Microsoft has announced price increases and a new tier for its Game Pass multi-game subscription offering. The highest tier, Game Pass Ultimate, will see price increases across all global markets, rising from $16.99 per month to $19.99 (+18%) in the US, going from £12.99 to £14.99 (+15%) in the UK and from €14.99 to €17.99 (+20%) in European markets. PC Game Pass, the PC-only version of the service, will also increase from $9.99 to $11.99 a month in the US, £7.99 to £9.99 in the UK and €9.99 to €11.99 in Europe. Game Pass Core, the basic multiplayer offering for the Xbox consoles, will also see price increases for a 12-month subscription of between 12% and 25%. All price increases will take place on the 12^th of September before the launch of the latest Call of Duty at the end of October.

Alongside news of these price increases, Microsoft also announced the upcoming launch of a new tier – Xbox Game Pass Standard – which will include access to a catalogue of Xbox console games bundled with multiplayer access on Xbox devices. This new service will exclude the inclusion of day-and-date (or ‘day one’ as Microsoft brands it) releases of games, a cornerstone of the Game Pass offering.

This new standard tier is poised to replace the existing Game Pass Console, which is now no longer available to new subscribers, although Microsoft has yet to confirm the launch date of the new tier. Conversely, Game Pass Console currently includes day one releases but does not include multiplayer gaming. Existing Game Pass Console subscribers will be able to maintain their offering for as long as they keep their subscription active.

Making the Game Pass offering on console more coherent

Microsoft’s changes to Game Pass are meant to improve the coherence of the offer but have also added another layer of complexity. Previously, Game Pass Console had its own challenges within the portfolio because it didn’t include multiplayer access, which is offered by Game Pass Core (or Xbox Live Gold as it was originally called).

However, it was impossible to bundle that into the Console version of Game Pass and maintain good differentiation from Game Pass Ultimate, which brings together the multi-game subscription service across PC and console, multiplayer access on console, EA Play and cloud streaming across multiple screens into one offer. Hence the need for a launch of a new tier at a more expensive price point but one that does not include day one releases to clearly differentiate it from Game Pass Ultimate.

With day one releases key to the value proposition for many consumers, this will inevitably drive most new subscribers to the Ultimate tier of the service, which is already the most popular tier. Ampere estimates that 74% of current Game Pass subs on console are the Ultimate version with Core and Console making up the remainder. The fact that most subscribers are on the Ultimate tier, and with existing Game Pass Console subscribers retaining access if they keep on subscribing, means third-party games that launch into Game Pass will not have their exposure significantly impacted by a lack of inclusion in Game Pass Standard.  

This shift makes sense in the context of the console subscription offer, but is partly at odds with PC Game Pass, which has no multiplayer subscription requirement, includes day one releases and is cheaper than Xbox Game Pass Standard. The move also now makes Game Pass on console – Core, Standard and Ultimate – aligned with its key competition: Sony’s PlayStation Plus Essential, Extra and Premium.

This might not be the last version of Game Pass to come to market. Microsoft is in the midst of building its own mobile app store, so we might also see a new mobile-focused version of Game Pass including perks related to King's portfolio of games such as Candy Crush Saga.  

Costs have increased and profitability is the key target

The commercial landscape for the games sector in 2024 is one focused on reining in costs and trying to deliver profitability. Microsoft has been pursuing that aim across its whole games portfolio and Game Pass is no exception. In some ways, Game Pass’s profitability is driven by its scale, and with growth slowing, the company needs to look at other ways of driving up spend per user to offset escalating costs.

However, reaching an audience off console and PC does not necessarily deliver profitability because the distribution costs in cloud gaming are significant – far more than just downloading games. As such, Microsoft needs existing subscribers to pay more, while also paying less to license games. The need to act has also been driven by the confirmation that new Call of Duty releases will be added to Game Pass Ultimate: Because that is such a significant annual premium release, offsetting some of the costs of that move was necessary.

Microsoft is mitigating the impact by improving consumer ARPU through price increases, driving users to the Ultimate tier of Game Pass, and limiting the subscription stacking for Game Pass Console to 13 months. Gamers who want to dip into Game Pass to play the new release will have to do it at the Ultimate (or PC) tier.

These strategies together should help increase ARPU significantly at the end of 2024 and into 2025. Ampere estimates that global Game Pass ARPU across all service tiers will increase by 5.4% in 2024 and that is expected to jump to an increase of 15.3% in 2025. Global consumer spending on Game Pass as a whole is expected to reach almost $5.5bn in 2025.  

Other approaches Microsoft can take to mitigate the impact were outlined in this earlier Insight piece: https://www.ampereanalysis.com/insight/new-call-of-duty-in-game-pass-ultimate-boost-and-sony-disruption