Microsoft’s Xbox Game Pass Subscriptions Have Underperformed For Two Years

Microsoft’s Xbox Game Pass: According to a new financial filing, Microsoft’s all-access Game Pass subscription service failed to meet an annual business target connected to CEO Satya Nadella’s remuneration.

The significance: Microsoft’s ability to disrupt the gaming business has long been compared to the success of Game Pass.

It has also become a major topic of debate over the company’s $69 billion offer to acquire Call of Duty developer Activision Blizzard.

Details: As part of the company’s performance incentives for Nadella and other top executives, Microsoft set a goal of 73% growth for Game Pass for the fiscal year ending June 30, 2022. However, the expansion of the service was just 28%.

That’s a streak of two failures. After achieving the executive pay Game Pass objective in 2020, the corporation fell short of the mark in 2019.

The petition claims that the Xbox division has produced “over 25 million Game Pass subscribers,” while Microsoft does not disclose its actual Game

Pass Subscriber Target Numbers

Game Pass, available for the Xbox console and PC, provides customers with instant access to hundreds of games, including new releases from Microsoft, in exchange for a monthly charge.

It’s a departure from the conventional method of having customers pay in full before receiving their desired video game.
in the gaps: Phil Spencer, Microsoft’s president of gaming, described Game Pass as profitable but restricted in an interview with the Wall Street Journal at a tech conference yesterday.

• “Profitable for us,” he said, it makes up 10%-15% of the company’s content and services income (which includes gaming).
• Spencer was quoted by The Verge as saying that Game Pass had experienced “amazing” growth on PC but had slowed down on consoles “primarily because at some point you’ve reached everybody on console that wants to subscribe.”

Similarly, if there aren’t enough new AAA games on Game Pass, then the service’s expansion may stagnate. Microsoft has released fewer major exclusive games in the past two years than its competitors Sony and Nintendo, who do not include new releases in their subscription packages.

What makes this agreement so intriguing is that the U.K.’s Competition & Markets Authority has raised concerns about Game Pass as a reason for rejecting Microsoft’s acquisition of Activision.

If Microsoft were to add Call of Duty on Game Pass, the research claims, “there is a realistic chance of a major lowering of competition” in “multi-game subscription services.” The report is 76 pages long.

The notion is that if Game Pass were to offer the popular series, which typically accounts for any given year’s best-selling game, it would become tempting.

Microsoft, on the other hand, claims that this wouldn’t be anti-competitive enough to warrant blocking the contract, arguing that PlayStation can always respond by releasing stronger exclusives on its service or by launching Game Pass on PlayStation.

A fatal blow to the proposal could be dealt by the CMA’s decision to reject it, which is not expected until early next year. Microsoft’s Game Pass growth is the sole gaming-related performance target in the CEO compensation package, so it is a key statistic for the company.

Aside from this, we also hope to increase Microsoft Cloud revenue, Team utilization, and LinkedIn Sessions. This year, the Game Pass metric carried more weight than in previous years, and its potential payout to Nadella was more than $37 million in stock.

It’s likely not too distressing to have missed that statistic. Nadella received $55 million in cash and equity remuneration for the year ending June 30, 2022.

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