Xbox Game Pass isn't all that lucrative, but it's all by design. Microsoft is aiming for a long-term strategy of over-delivering value.
Whatever your thoughts on Microsoft’s consoles and the output from its first-party studios, it’s hard to speak ill of Xbox Game Pass.
The service offers unrestricted access to hundreds of Xbox games – many of which are available from day one – for as little as $10 a month (or just $1 for the first month courtesy of a limited-time promotion).
Microsoft doubled down on this value proposition during last week’s Xbox Games Showcase. Many of the featured next-gen Xbox Series X titles will be available at launch on Game Pass.
That’s one of several reasons the service remains mostly in a league of its own. The sheer value can’t be understated. A reported user base of 10 million subscribers attests to this.
How does Microsoft do it while remaining profitable?
According to Xbox marketing head Aaron Greenberg, it doesn’t. Xbox’s best feature isn’t all that lucrative for Microsoft.
And that’s by design.
In an interview during a recent episode of the What’s Good Games podcast, Greenberg explained the company is very much banking on the long-term with Xbox Game Pass.
For Microsoft, “over-delivering” value is as persuasive and effective as any well-orchestrated marketing campaign thanks to the power of word-of-mouth.
With Xbox Game Pass, Microsoft is focusing on over-delivering on value, even if it comes at the cost of profits in the short term. It’s a different mindset. If you do optimize for profit, you can either say ‘How we do get as much profit out of each customer?’ or, do you pivot that and say, ‘How do we add as much value to our fans?’ ‘How can we actually over-deliver on value?’
If you do that, you build fans for life. When people feel like you’re over-delivering on value, they want to not only continue to use your service, but they want to tell their friends about it. The most powerful marketing is word-of-mouth marketing.
Ultimately, we think long-term that is the right thing for the business and will have long-term benefits for us. In the short-term, yeah, Xbox Game Pass is not a big profit play. But we think long-term it works out good for everybody.
Based on their latest move – merging the Project xCloud streaming service into Xbox Game Pass Ultimate at no extra cost – Microsoft has no plans to stop upping the value proposition anytime soon.
Last modified: September 23, 2020 2:09 PM