Xbox Game Pass Could Cause a Spotify Effect! - Ultimate Guide

Former Microsoft exec Ed Fries is convinced that Xbox Game Pass is going to harm the industry. However, industry insiders argue that subscription services allow more people to play the games and boost in-game purchases. With millions of people tuning in to watch esports matches on Twitch and Youtube and betting on top sites like gg.bet, it is hard to argue that subscription services are hurting the gaming industry. However, Fries may be right that the days of buying games may be over!

What is Xbox Game Pass?

Xbox Game Pass was launched in 2017 and, for a single monthly fee, gives players access to a wide range of rotating games. The subscription model has proved a big hit with gamers, and Xbox Game Pass currently has just under 30 million subscribers. Microsoft said they believe that subscriptions will not become a dominant revenue stream for video games but could play a key role in growing the number of players and driving in-game purchases.

Former Microsoft exec Fries is not happy about Xbox Game Pass and believes that the subscription model will become the primary way players access games, and soon nobody will purchase video games. Fries compared Xbox Game Pass to Spotify and said what Spotify did to the music business, Xbox Game Pass will do for the gaming industry.

Fries claimed that Spotify wreaked havoc on the music industry and crushed music sales. He claimed that annual revenue in the music business was halved, and that nobody buys songs anymore. He pointed out that Apple is even going to stop selling music via iTunes because sales have declined so much.

He warned if the gaming industry is not careful, there could be a repeat of the crash in the gaming industry in the 80s or the education software business in the 90s, which he witnessed. The problem with Fries comments is that Spotify, according to many music experts, actually revived the music industry, which had been obliterated by piracy. Spotify has convinced millions of consumers to pay for music via a monthly subscription fee when they can quite easily pirate music for free. Low monthly subscription fees and easy-to-use platforms may help grow the gaming industry and attract millions of new players.

Could Xbox Game Pass Actually Help Game Developers?

Many gaming insiders have taken the opposite view to Fries. They argue that subscription services are beneficial to game developers because they create a new revenue stream and allow millions of new gamers access to their titles. For example, you could have a great game that flies under the radar, and nobody is willing to spend $60 to purchase it. However, if this same game is added to Xbox Game Pass, suddenly, millions of players try it out for free, which causes both $60 outright purchases to explode as well as in-game purchases.

Xbox is also not convinced that Game Pass won’t swallow outright game purchases because many players are only interested in a couple of games. Therefore paying a monthly fee does not appeal to them because they can happily buy 1 game a year. Also, in-game purchases are more lucrative than the initial purchase price of video games. So by allowing millions of players to enjoy games for a small monthly subscription fee, they are more likely to drive higher revenue from in-game purchases. Microsoft CEO Satya Nadella said in 2021 that Xbox Game Pass users spend 50% more on gaming via in-game purchases than non-subscribers. The jury is still out if Xbox Game Pass will cannibalize the gaming industry or be a catalyst for new growth. We will have to wait and see!