Xbox Game Pass a little 'crisis'? A missed growth target highlights key weakness

Xbox Game Pass a little 'crisis'? A missed growth target highlights key weakness

The Game Pass is the revolutionary element of Microsoft's strategy or at least these are the company's plans. Phil Spencer and associates started this generation with the imposing ambition to challenge not only Sony's dominance in high-end consoles but to reshape the sector itself by leaving out some of the concepts behind the definition of generation and what constitutes a gaming platform.

Microsoft's weapons for this battle aren't the hardware (the company has probably known for a long time that Xbox Series X and PS5 would ultimately be pretty similar from this point of view. view, at least for the average consumer), but services. This is a strategy that had a very good effect the last time it pushed Sony at a disadvantage, with Xbox 360's online services overpowering PlayStation's belated and inadequate efforts. This time the Game Pass is Microsoft's ace in the hole, the service that has the task of putting an end to the dominance of the competition and at the same time engaging consumers in a totally new vision of platforms and services that is intrinsically unrelated to a single hardware.

The centrality of the Game Pass, tacitly confirmed by the decision to use the growth of subscribers as one of the metrics on which the compensation packages of the executives are calculated, means that it is inevitable that the growth numbers are followed with attention from anyone with interests in the industry. The company does not often provide updates on the number of subscribers, the last one we had in January when around 18 million subscribers were declared, but it has begun to declare the growth numbers in the reports of 2020, when the targets of growth of 71% they were largely exceeded, reaching 86% during the year.

The growth of the Game Pass is partly a sore point currently: it has significantly missed the 47% growth target by declaring only 37% growth in the number of subscribers

Quest 'year however, those fortunes were reversed with an investor meeting that revealed that Game Pass growth is a slight pain point at the moment. This figure significantly missed the 47% growth target with Microsoft reporting 37% growth in subscriber numbers over the year.

There are two ways to look at this goal missed. One, that 47% was already a conservative figure considering the 86% growth in the previous year, so the numbers that Microsoft failed to touch are already significantly down. Not great news.

The other way to look at the matter, on the other hand, is that this probably would have been the year when the numbers would have seen a decline relative to the growth driven by lockdowns and pandemic, so Microsoft may simply have underestimated the steepness of the curve this event would cause. In this it is at least constant: it has underestimated the high point of last year and the low point of this year. This more optimistic approach requires taking into account previous years and would lead to the expectation that growth will return to more positive numbers in the next year.

The point is, I don't think a predictable decline in demand after the pandemic explains. all that is behind the decline from 86% to 37% growth, if only given that many other companies seem to be experiencing a continuous boom rather than a decline in revenue. Actually what we're seeing here I think is a good reminder that Game Pass, as brilliant as it is a brilliant service loved by many millions of subscribers (including myself), is ultimately something very complex to manage and that it is inevitable that you encounter some obstacles along the way. Perhaps even at levels that Microsoft itself did not foresee at the beginning.

I anticipate all my reflection by pointing out that a 37% growth for a service with numbers that have reached 18 million subscribers rather soon is not a bad data but the temptation to underestimate everything by saying "oh poor Microsoft only six million other people who pay a dozen euros a month" must be dampened by realizing how much this is a drop in the ocean for a $ 1 trillion business like Microsoft's.

As wonderful as it is to play Bethesda classics on a modern system, this isn't exactly what will drive the growth of the Xbox Game Pass Giants like Microsoft, Apple and Google are constantly blocking divisions that would be gems for a smaller company but not worth the expense of time and focus, which creates an internal environment in which any division that is not achieving its goals You have to find a way to get back on track very quickly. Subdued growth at this point is not what Microsoft needs to achieve the goals of the Game Pass as the beating heart of a gaming strategy that goes beyond the platform as a central pivot. All questions that make it all the more important to ask what the other reasons behind this missed goal might be and how they can be remedied.

The continuing lack of hardware obviously didn't help but this has been a somewhat opaque year for the Game Pass. That the library has grown is clearly undeniable but largely it was backward compatible games with one of the most interesting points being the addition of several Bethesda titles.

For all the value it guarantees with 'old' games , Game Pass faces exactly the same key challenge as every other console in history when it comes to getting people to subscribe. the year of the Game Pass, or the launch of 20 games from the Zenimax catalog. As much as these are beloved games it is a rather weak element to highlight as the key point of the year for your ace in the hole in gaming. A handful of Xbox exclusives debuted at launch on Game Pass but it would be tricky to point to one that prompted many consumers to share their credit card information and become a Game Pass subscriber.

That's really the point of the game. Question: While the value of offering "old" games is great, the Game Pass faces exactly the same key challenges as every other console in history when it comes to getting people to subscribe. The value of the game catalog offering from the past is a loyalty mechanism, it is a reason for people to stay in the system once they have already taken the first step but to push people to take that first step, the big ones are needed. high-profile games, the ones that must be played absolutely and that on the Game Pass could find the most convenient place for functionality and costs.

This is where the service has faltered precisely because the same line-up of games first- Microsoft's party faltered. The publisher and developer acquisitions have not yet borne much fruit, and while the promise of what's to come is enticing to many consumers, Xbox's first-party software remains an unstable colt and not the racehorse we all hope it will become. . The hope for a future line-up is enough for many to buy a console but it is no reason to spend money right away on a Game Pass subscription when you can just wait and start spending later once the games are actually there. will be.

This is the context in which we should read Phil Spencer's comments regarding the acquisition of other studios: Spencer fully understands the fact that the Game Pass will have a ravenous appetite for exclusive and prominent games if we want to keep the growth numbers. Microsoft's goal with any future acquisition will be much less about stealing software from rivals like Sony (that's a side effect in most cases) and more about feeding that hungry appetite for content without which the service Microsoft has been on. Your hopes for this industry will stutter and stumble.

Despite all the huge benefits for both Microsoft and consumers (and for publishers and developers perhaps, at least for its prospects as a generator of long-term sales), the Game Pass will likely be even more difficult to support with the necessary content than a traditional console. Consumers buy a console in advance to play certain titles and if there is a gap between releases where nothing matters then so be it, the console stays under the TV until the next big game. With a subscription service, however, long periods of game gaps that excite users could lead to not only shutting down the flow of new consumers but even causing a reversal in growth by prompting existing subscribers to feel nervous about the money they spend each month. . While the catalog of past games may be as revolutionary as Game Pass's, it will only go so far when it comes to ensuring player retention.

Don't underestimate the problems Game Pass is facing in this context: the work on Microsoft's first-party games is increasing the pace but here and today it is not able to hold a candle to its rivals Sony and Nintendo and this point will be a central problem given that with the Game Pass and its ambitious growth plans, the Xbox division has created a challenge that surpasses all that competitors face with their first-party publishing efforts.

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