Xbox Clarifies Its Own Admission That Game Pass Cannibalizes Some Game Sales

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Microsoft has clarified its own admission that putting games into Xbox Game Pass can, in some cases, lead to a decrease in sales. Responding to the many headlines recently about the cannibalization effect for Game Pass releases, Microsoft shed some further light on the matter.

In a statement to GameSpot, a Microsoft spokesperson said Microsoft tries to help game developers make the most money they possibly can through Game Pass. As such, Microsoft cuts deals with developers and publishers on a title-by-title basis, the terms of which are not made public and are presumably not consistent across the board. In its statement, Microsoft didn’t comment specifically on any cannibalization effect, but it also didn’t say this never happens.

Given the size and scale of Xbox Game Pass, the custom financial arrangements for each game, and all manner of other potential contributing factors, it certainly seems that some Xbox Game Pass titles would see their full-game sales affected by being included in Game Pass. In other cases, however, game sales may grow over time thanks to being included in Game Pass.

Microsoft submitted to the UK’s Competition & Markets Authority that a certain percentage (that was redacted) of base game sales decline 12 months after being added to Game Pass.

“We’re focused on helping game creators of all sizes maximize the total financial value they receive through Game Pass,” a Microsoft spokesperson said. 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.”

The statement went on: “Xbox Game Pass offers gamers and game creators more choice and opportunity in how they discover, experience, and deliver games. For gamers, that means providing another option for them to discover games and play with friends at a great value. For developers, that means creating another option for how they monetize their games.”

Microsoft Gaming CEO Phil Spencer himself has spoken openly about how there is no one defined path for the deals it makes for Game Pass releases. He told The Verge that Microsoft’s Game Pass deals are “all over the place,” and he understands that this might sound “unmanaged.” In some cases, Microsoft will completely fund the development costs of a game, and the studio can go sell their game on rival stores like PlayStation and Steam, or at retail, while Microsoft enjoys the benefit of having another Game Pass game. “For them, they’ve protected themselves from any downside risk. The game is going to get made. Then they have all the retail upside, we have the opportunity for day and date. That would be a flat fee payment to a developer,” he said.

In other cases, a game might be finished, and then Microsoft works out a straight cash deal to bring it to Game Pass, Spencer said. Still, other deals involve usage and how much monetization a game has through in-game sales. If this all sounds like the Wild West, it’s because it is.

Spencer has been frank in acknowledging Microsoft doesn’t have all the answers. “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,'” he said.

The indie game Descenders saw its sales quadruple after it arrived on Game Pass, for example. Of course, there may be some confirmation bias here, as developers aren’t exactly coming forward to share stories of how poorly their games sold after coming to Game Pass. It’s reasonable to assume that, of the hundreds of games on Game Pass, not all have succeeded.

The economic realities of Game Pass may never become clear, in part because Microsoft will not (of course!) publicly share the terms of its deals with developers and publishers. At a higher level, Microsoft doesn’t even disclose Xbox console sales numbers anymore, as the company instead focuses on ambiguous “engagement” metrics that can be spun and positioned to Microsoft’s benefit.

The new commentary around Xbox Game Pass is coming to light as Microsoft submits documents and gives interviews to regulatory bodies around the world, including the CMA, as it attempts to help appease regulators and get the $68.7 billion acquisition of Activision Blizzard approved.