One of the more interesting things to come out of the UK’s Competitions & Markets Authority report on Microsoft’s acquisition of Activision Blizzard has to do with Game Pass. According to Microsoft, base sales of a game decrease after it becomes part of the service. The CMA stated in its report “Microsoft also submitted that its internal analysis shows a [redacted]% decline in base game sales twelve months following their addition on Game Pass.” Microsoft also recognizes that Game Pass does cannibalize direct purchases of games sales. An exact number is unknown. Following the news, Microsoft has since clarified its own admission.
Microsoft says that they try to help game developers make the most money they possibly can through Game Pass. Deals are made with developers and publishers on a title-by-title basis. Microsoft Gaming CEO Phil Spencer told The Verge “Our deals are, I’ll say, all over the place. That sounds unmanaged, but it’s really based on the developer’s need. One of the things that’s been cool to see is a developer, usually a smaller to mid-sized developer, might be starting a game and say, “hey, we’re willing to put this in Game Pass on our launch day if you guys will give us X dollars now.” What we can go do is, we’ll create a floor for them in terms of the success of their game. They know they’re going to get this return.”
Spencer also notes that Microsoft will pay for the full production cost of the game in certain cases. It protects them from any downside risks and allows developers to get the full retail opportunity on top of Game Pass. They can sell it on PlayStation, Steam, Xbox, and Switch. This gives devs all the retail upside and Xbox would get an opportunity for launching day and date. This would be a flat fee payment to a developer.
“Others want [agreements] more based on usage and monetization in whether it’s a store monetization that gets created through transactions, or usage,” Spencer said. “We’re open [to] experimenting with many different partners, because we don’t think we have it figured out. When we started, we had a model that was all based on usage. Most of the partners said, “Yeah, yeah, we understand that, but we don’t believe it, so just give us the money upfront.”
In its statement, Microsoft didn’t say anything about a cannibalization effect, but never said that this doesn’t happen.
“We’re focused on helping game creators of all sizes maximize the total financial value they receive through Game Pass,” a Microsoft spokesperson told GameSpot. Each game is unique, so we work closely with creators to build a custom program to reflect what they need, ensure they are compensated financially for their participation in the service, and allow room for creativity and innovation. As a result, the number of developers interested in working with Game Pass continues to grow.”