Microsoft announces Xbox Game Pass price hikes, new subscription tiers

In a move that has sent ripples through the gaming community, Microsoft has announced significant changes to its Xbox Game Pass subscription service. As revealed during the Summer Game Fest, the tech giant is set to increase prices and introduce a new tier to better capture various market segments.

Key Changes at a Glance

• Xbox Game Pass Ultimate: Price increasing to $19.99/month, includes all titles and day-one releases.
• PC Game Pass: Price increasing to $11.99/month, includes day-one titles.
• New Xbox Game Pass Standard: $14.99/month, excludes day-one titles.
• Subscriber Growth: From 10 million in 2019 to approximately 34 million in 2023.
• Revenue: Generated between $1.258 billion and $1.887 billion in 2021, and between $1.197 billion and $1.796 billion in 2022.
• Profitability: Described as profitable by Xbox CEO Phil Spencer, excluding major acquisitions.

New Pricing and Tiers

Starting in September, Xbox Game Pass Ultimate, the premium subscription service, will see its price rise from $16.99 to $19.99 per month. This tier includes access to all titles, including highly anticipated day-one releases like the new Call of Duty.

The PC Game Pass, which also includes day-one titles, will see a price increase from $9.99 to $11.99 per month. Additionally, Microsoft is introducing a new tier called Xbox Game Pass Standard, priced at $14.99 per month. Unlike the other tiers, this new option will exclude day-one titles.

This restructuring is akin to strategies employed by streaming services like Netflix, where multiple tiers are offered to cater to different user needs and preferences.

Subscriber Growth and Financials

Xbox Game Pass has experienced robust growth over the past five years:

• 2019: Approximately 10 million subscribers
• 2020: Approximately 18 million subscribers
• 2021: Approximately 25 million subscribers
• 2022: Approximately 29 million subscribers
• 2023: Approximately 34 million subscribers

Despite claims that subscriber numbers have plateaued, Microsoft continues to push forward with aggressive pricing strategies. Xbox Game Pass generated revenues between $1.258 billion and $1.887 billion in 2021, and between $1.197 billion and $1.796 billion in 2022. Xbox CEO Phil Spencer has stated that the service is profitable, though there is likely some “marketing math” behind the claim, considering the major acquisition of Activision Blizzard.

Our Reactions and Future Implications

The price hikes, while inevitable, reflect a broader trend in the gaming and streaming industries. Upptic CGO Warren Woodward notes that Game Pass has been a too-good-to-be-true value in the gaming ecosystem. This price adjustment is a move towards a more sustainable model.

However, there is skepticism about the new lower-cost tier, with Warren noting that it’s a false choice. Most gamers will opt for the $20 Ultimate Pass for access to day-one titles.

Upptic Marketing Director Xander Agosta highlights the importance of understanding the long-term strategy behind these changes: This is a classic land and expand strategy. While there’s subscription fatigue across the board, for hardcore gamers, $240 a year for Game Pass Ultimate is still a reasonable price tag.

What’s Next?

Microsoft’s commitment to including major releases like Call of Duty: Black Ops 6 as day-one games in the Game Pass lineup underscores its strategy to make Game Pass the go-to model for game consumption. As the next earnings report approaches, the industry will be watching closely to see what the numbers reveal.

Despite mixed reactions, it’s clear that Microsoft is in this for the long haul. The gaming giant’s strategy aims to solidify Xbox Game Pass as an essential service for gamers, ensuring it remains a profitable and influential player in the gaming ecosystem.