Microsoft’s big Xbox Game Pass bet is starting to pay off

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Microsoft now has 10 million subscribers to its Xbox Game Pass service, the company confirmed during an investor call yesterday. It’s the first time Microsoft has publicly disclosed Xbox Game Pass numbers, and it’s a sign that the company’s ambitious bet on subscription gaming is starting to pay off. Microsoft has been trying to build a “Netflix for video games” for years, and it looks like it’s taking an early lead before a significant expansion to game streaming later this year.

10 million Xbox Game Pass subscribers is a significant milestone. EA’s competing subscription services, EA Access and Origin Access, hit more than 5 million subscribers last year, and Sony’s PlayStation Now subscriber base reached 1 million in October, five years after its debut. Apple and Google haven’t disclosed numbers for Apple Arcade or Google Play Pass, and Nvidia’s GeForce Now service reached 1 million users shortly after its launch.

Microsoft is also sharing some additional Xbox Game Pass statistics today. “Since March, Xbox Game Pass members have added over 23 million friends on Xbox Live, which is a 70 percent growth in friendship rate,” explains Xbox chief Phil Spencer. “Game Pass members are also playing twice as much and engaging in more multiplayer gaming, which has increased by 130 percent.”

Xbox Game Pass multiplayer statistics.

A lot of this increased usage could be attributed to the coronavirus pandemic, and increased gaming activity that we’ve seen elsewhere. Xbox Live active users jumped to nearly 90 million this quarter, which includes Xbox, Windows 10, and mobile devices using Xbox Live.

Xbox Game Pass is currently available in 41 markets worldwide, priced at $9.99 per month for console access with more than 100 titles in the library that subscribers can download and play. Microsoft also expanded to Japan and Korea earlier this month. The software maker has been aggressively building up Xbox Game Pass since its debut nearly three years ago, and has regular introductory offers to incentivize people into subscribing to the service.

It’s still difficult to measure the revenue impact of Xbox Game Pass on Microsoft’s earnings. Xbox content and services increased by just 2 percent in the recent quarter, despite increased engagement during stay-at-home pandemic-related orders.

There are a variety of ways to subscribe to Xbox Game Pass too, and Ultimate versions even include Xbox Live Gold access. Microsoft also launched a PC version of Xbox Game Pass last year, with more than 100 titles available as part of the monthly $4.99 charge during the beta period.

Xbox Series X.

Microsoft is now gearing up for the next significant stage of Xbox Game Pass: streaming. “Later this year our cloud game streaming technology, Project xCloud, will come to Game Pass,” says Spencer. Microsoft hasn’t revealed pricing for the combination of Xbox Game Pass and xCloud, but it’s reasonable to assume the streaming aspect will likely be bundled into some Game Pass tiers.

After dodging Xbox One sales numbers for years, Microsoft is clearly confident enough in its Xbox Game Pass strategy to reveal some early success rates. The company boldly claimed it wanted to reach “2 billion gamers in the world” two years ago, and the combination of Xbox Game Pass and xCloud will be key to that.

Microsoft faces some roadblocks, though. Xbox Game Pass and Project xCloud are only available on Windows PCs, Xbox consoles, and Android devices. Microsoft is still working through some restrictions with Apple’s App Store policies, and there’s no signs yet that Xbox Game Pass or xCloud streaming will be available on Sony’s PlayStation 4 or Nintendo’s Switch consoles. Microsoft did partner with Sony last year, with Sony now looking to Microsoft’s vast cloud experience to help power its existing and future streaming services.

That unique partnership hints at where the industry is heading, as Microsoft and Sony look to share tech to fend off new competitors. Google launched its Stadia game streaming service last year, and it’s attempting to leverage its strong base of YouTube, Gmail, and search to convince people to subscribe to Stadia Pro. Spencer has also previously admitted that Microsoft sees Amazon and Google as its main gaming competition for the future, not Sony and Nintendo.

Google Stadia Controller

Google Stadia.

Microsoft missed the hardware sales opportunity during this current generation of Xbox consoles, lagging behind Sony’s PS4 sales and even Nintendo’s Switch sales according to industry estimates. Xbox Game Pass offers a new path forward for Microsoft, particularly if the company can launch some solid first-party exclusives for the service ready for the Xbox Series X and beyond.

How Microsoft positions the combination of Xbox Game Pass, Xbox Series X, and Project xCloud, remains to be seen. Pricing will be key here, and Microsoft has already committed to Xbox All Access bundles that split the cost of an Xbox Series X console, Xbox Game Pass, and Xbox Live into monthly payments. A second next-gen Xbox that’s cheaper and less powerful looks like an ideal pairing for Xbox Game Pass, but Microsoft isn’t ready to discuss these plans just yet.

“We’re also inspired to deliver you our fastest, most powerful console ever that will set a new bar for performance, feel, speed and compatibility when it releases this holiday; as well as a library of games from our 15 Xbox Game Studios and thousands of development partners around the world,” says Spencer. The combination of a new Xbox console, Xbox Game Pass, Project xCloud, and 15 Xbox Game Studios certainly sounds impressive on paper. It’s now up to Microsoft to prove it can combine all these Xbox efforts and succeed with its plan to reach 2 billion gamers.

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