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



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.”



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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.



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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.


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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.



 
Xbox Series X still set to launch on schedule, but games could be delayed



Microsoft’s Xbox chief, Phil Spencer, says the company’s next-gen Xbox Series X console is still on schedule for later this year, but game production is a little more of an unknown. In an interview with CNBC, Spencer notes that there could be “some impact” to Xbox Series X schedules, but that “the teams are doing a very good job with keeping our hardware on track” and “overall we’re in line with where we thought we would be.”


Microsoft hasn’t provided an exact release date for the Xbox Series X beyond holiday 2020. Several official Xbox sites listed a launch date of “Thanksgiving 2020” back in March, but Microsoft said this was inaccurate and the company was still committed to launching in holiday 2020. If Microsoft was planning to launch the Xbox Series X as soon as November, the company’s vague holiday 2020 schedule gives Microsoft some wiggle room either way.


While the hardware is still on track, things are less clear on the game front. Microsoft has only officially committed to launching Halo Infinite alongside the Xbox Series X, but even this title and other first-party games won’t be exclusive to the new Xbox.

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“I’d say the bigger unknown is probably the game production, just being honest,” says Spencer. “Game production is a large scale entertainment activity now, you have hundreds of people coming together, building assets, working through creative.”


Xbox game developers are now mostly working from home, creating and sharing assets that are often gigabytes in size over US home internet connections — an obvious challenge. “On the game production side, we’re learning every day,” admits Spencer. “I still feel good about it, but I also need to make sure that the security and safety of the teams is the most important thing, and not unduly push when things just aren’t ready.”


Microsoft teased Halo Infinite two years ago, and provided more glimpses of Master Chief in a five-minute video last year. We still know very little about the game, beyond that it continues the current storyline after Halo 5, and appears to be an open-world version of Halo. Microsoft has also been building a new Slipspace Engine to power the game.

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Microsoft has already delayed Wasteland 3 and Minecraft Dungeons due to the ongoing coronavirus pandemic, and there are fears Halo Infinite could see some form of delay, too. Spencer said last month that “things right now aren’t easy,” in an interview with IGN. “Things are stretched. I can feel it in the teams — they are stretched.”


Microsoft is now planning to showcase games for the Xbox Series X during an online event next week. The software giant will show third-party titles, and will hold back its own Xbox Game Studios titles, like Halo Infinite, for an event in the summer.


Next week’s event will give us a first good look at how game developers are optimizing for the Xbox Series X. It’s likely that most early games we see will be enhanced for the Xbox Series X in a similar way that titles were optimized for the Xbox One X and PS4 Pro launch. Expect to see a big focus on frame rates, load times, and ray tracing.


It’s also a chance to see how many games will take advantage of Microsoft’s upcoming Smart Delivery program for cross-generation games between the Xbox Series X and Xbox One. Smart Delivery allows you to buy an Xbox One version of a game and get the upgrade to the Xbox Series X version free of charge. Assassin’s Creed Valhallathe new viking-based iteration of the popular franchise — will support Smart Delivery, which is an encouraging sign for the next generation of consoles.



 
Microsoft has been killing it with the Series X. I just feel that too many people still waiting for Sony the Savior to swoop in and do better.
 
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