Microsoft says Xbox Game Pass is profitable as it sees subscription growth slow

Microsoft Gaming CEO Phil Spencer has revealed that the company’s Xbox Game Pass subscription service is already profitable. Speaking at The Wall Street Journal’s Tech Live conference, Spencer also revealed that Xbox Game Pass is around 15 percent of Microsoft’s overall Xbox content and services revenue.

Spencer says he now expects Xbox Game Pass to stay at around 10–15 percent of Microsoft’s Xbox content and services revenue and that “it’s profitable for us.”

“Game Pass as an overall part of our content and services revenue is probably 15 percent,” says Spencer. “I don’t think it gets bigger than that. I think the overall revenue grows so 15 percent of a bigger number, but we don’t have this future where I think 50–70 percent of our revenue comes from subscriptions.”

It’s a rare insight into Microsoft’s Xbox console and Game Pass subscription businesses, particularly as Spencer suggests Xbox Game Pass won’t dominate Microsoft’s gaming revenue. There’s a reason for that, as there are only so many Xbox console owners that can subscribe to the service.

“We’re seeing incredible growth on PC … On console, I’ve seen growth slow down, mainly because at some point you’ve reached everybody on console that wants to subscribe,” explains Spencer.

Microsoft just revealed that it saw PC Game Pass subscriptions increase by 159 percent year over year and that more than 20 million people have streamed games on Xbox Cloud Gaming, up from 10 million earlier this year. PC looks like an obvious growth area for Microsoft, but there’s always mobile, too.

Microsoft is building an Xbox mobile gaming store to take on Apple and Google, but it will face challenges in growing Xbox Game Pass on platforms like iOS, where it’s currently impossible to offer rival stores and even cloud gaming apps. Spencer acknowledged those challenges, but he thinks Microsoft is playing the long game on a mobile Xbox store.

“If you take a long-term bet, which we’re doing, that we will be able to get access to players on the largest platforms that people play on — Android and iOS phones — we want to be in a position with content, players, and storefront capability to take advantage of it,” says Spencer. Microsoft’s Activision Blizzard deal is key to the company’s mobile gaming efforts, and it’s quietly building a mobile Xbox store that will rely on Activision and King games.

Pricing was another hot topic during Spencer’s appearance at WSJ Tech Live. While Microsoft hasn’t increased the price of Xbox Game Pass or its Xbox consoles, that might not hold for much longer, and Spencer has hinted changes could be on the way in the future.

“We’ve held price on our console, we’ve held price on games and our subscription. I don’t think we’ll be able to do that forever,” admits Spencer. “I do think at some point we’ll have to raise some prices on certain things, but going into this holiday we thought it was really important that we maintain the prices that we have.”