Xbox’s struggle is evident in its hardware sales and user base. While Xbox generates substantial revenue, its growth in hardware and console install base is limited. PlayStation’s dominance is a critical factor, with a larger and more active user base that attracts developers and publishers alike.
Xbox’s revenue is buoyed by services like Xbox Game Pass, which offers a library of games for a monthly fee. However, revenue growth from services does not equate to an expanding hardware footprint.
The limited growth in Xbox’s hardware install base has made the platform less of a priority for many developers, particularly smaller studios with fewer resources. According to reports, many developers consider Xbox a viable investment only if a Game Pass deal is secured. Without such deals, the financial return on developing for Xbox is often deemed insufficient.
And this is not the first time; many developers, mostly indie, are eager to release their games on Xbox for Game Pass deal. But, later then, most indie developers are finding it harder to secure their Game Pass deal because of a of a major change in policy.
The Double-Edged Sword of Game Pass
Microsoft’s strategy of securing day-one availability for Game Pass titles is a double-edged sword. While it ensures a steady stream of content for subscribers, it may also deter traditional game purchases and diminish the perceived value of individual titles.
Skill Up, highlighted that many developers feel conditioned to expect upfront payments from Microsoft through Game Pass deals. This conditioning has altered the market dynamics, making it challenging for studios to rely on traditional sales models. This conditioning means, Game Pass conditions users to buy fewer games. Why do you have the urge to buy a game when you can just rent it, and then a month later you leave the game like always?
Skill up stated it on their Patreons, “You just aren’t going to sell the same units as you would elsewhere,” said one developer, who led a studio responsible for multiple titles that had achieved commercial and critical success. “It’s a bit like trying to sell a DVD to someone who uses Netflix. Sure, people still do that from time to time but you’re not targeting the right audience.”
Indie and AA studios, in particular, face significant challenges. These developers often operate on tight budgets and cannot afford the risk of low returns from traditional sales. Consequently, they see Game Pass deals as essential for financial stability and project viability.
Even larger AAA studios are affected. Some have chosen to skip the Xbox platform entirely, prioritizing PlayStation due to its larger user base and higher potential sales. This trend further exacerbates the gap between the two platforms.
Microsoft’s Commitment to Game Pass
Despite these challenges, Microsoft remains committed to Game Pass. The service continues to attract subscribers with high-profile releases like Black Ops 6, scheduled to arrive later this year. Microsoft believes that the growing buzz around Game Pass will eventually translate into a broader user base and higher engagement.
However, to address the current issues, Microsoft needs to make strategic adjustments. This includes finding a balance between securing Game Pass deals and encouraging traditional game sales. Additionally, improving the overall Xbox experience and expanding the hardware install base are crucial steps.