Xbox is once again cautiously skirting around its first-party next-gen game pricing plans.
Speaking at the Jefferies Interactive Entertainment conference last week , Xbox CFO Tim Stuart offered yet more corporate platitudes to avoid addressing whether Microsoft it is eyeing up a first-party price jump.
Asked whether the company planned to follow in the footsteps of other publishers and raise pricing on first-party AAA titles, Stuart said:
“I think we’re not making specific announcements on first-party pricing yet. So we’ll do that sort of in due time. I think if publishers can find a price point that works for their audience, defines a price point that works for the maximization of, I’ll say users and revenue, because you want to drive engagement.”
The CFO continues
“Prices have not gone up for a couple of generations now, so it’s not unheard of to see things like this going on. Content creation costs go up. And these publishers and content creators, including ourselves, want to make sure you’re driving the right gross margin profiles, the right earnings profiles of what it takes to build these new, awesome, amazing games. And you want to make sure you have a good top line to support that.”
Xbox’s current first-party pipeline, which lacks any imminent big-budget next-gen releases after the delay of Halo Infinite, affords it the luxury of time. Unlike Sony, whose entry into the next-gen featured several first-party titles, Xbox is under little pressure to reveal its cards. There’s been no commercial or marketing imperative to lay its first-party pricing plans on the table.
A steady flow of publishers is slowly pivoting to higher next-gen game prices, including Take-Two Interactive, Activision, and Sony. Like many other publishers, Microsoft will likely follow suit, swept in by the inevitable pull of additional profits. The gaming giant appears content to let others bear the brunt of the backlash from gamers for the time being and wait on the sidelines to see how it plays out.
As former PlayStation executive Sean Layden noted back in June, the current AAA model isn’t unsustainable. The development cost of fifty-hour experiences willed into existence over five years are only set to balloon with the new generation. As it stands, budgets for AAA titles easily surpass $100 million without factoring in marketing costs.
In particular, Layden points to the previously-unmovable $60 basic price point as the most crucial factor in this unsustainable model. In some respects, the higher retail cost of games warrants the price increase, an argument fielded by publishers who’ve already made the jump.
Rather than up the price as the current trend seems to be surging towards, the ex-PlayStation Worldwide Studios head offers an alternative: scaling back games to shorter 12-15 hour experiences developed over three years.
The biggest hurdle to returning to these more focused types of games is the sheer demand among gamers for glitzy, sprawling AAA experiences. Modern expectations demand high-budget next-gen titles, as evidenced by the profits swept up by the Call of Duties and Red Dead Redemptions of the gaming world.
Publishers will always follow the money, and discounting a few rare outliers among the sea of anonymous low-budget games (Among Us, Fall Guys, and Phasmophobia, to name the most recent), the most reliable source of sales are costly AAAs.
As eloquent as Microsoft has been about framing this generation as player-focused and offering value in both Xbox Game Pass and the Series S, tiptoeing yet again around what seems a certainty appears somewhat disingenuous, dampening the goodwill amassed during a mostly transparent and forthcoming lead up to the Xbox Series X/S launch.