Game Pass is Reportedly Profitable Even if Taking Costs for First-Party Games Into Account

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Following his earlier comments about Microsoft’s Game Pass subscription service on social media, Christopher Dring – co-founder and editor-in-chief of The Game Business – has offered some additional insights. In a recent post, he reveals that, according to Xbox sources, Game Pass remains profitable, despite potential losses from first-party game studios’ titles being available on the platform.

It’s said that Microsoft keeps separate financial reports (Profit and Loss statements) for its self-produced game releases compared to Game Pass, because these games often generate income in ways other than just sales. For instance, contemporary releases may include microtransactions, expansion packs, and battle passes as additional revenue streams.

18 months ago, Dring inquired about what expenses are considered in the Profit and Loss statement (P&L) of Xbox Game Pass. Specifically, he wanted to know if the costs associated with internal studio games impact unit sales. He was informed that first-party games have their own separate P&L because they generate revenue through other means. This financial detail suggests that Game Pass might be profitable, but it could also put strain on the profit margins of internal games and potentially mean some studios are not earning as much (or any) profit.

It’s important to mention that these Profit and Loss statements do not include revenue generated by Microsoft from selling its games on alternative platforms such as the PS5. The income from separate sales on other platforms significantly boosts the earnings of first-party studios, which are independently recorded from the expenditure and profits associated with Game Pass.

Despite the various factors mentioned, Dring shared that even considering lost income from first-party game microtransactions, Game Pass remains profitable according to sources. In other words, this is fantastic news!

In his remarks, Dring clarified that when evaluating Game Pass financials, Microsoft does not typically factor in revenues deemed as “lost” due to the service.

As a gamer, I’d rephrase Dring’s post like this: “Dring mentioned that Game Pass is profitable due to fees, marketing, and service costs. However, he pointed out an important factor that’s often overlooked – the potential loss of income for Xbox’s first-party studios because of the service. If these studios were compensated similarly, the profitability might not be as accurate.

Previously, Dring pointed out that unlike third-party game publishers, first-party developers may not receive payment for including their games on the Game Pass service at launch. If this were different, it could significantly impact the profitability of the service, as first-party Xbox titles are made available through Game Pass on the day they’re released.

Back in the early days of this year, ol’ Phil Spencer, the big cheese at Microsoft Gaming, spilled some beans. He shared his thoughts on how Game Pass fits like a glove for me and gamers who jump from one title to another, rather than those who only play a couple of games a year, just like picking up a new comic book series.

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2025-07-08 17:41