Microsoft’s recent Xbox Game Pass Ultimate price hike is the second increase since the service rolled out in 2019, and represents a +18% increase in a year’s time.
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As we had predicted in 2022, Microsoft recently made the decision to raise Xbox Game Pass Ultimate subscription prices to reflect the added value of new games, such as the gargantuan Call of Duty Black Ops 6. That’s not the only thing Microsoft did, though; the company also fragmented the value of Game Pass by removing day one first-party releases on its new Game Pass Standard tier.
The new multi-tiered structure gave rise to a price hike for the all-encompassing Xbox Game Pass Ultimate subscription. This appears to be an effort to offset cannibalization and ensure long-term revenue via the lease-based model of subscriptions versus the one-off premium purchase that companies like Activision enjoyed in the past; gamers can sub for one month of Xbox Game Pass Ultimate for $20 instead of paying $70 for new first-party games, including Call of Duty Black Ops 6.
5Looking at the pricing developments reveals interesting trends in the Xbox subscription model.
Xbox Game Pass Ultimate was first introduced in June 2019 with a $14.99 price point. This was a big bet to accumulate subscribers, the same way Disney bet on Disney+’s introductory $6.99 price to boost subscriber counts.
This introductory price held steady across a four-year period.
But in recent years, subscribers appear to have hit a wall, at least in Microsoft’s own walled garden of console hardware. Total Xbox Game Pass subscribers were at 34 million as of February 2024, and the number may not be growing as fast as Microsoft had hoped. So to push back against increased spending, and to help continually justify the $70 billion purchase of Activision Blizzard King, Microsoft hiked the price of Game Pass Ultimate.
The first price increase was in July 2023, where Game Pass Ultimate jumped by some 13% to $16.99 a month, up about $2 from its previous price tag.
This month, Game Pass Ultimate rose another $3 to $19.99, representing around an 18% price jump when rounded.
All told, Xbox Game Pass Ultimate has increased a total of $5 in a five year period, or a +33% price increase. Comparing by cost, that’s not such a big jump when related to streaming subscriptions.
However, the potential for revenue is much, much higher for interactive entertainment subscriptions by virtue of two things: 1) subscribers can buy games at a discounted rate, and 2) subscribers can also buy microtransactions and in-game content. These options are not available in streaming services such as Netflix and Disney+.
For example, based on previous details made from Xbox CEO Phil Spencer, we know that Xbox Game Pass revenues were between $1.258 billion – $1.887 billion in 2021, and $1.197 billion – $1.796 billion in 2022.
Revenue is not profit, however Spencer has said multiple times in the past that Xbox Game Pass is a profitable service.