Game Pass’ updates mark a new era for Xbox

Xbox recently announced significant changes to its subscription offering ahead of Call of Duty: Black Ops 6 hitting the service. In September 2024, Xbox is:

• Increasing prices for Game Pass Ultimate from $16.99 to $19.99 a month, and Game Pass PC is jumping from $9.99 to $11.99 a month, with similar changes in non-US markets
• Removing Game Pass Console for new subscribers, which we predicted a month before the announcement. The Consoletier will remain an option for current subscribers. It offers day-one access to first-party games but not the ability to play premium multiplayer games online
• Adding a $14.99-a-month Game Pass Standard tier on console, including access to the multiplayer for online premium games and a game library (but not day-one access to first-party games)

Why is Xbox upping the Game Pass pricing?

While there will be periods of growth for Game Pass in line with high-profile content drops,  the service’s growth phase is mostly over on console (and has been for a while). PC has more room for growth, but peeling PC players away from Steam is extremely challenging. Epic Games is even struggling to poach Steam aficionados with free games.

Call of Duty will attract some Game Pass subscribers on console and PC. After all, MIDiA data shows over a fifth of all consumers play – or have played – a Call of Duty game. Xbox is looking to maximise average revenue per paying user (ARPPU) and onboard new subscribers with the higher pricing precedent.

But the price hikes might be a tough pill to swallow for current subscribers and potentially regulators, as Xbox previously said to a British regulator it would not raise Xbox Game Pass prices due to its Activision Blizzard merger.

Still, the games market is resilient to price hikes, as shown by gamers accepting $70 games and increased console prices with few complaints (even during tough economic times).

Ultimate now costs roughly $240 a year – the price of just over three new games. Therefore, this tier is only for highly engaged gamers with time to play multiple games per year.

However, 37% of console gamers and 34% of PC gamers play for more than 10 hours per week, meaning the total addressable market for Game Pass Ultimate subscribers is significant.

Xbox recently pleased fans with an impressive roster of upcoming games, so plenty of players will pay more for the privilege to play. Given Xbox’s stacked content pipeline, we expect to see more price increases in the future.

Why is Xbox removing Game Pass Console for new subscribers?

European Commission documents from the Activision Blizzard acquisition suggested that around 70-80% of Game Pass subscribers are on the Ultimate tier on console, so just a slither are on the Console tier. Unlike Ultimate, Game Pass Console does not give subscribers online multiplayer access to premium games like Call of Duty.

Game Pass Console allows access to Black Ops 6 on day one but not its online mode, which could be confusing for players. Xbox is removing this tier to remove that confusion, replacing it with one more aligned with Xbox’s new mindset.

Why is Xbox adding the Game Pass Standard tier?

Game Pass Standard, a replacement for the legacy Console tier, resembles the lowest-level tier, Xbox Game Pass Core. However, Standard has a more fleshed-out library of games (albeit also without day-one first-party access).

Xbox is essentially hoping to do three things with Standard:

• Maximise ARPPU for new subscribers, as Standard costs $14.99 a month, $4 more than the previous Xbox Game Pass console tier
• Create a half-step from Game Pass Core to Ultimate, making the subscriber upsell journey to the highest staggered (with less sticker shock)
• Re-train Xbox players to buy new premium games again: Cannibalised premium revenues have been a massive opportunity cost for Xbox (slightly offset by paid early access). On console,non-Ultimate Game Pass subscribers might opt to buy first-party games again on a case-by-case basis

That said, regulators are already making their frustrations clear around Xbox’s more expensive Standard tier (that does not offer premium online multiplayer access):

‘’This product costs 36% more than Console Game Pass, and withholds day-one releases, said the FTC in a letter. ‘’Product degradation—removing the most valuable games from Microsoft’s new service—combined with price increases for existing users, is exactly the sort of consumer harm from the merger the FTC has alleged.’’

Some fans will also be disgruntled by the changes. But as always, this will be a vocal minority. Xbox should nevertheless tread carefully in not pushing subscribers too far. Churn is a real risk, and some subscribers might simply unsubscribe during quieter months for content.

What’s next for Xbox and Game Pass?

To help provide a lower onboarding ramp for Game Pass, Xbox will likely launch an ad-supported Game Pass tier in the future. 

Speaking more generally, Xbox’s evolution from hardware brand to platform and third-party publisher is continuing. The Xbox console and PC (and Game Pass on these platforms) will remain vital for Microsoft’s gaming ambitions, but those segments have reached – or are reaching – saturation.

“We’re a business. I’ve said over and over. I don’t get any luxury of not having to run a profitable growing business inside of Microsoft,’’ Xbox boss Phil Spencer told Polygon earlier this year.

Spencer is putting his money where his mouth is. The changes reflect Xbox's strategy of upselling fans to Ultimate and increasing ARPPU ahead of the company's huge off-platform, mobile, and cloud push.

The timing of the changes may cause some confusion, though, as the words ‘’play it day one with Game Pass’’ flashed on the screen no fewer than 15 times during Xbox’s June Showcase, and the event made sure to hammer this point home for Black Ops 6.

The changes mean that of Xbox’s four Game Pass tiers – Core, Standard, PC, and Ultimate–  only half offer day-one access to games. Of the three console tiers, just one has day-one access (Ultimate).  

Xbox must now rise to the challenge of keeping its current fans happy (and in the loop) while increasing its total addressable market, entering challenging uncharted waters like mobile and cloud, and – ultimately – growing its revenues and user base.