I remember that even Microsoft itself in the past sold Game Pass as the Netflix of video games. A comparison that back then seemed right. However, today they like it less since video streaming services are in the doldrums; with losses in profitability and a model that is difficult to sustain.
To this we must add the uncertainty around whether Game Pass is part of what would be a “Netflix” or not; Personally, it always seemed like a model more similar to Prime Video, but people liked the other option.
Community is the key to Game Pass
Yesterday, in a recent interview with Polygon, Phil Spencer stated that he was never convinced by the comparison with Netflix, and that their service is more complementary than anything else. In addition, the manager ensures that the key is in the commitment and value to offer subscribers.
To eliminate the comparison, Spencer assures that Game Pass has a differentiating element, which is the community, that is something that does not exist in video or music, which makes this model unique.
I have never been a fan of the “Game Pass is the Netflix of games” thing. Not because Netflix isn’t a great brand. I love netflix. But as you know, video games have a very different financial model than video. Many of the video games out there are sort of a financial engine unto themselves. So for us, when we think about Game Pass, it’s as much about curation as it is about distribution as it is about value.
We found in talking to our customers that the first thing that mattered to them was that we curate a great wallet for them that they could access anywhere they wanted to play. And really, we weren’t getting a lot of feedback like, “I’m doing the math on how much I’m paying each month versus how many games I’m playing.”
When I think of Game Pass, I think of it more as community-led, both from the creator side and the player-led side. What you wouldn’t say about streaming video services today. Most of them don’t have any sense of community, right? You log in and you can’t talk to someone about how you feel about a show, actor or actress.
We know in video games that a community is very critical. So when we think about bringing Game Pass to other endpoints, we want to make sure that as Game Pass moves, the community moves with it. So Xbox Live has to be there. We want to make sure your status has moved with you, so your games are there, your achievements are there. And we want to make sure that you can go play with your friends. If you’re sitting on a cloud device, someone else is on a PC, and someone else is on an Xbox, and everyone wants to play Sea of Thieves, then great. We want to allow that.
So I think in some ways it’s more complicated than music or video. Because there is a community and multiplayer aspect that is fundamentally what Game Pass is. That adds some complexity. But I also think it adds opportunities.
Xbox is a profitable business and they are growing with the support of Microsoft
Another important piece of information is the turnover that Xbox represents within the global company, Microsoft. A figure that fortunately continues to grow. The division is also profitable, which means that everyone within the software giant is happy.
I would say that we can take a long-term view of our finances and our success. We’re about to… call it 10% of Microsoft’s revenue right now. So Microsoft is not going under or anything based on the success of Xbox today. So it allows us to get some long-term perspectives of what our success looks like. We run a profitable business within the company and that is important. We do it today. We want to grow that; We keep growing. That is an important part of our strategy.
But I would say that the most important thing that Microsoft gives us is stability and a long-term perspective, more than any single type of technology. And that is a very important component of who we are.