreasing spend on individual titles.)

I think it's an especially smart deal to offer to the large audience of casual adults who have enough spending power to keep a handful of subscriptions on auto-pilot but otherwise might have been too busy or otherwise not interested enough to keep shopping for new individual titles (or in some cases been lost to over to piracy for the convenience and wide variety.)

 

[Durch]

It seems every new game that comes out is rushed and barely playable with the bugs that aren't fixed until several patches later or are just completely abandoned. Not to mention that there's hardly any support for crossplay to connect with friends on different hardware.

Let's also not ignore the fact that most of these same studios throw everything behind their micro transaction games or package their "buy once" games with several DLCs to squeeze even more money out later.

Gamepass isn't cannibalizing sales, it's terrible game quality and support, plain and simple. I'd much rather subscribe to a service than outright buy the trash that these game studios put out today.

 

[Tom Yum]

In every area I've tried subscription streaming plans -- music, videos, books, and Game Pass -- it has increased my total spend in that area (while yes also decreasing spend on individual titles.)

I think it's an especially smart deal to offer to the large audience of casual adults who have enough spending power to keep a handful of subscriptions on auto-pilot but otherwise might have been too busy or otherwise not interested enough to keep shopping for new individual titles (or in some cases been lost to over to piracy for the convenience and wide variety.)

Each to their own of course, but that has not been my experience, and the MS data would suggest your example is uncommon. I basically don't buy games on PC anymore now that I have Gamepass, because it provides more content than I'll ever have time to experience. Whereas before I probably would have bought 5-6 games a year which from a dollar value would have been more expensive than my yearly Gamepass subscription.

Likewise with music, I used to buy a CD album roughly once a month, now I pay half that to get access to all the music I could possibly ever want.

What is in it for content generators is stability of revenue, rather than net income. That has its own worth because it reduces business risk, but from a profit perspectives the only one that ends up ahead is MS.

 

[Burty117]

Each to their own of course, but that has not been my experience, and the MS data would suggest your example is uncommon. I basically don't buy games on PC anymore now that I have Gamepass, because it provides more content than I'll ever have time to experience. Whereas before I probably would have bought 5-6 games a year which from a dollar value would have been more expensive than my yearly Gamepass subscription.

Likewise with music, I used to buy a CD album roughly once a month, now I pay half that to get access to all the music I could possibly ever want.

What is in it for content generators is stability of revenue, rather than net income. That has its own worth because it reduces business risk, but from a profit perspectives the only one that ends up ahead is MS.

I think a few things need to be mentioned here, games can come off the subscription service, so you lose access to it, and if you do play one particular game quite a lot, you now have to pay a subscription to keep playing and pray it's not removed from the subscription.

When it comes to revenue stability, I'm unsure if that's a good thing or not. Games already play it too safe with a million sequels, come out in alpha form rather than a finished product, or become exclusives to a platform at the last second.

Does having an even more stable revenue stream mean they'll make even more boring, broken sequels that people will play anyway just because it's a part of their subscription?

I'd worry that if Devs see a return on their rubbish game regardless, that'll encourage even more rubbish than we see today.

 

[passwordistaco]

A paid subscription is, by definition, not free.
They mutually exclusive.

 

[dangh]

Gamepass isn't cannibalizing sales, it's terrible game quality and support, plain and simple.

It is actually both - it encourage developers to monetize more on DLC's and additional passes, and encourage rushing the games or release them with limited scope, but as well greatly limiting sales. But MS is willing to do so in order to position themselves as gaming service market owner (monopoly is something they have in their blood...) so they don't care yet about the costs, unless loses will be to large to ignore, as with windows phone.

 

[Neatfeatguy]

I personally hate subscription based things. I like to have the physical copy on hand so I can choose when and where I want to use it. You don't get that with subscription based things.

Look at Sony, they lost (or didn't renew contract, I forget) the rights for some movies on their Playstation store. Folks that paid for a digital copy of movies (I think John Wick movies were a couple) that Sony no longer can share/distribute on their Playstation store. Anyone that had purchased a digital copy of those movies, they can no longer access them. That's awful.

I like having physical copies of games/moves/shows that I can decide what I want to do with them.

All my movies/TV shows I have on my Plex server, I have a physical copy of them so if by some chance something should ever happen I can always watch the movie/show on a DVD/Bluray player. I'm not left standing there with my dingaling in my hand because a digital platform shutdown or lost distribution rights to a game/movie/show I paid money for and now I no longer have access to them.

I hate that most movies and shows are going straight to digital streaming only. Nothing good is coming out to theaters these days to come out on DVD/Bluray and the B movies that do come out on DVD/Bluray are generally too crummy for me to bother getting a copy of.

To each their own, I suppose. If you like the digital only life then good for you. I don't and wish it wasn't going that route for everything.