Microsoft Is Going for a Gaming Hail Mary

The company is putting a huge game on its subscription service but may be leaving a staggering amount of revenue on the table.

Photo of Call of Duty game on a TV screen
Photo by Fábio Magalhães via Unsplash

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Microsoft is more killer than casual gamer.

The tech giant said last week it’s putting the new “Call of Duty” video game straight onto its subscription service, Xbox Game Pass, where users pay monthly to access a catalog of games. It’s not an entirely surprising move, given Microsoft spent $69 billion buying the company that makes the game, but it is leaving a staggering amount of revenue on the table, all because it’s banking that it can pivot to streaming.

Tactical Nuke

The Game Pass has been something of a saving grace for Xbox  — while the consoles were outsold by its competitors, it still generated extra monthly revenue. Microsoft’s gaming chief Phil Spencer said in 2022 that Game Pass accounted for around 15% of Xbox’s total revenue. The trouble is when you put high-budget, blockbuster games on the service the same day they’re released, you’re cannibalizing your business. Scratch that, you’re devouring it.

And you don’t really get more blockbuster than “Call of Duty.” Rhys Elliott, a games industry analyst at MIDiA, told The Daily Upside Microsoft is passing on an eye-watering amount of sales revenue: 

  • “Let’s put it this way: If 7 million Xbox Game Pass subscribers were planning to buy ‘Call of Duty’ for $70 but now have no reason to (as it’s part of their subscription), that leaves almost half a billion dollars of revenue on the table,” said Elliott.
  • The upper limit for sales is also much higher than 7 million. In 2020, “Call of Duty: Modern Warfare” sold over 30 million copies (although that was in early-pandemic lockdown, when people were buying video games more voraciously).

Elliott said the upside for Microsoft isn’t really about Xbox users. “Game Pass growth numbers on the console have mostly saturated at this point … Game Pass on PC, however, still has plenty of room to grow, so ‘Call of Duty’ could lead to an even bigger influx there.”

All or Nothing: To Elliott, this move shows that Microsoft is pushing its Game Pass business strategy to the limit. “Game Pass has not grown as quickly as Xbox had hoped, as shown by leaks,” he said. “‘Call of Duty’s’ inclusion will be a make-or-break moment for the strategy. If ‘Call of Duty’ can’t give Game Pass the growth it needs, nothing will. Its strategy would need to shift,” he added.

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