Microsoft Expands Game Pass as Regulators Fret Over Activision Deal

Bloomberg2023-02-28

The subscription service, which dominates competing efforts from Sony and Amazon, is moving into dozens of new countries.The Xbox console has been the key to Microsoft Corp.’s clout in the gaming ...

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June_C
2023-02-28
June_C
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As gaming continues to expand far beyond bulky devices that people plug into their television sets, the company is evolving to keep pace with gamers. But its transformation is beginning to raise hackles among regulators who say Microsoft could be even more dominant in the industry’s next era, especially if it completes its proposed $69 billion acquisition of gaming giant Activision Blizzard Inc.A key to Microsoft’s strategy is Game Pass, a six-year-old service that charges users $10 to $15 a month to play a collection of more than 400 games on the Xbox, Microsoft’s Windows PC operating system, smart TVs, smartphones and tablets. As of January, the number of users who accessed the service on three or more devices had grown 20% compared with the same period the year before. On Feb. 28 the company will expand Game Pass to dozens of new markets, including in Latin America, the Middle East and Eastern Europe, almost doubling the number of countries where it’s available to 86.Gaming subscription services are currently a relatively small portion of the broader gaming market. But Microsoft sees its Netflix-esque gaming experience, running on a wide range of devices, as the future of video games. “When I look at the industry today, that’s not where it is, but it is where it wants to be,” says Sarah Bond, Xbox’s vice president for game creator experience and ecosystem.The company’s success with Game Pass, which has more than 25 million subscribers, has been notable in comparison with its major competitors. Amazon.com Inc.’s Luna service has been steadily losing games in its catalog, and Alphabet Inc.’s Google shuttered its game subscription service altogether in January. Even Sony Group Corp., long the leader in the gaming market, is struggling to compete. It hasn’t offered its biggest gaming titles on its own subscription service, PlayStation Plus, with the initial release, depriving Sony of the hype Microsoft attracts with splashy Game Pass releases.Microsoft has clear advantages over its competitors in both content and infrastructure. It owns about two dozen game studios, including the ones behind hit franchises Minecraft and Halo, and has built-in delivery systems on the Windows operating system and Xbox console. It also operates one of the world’s biggest cloud computing networks in Azure. This is a crucial distinction between Microsoft and Sony when it comes to cloud gaming, where games are streamed directly from central servers instead of downloaded in advance. One tier of Game Pass offers cloud gaming, and Microsoft’s cloud network helps it to provide the service with low latency, the lag time between when something happens on a server and when it’s reflected on a user’s device.“It’s a big, industrial-sized investment,” says Joost van Dreunen, a lecturer on the business of games at New York University’s Stern School of Business. “By taking the games out of the box—away from the PlayStations and Xboxes—and turning them into a digital service, or ultimately a cloud-based service, Microsoft finally found a way to outmaneuver the PlayStation.”This year’s geographic expansion is a way for Microsoft to capture audiences for whom console gaming has historically been out of reach. “A lot of folks are going to be experiencing Xbox for the first time,” says Xbox Chief Marketing Officer Jerret West. For much of the Game Pass activity in regions such as Latin America and Southeast Asia, where gamers are more likely to use cheaper PCs or mobile phones, streaming can “play more of a primary role in a gamer’s experience,” he says.Microsoft declined to share the total number of subscribers in any market but says Game Pass membership in Vietnam doubled in January alone and has doubled over the past two years across Asia, where 80% of the online population plays mobile games.Microsoft’s interest in buying Activision Blizzard is centered on securing content to draw in new gamers. Activision Blizzard makes some of the most recognizable titles for core console gamers and casual smartphone users. Its first-person shooter Call of Duty has tens of millions of monthly active users, and King, its subsidiary that publishes the mobile gaming megahit Candy Crush, attracted 233 million monthly active users in the quarter that ended December 2022.Regulators in the US, Europe and the UK, which are all reviewing the deal, are already expressing concerns about Microsoft cementing its preeminent position in a nascent market. “Microsoft has a combination of assets that we provisionally consider is difficult for other cloud gaming service providers to match,” the UK’s Competition and Markets Authority, the country’s primary antitrust regulator, wrote in its preliminary findings in February, citing the Windows operating system, Xbox Cloud Gaming and Azure, and Microsoft’s existing ecosystem of consoles and games. The CMA wrote that the merger could result in a “substantial lessening of competition” in the console and cloud gaming services markets.Microsoft doesn’t make the terms of its Game Pass licenses public, but developers say they often receive upfront payments to include their titles in the catalog, along with bonuses for games that do well on the service. A major plank of its pitch is that Game Pass brings a level of sustained engagement.Some skeptical analysts and developers say that engagement on streaming comes at the expense of more lucrative one-off sales, echoing the complaints that musicians have about streaming services. In its preliminary findings, the CMA wrote that Microsoft’s internal documents “recognise that adding titles to Game Pass would lead to cannibalisation” of traditional game sales. It’s hard to tell how this dynamic is playing out today, in part because many of Microsoft’s partners are reluctant to discuss the specifics of their arrangements. Most publishers contacted for this story didn’t comment, some citing a concern that doing so could damage their relationship with Microsoft.Mike Rose, founder of game publisher No More Robots, saw the benefits of Game Pass when he put the mountain biking game Descenders on the service in 2019. The game had been available for more than a year, but sales quadrupled soon after he added it to Game Pass. Rose now aims to get all of No More Robots’ games on the service. Jason Kingsley, chief executive officer of Rebellion Developments, the British maker of zombie and Alien vs. Predator games, says that when he adds titles to Game Pass, many of his company’s other games benefit from a noticeable increase in sales despite not being on the service themselves. Between 20% and 30% of people who play games on Game Pass also purchase additional downloadable content, Kingsley says.Still, the biggest games today seldom get released on Game Pass unless they come from Microsoft-owned studios. Many indie game developers remain wary about Microsoft’s power to use Game Pass to determine which smaller games succeed. That, more than the impact on Sony, is what antitrust regulators should be asking about, says George Jijiashvili, an analyst at Omdia: “Is this perhaps too much power for one entity to have in terms of subscriptions?”Microsoft says it gives a wide assortment of indie games companies a shot in Game Pass. There are more than 125 titles from Microsoft's ID@Xbox indie game program in the Xbox version of Game Pass and more than 140 in the PC version. And if indie developers sour on Game Pass, the game service landscape is currently fragmented enough to give developers various distribution options, Jijiashvili says. If Microsoft continues to outrun the competition, that may not always be the case.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[{"id":9957771189,"gmtCreate":1677573878241,"gmtModify":1677573880298,"author":{"id":"3574813964437135","authorId":"3574813964437135","name":"June_C","avatar":"https://static.tigerbbs.com/ae77017e1795eeceab087663e5586137","vip":1,"crmLevel":2,"crmLevelSwitch":0},"htmlText":"Great","listText":"Great","text":"Great","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/9957771189","repostId":1184474702,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":105905534,"gmtCreate":1677576112426,"gmtModify":1677576115665,"authorId":3577182936341023,"author":{"id":3577182936341023,"authorId":3577182936341023,"name":"MIe","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":5,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":9957771189,"type":1,"supId":0,"prevId":0,"content":"<span class=\"s1\">Up</span>","text":"<span class=\"s1\">Up</span>","html":"<span class=\"s1\">Up</span>"}],"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":28,"commentSize":0,"repostSize":0,"favoriteSize":1,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.5","shortVersion":"4.22.5","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/1184474702"}