The largest gaming subscription model is dying. No matter what Microsoft does, a solution is not in sight.
A few years ago, when Xbox Game Pass was announced, it sounded like a dream come true for many gamers. Almost unlimited access to games, new and old, so that for a rather small monthly fee, you basically never have to buy games again and are continuously entertained.
What sounded so appealing ultimately was doomed to fail. The Game Pass has fallen far short of expected numbers, and the original plan to reach 77 million paying customers has crashed spectacularly. Even the significantly revised figure of 35 million subscribers was likely missed, as the current figure, according to the Wall Street Journal, is estimated to be around 30 million.
A miscalculation that has now led to a veritable bloodbath of layoffs.
A product that appeals to not even half as many people as originally intended has a tough time. But why is that? Why is the Xbox Game Pass not the expected savior for Microsoft and gamers alike?
There is no single, all-encompassing answer to that. However, there are many different reasons that come together.
The Elder Scrolls Online is one of the games that has been most heavily affected by the cancellations:
Core gamers were the target audience that did not need the Game Pass
Mat Piscatella, a well-known analyst from Circana, commented on the topic on Bluesky. In his opinion, Xbox’s strategy was doomed to fail because the Game Pass targets the completely wrong audience: core gamers.
Core gamers are not “the general public” that plays a variety of games and is rewarded with attention. Core gamers play maybe a handful of different games in a year, but they play them particularly intensively. Piscatella says about this (on Bluesky):
The average gamer buys only 1 to 2 games per year and spends most of their time in their favorite games, and that’s it. The Game Pass has primarily appealed to the most dedicated parts of the audience… but that’s not the group you want to reach if you want to achieve hundreds of millions in subscriptions.
Piscatella believes that there is no good solution to the problem. Even a shift towards indie titles would ultimately appeal to an even smaller segment of the market. He summarizes his analysis with the words:
All of this is due to the crushing and devastating impact of the giants that suck time and money away from the rest of the market.
Clearly: Those who spend a lot of time throughout the year in one or two games have no time left to check out subscription games or spend money on them.
Broader, more colorful, more indie?
Others, however, believe that the Game Pass might have been more successful with such a focus on indie games. Instead of focusing on bringing particularly large titles into the Game Pass, Microsoft should have offered a wide range of small games that would have been cheaper for Microsoft.
In such a case, the Game Pass would have needed to choose a completely different marketing approach. It could not have advertised with huge “Day 1” titles but could probably have been much cheaper. Because if especially large games like Star Wars: Jedi Survivor or Starfield had not been in the Game Pass, those games would likely have generated significantly more revenue on the open market.
We know, for example, that Starfield made around $300 million – that sounds like a success, but Bethesda expected a billion, as we know from leaked documents (Source: Insider Gaming). A number that could never be reached since the game was in the Game Pass.
Microsoft has not only paid enormous sums to even include games in the Game Pass, but in the end also drastically reduced its own revenues by making the games playable for just a few euros a month.
For some gamers, that was precisely the dream: to intensely play a new game for a few weeks and then let the Game Pass rest. An enticing offer that should have been foreseeable, especially for the large AAA games with enormous development costs, that this cannot be justified at all.
The end of Xbox – a slow fading away?
However, there is also speculation that the Game Pass is not a product that will have a future – whether in a streamlined indie variant or in general. Instead of bringing the Game Pass into a stable position with new orientation and realistic goals, some believe that Microsoft is currently in the process of gradually dismantling the entire Xbox department and quietly letting it disappear in the coming years.
One who shares this suspicion is Seamus Blackley, often referred to as the “father of Xbox”. He has suspected for a while that Microsoft, with its increased focus on Artificial Intelligence, might be moving away from seeing Xbox as the core pillar of the business. Instead, Microsoft’s perspective would change and Xbox would simply become part of a new technological strategy centered around AI and cloud services.
In an interview (via GameRiv), Blackley explained that he sees the new management as “a doctor for palliative care,” ensuring that “Xbox gently glides into the night” – essentially a sort of end-of-life care for a part of the company that Microsoft no longer values greatly. Either because the company’s interests have shifted or simply because there seems to be no possibility of rescue.
Whether this will really happen remains to be seen. However, it is already apparent that many of the studios affected by the layoffs at Xbox can hardly continue their work and cannot support upcoming or ongoing games to the extent that was once planned. This also affected the creators of The Elder Scrolls Online, who had to completely overhaul their roadmap.
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