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[Chronicle]

It's important to note with Spotify that their lack of profitability is a choice since their marketing spend far outstrips the revenue they need to break even. They are choosing to make the loss in an effort to get the maximum number of customers they can. If they went the Netflix route and started to back off the marketing push they could easily be in the black.

But that's not economically feasible. They'll eventually go belly up.

 

[DaGwaphics]

But that's not economically feasible. They'll eventually go belly up.

They have a lot of cash flow so they can keep the wheels turning. Eventually the marketing will start to not be as effective and they will slow their spending on advertising, the same way that Netflix has over the last couple years. That will come at the expense of user growth but make them more profitable.

 

[Bulletbrain]

But that's not economically feasible. They'll eventually go belly up.

At a certain stage a subscription company would reach a stable cost/content ratio that is aimed at positioning them in a suitable way against the competition. This cost is more or less a fixed cost (sort of like an annual budget) that the company can spend each year on content. So in the end, what a company needs to do is have enough subs and revenue to overcome that fixed cost. And for each additional sub once the fixed cost is cleared, the company is earning extremely high profit, since the marginal variable cost for each new sub is relatively lower. That's where the marketing cost comes in; to build the sub count to reach the tipping point of overcoming the more or less fixed content cost. After subs have reached that ideal number, marketing costs can ramp down a bit.

 

[DarkMage619]

They have a lot of cash flow so they can keep the wheels turning. Eventually the marketing will start to not be as effective and they will slow their spending on advertising, the same way that Netflix has over the last couple years. That will come at the expense of user growth but make them more profitable.

In many businesses profits while important are just aspect of business especially if you are trying to grow your subscription base and you have alternative revenue streams. Game pass is one such example. Speaking strictly about profits misses lots of what Game pass is about.

 

[StreetsofBeige]

In many businesses profits while important are just aspect of business especially if you are trying to grow your subscription base and you have alternative revenue streams. Game pass is one such example. Speaking strictly about profits misses lots of what Game pass is about.

Yup.

That's how business works. Established profitable product lines fund the up and comers till it stands on it's own legs.

The funny thing is people assume GP is losing big money but you never know. Maybe it's already profitable. It's just that MS doesn't disclose granular details. Their reporting structure is at the division level. In that same division is Surface, Bing and Windows. Well in that case, none of those are profitable either because MS doesn't disclose P/L data at the product line level - not even Windows. So to all the armchair analysts who can't even understand a basic balance sheet or income statement from accounting class in high school, to them I guess even Windows is unprofitable.

And Apple too. They do the same thing but even at a higher level. All their hard goods product line profits are combined into one vague number. The only other profit line disclosed to the public is their Services division.

Sony is the same. They don't disclose profits from their game sub plans either.

 

[SoloKingRobert]

But wait?

Werent they only supposed to be bringing in like $500 million.
Isnt that what GAF Finacial analysts told us?
Wasnt everyone using the $1 deal....so how did they get to 2.9 billi with 1 dollar subs?
Dont most people only sub for the month the game they want to play is out, then stop subbing anyway?


I am a fucking GAFFER!, I demand to know exactly how much profit, not revenue, fucking profit the service is actually making because thats gonna affect my decision to do absolutely fucking nothing but keep pounding at my keyboard.

Don't Google it, Bing it!

Microsoft has Xbox all Access scheme that includes Game Pass Ultimate, paying monthly Installments. It's a popular Scheme. Those Gaffers are like Reddit. They're the tiny minority in politics.

 

[3liteDragon]

 

[Griffon]

Making literal billions while paying a measly 600k to devs for getting their content.
Between this and Sony starting to do that same subscription model, the industry is fucked.

Developers are getting fucked while gatekeepers make insane bank. Hopefully this info getting out will wisen up devs about accepting shitty deals for "exposure".

 

[phil_t98]

You realize this kills the talking points that MS has to "always" pay higher than Sony for exclusivity deals (service exclusivity deals in this case), and that Sony prevent Microsoft from acquiring content for GamePass by forcing 3P pubs to ignore the service, right?

Those were both points brought up by Microsoft in the Brazilian court documents and this single example shows that those points don't actually hold up (outside of instances of games Sony have marketing rights, exclusivity or co-funding to. In which case it makes sense they would try stopping GamePass from getting equal or preferred treatment on those games). IJS

you do realise this is an old game and if there is a new game that is coming to gamepass Microsoft may of approached the company before Sony tried to stop it going to gamepass

 

[adamsapple]

Not surprising. Them revealing this info so brazenly and this being literally the only source of the info in years probably didn't sit well with any of the parties lol.

Making literal billions while paying a measly 600k to devs for getting their content.
Between this and Sony starting to do that same subscription model, the industry is fucked.

Developers are getting fucked while gatekeepers make insane bank. Hopefully this info getting out will wisen up devs about accepting shitty deals for "exposure".

huh ?

That 600K was for a small indie game. Ark got $2.5M for a renewal and we don't know how much they paid for it originally. Guardians rumored to get between 5~10M USD.

Not every game gets the same price and with indies MS also helps fund the game itself, reportedly.

 

[phil_t98]

Making literal billions while paying a measly 600k to devs for getting their content.
Between this and Sony starting to do that same subscription model, the industry is fucked.

Developers are getting fucked while gatekeepers make insane bank. Hopefully this info getting out will wisen up devs about accepting shitty deals for "exposure".

600k for an indie game that most likely wouldn't of made that kind of money. am sure the developer of that game was more than happy

 

[Griffon]

600k for an indie game that most likely wouldn't of made that kind of money. am sure the developer of that game was more than happy

huh ?

That 600K was for a small indie game. Ark got $2.5M for a renewal and we don't know how much they paid for it originally. Guardians rumored to get between 5~10M USD.

Not every game gets the same price and with indies MS also helps fund the game itself, reportedly.

Not a small indie. It's a studio that needs more per year to keep functioning, the game was a very successful simulator that made muuuuuch more than that on steam, the deal only accounted for 24% of their revenue of that year.

Besides, why does the studio size matters if the game was a proven success that should've gone for more money?

 

[Neofire]

Making literal billions while paying a measly 600k to devs for getting their content.
Between this and Sony starting to do that same subscription model, the industry is fucked.

Developers are getting fucked while gatekeepers make insane bank. Hopefully this info getting out will wisen up devs about accepting shitty deals for "exposure".

They made Billions In profit? Oh damn can you link that source?

 

[phil_t98]

Not a small indie. It's a studio that needs more per year to keep functioning, the game was a very successful simulator that made muuuuuch more than that on steam, the deal only accounted for 24% of their revenue of that year.

Besides, why does the studio size matters if the game was a proven success that should've gone for more money?

Was the game a success? How many copies sold? How long after the game launched did it hit gamepass?

 

[DeepEnigma]

 

[Shadowstar39]

Wow so many people invested in caring about a companies finances, for a rental service . Unless you have stock why do you care? So many fanboy shills, it's disheartening.

 

[Trazyn the Infinite]

Wow so many people invested in caring about a companies finances, for a rental service . Unless you have stock why do you care? So many fanboy shills, it's disheartening.

A service that is profitable means it can become a standard in the industry - it can change how we play games. It can also mean that a service that some of us enjoy stays around longer.

If it isn't profitable, it won't last. Means a service we like is removed.

Not a very complicated thing to understand, mate.

 

[phil_t98]

Not a small indie. It's a studio that needs more per year to keep functioning, the game was a very successful simulator that made muuuuuch more than that on steam, the deal only accounted for 24% of their revenue of that year.

Besides, why does the studio size matters if the game was a proven success that should've gone for more money?

So the deal was a quarter of their revenue and you think that is bad?

 

[adamsapple]

Not a small indie. It's a studio that needs more per year to keep functioning, the game was a very successful simulator that made muuuuuch more than that on steam, the deal only accounted for 24% of their revenue of that year.

One quarter of their annual revenue is not small, in their filings the publishers mentioned this revenue accounts for a "significant effect" on their revenue. And this deal was made at a point when the game was nowhere near its peak. The publishers Big Cheese happily agreed to it. This doesn't even account for all the other revenue generated from MTX/Content that people would buy because they already have access to the game itself.

Anyway, as has already been said, $600K is not a baseline, every game has a different deal and in the cases of Indies, their entire development often gets funded. They wouldn't keep putting out Indies on Game Pass if the devs/pubs weren't being offered acceptable deals.

 

[Ozzy Onya A2Z]

One quarter of their annual revenue is not small, in their filings the publishers mentioned this revenue accounts for a "significant effect" on their revenue. And this deal was made at a point when the game was nowhere near its peak. The publishers Big Cheese happily agreed to it. This doesn't even account for all the other revenue generated from MTX/Content that people would buy because they already have access to the game itself.

Anyway, as has already been said, $600K is not a baseline, every game has a different deal and in the cases of Indies, their entire development often gets funded. They wouldn't keep putting out Indies on Game Pass if the devs/pubs weren't being offered acceptable deals.

Agreed, it's also been on record from the indie devs/studios at an objective bias of 9 out 10 reports all parties are happy and performing better than expected. We had threads on this already with actual devs statements, many facets to the argument too. The baseline is it's working and successful for 90% of those who signed up for whatever agreement they settled on with Xbox/MS.

In terms of game delivery, exposure and more devs/studios getting a steady cash injection/flow it's a brilliant thing for the industry in my opinion. It also gives rise to self-development and/or publishing in many ways, just as we've seen with ID@Xbox and Gamepass.

 

[Frank Horrigan]

Wow so many people invested in caring about a companies finances, for a rental service . Unless you have stock why do you care? So many fanboy shills, it's disheartening.

He says in a thread discussing revenue.

This kind of shit has been discussed for decades, so join in or keep your shitty opinions to yourself

 

[adamsapple]

He says in a thread discussing revenue.

This kind of shit has been discussed for decades, so join in or keep your shitty opinions to yourself

This you ?

IMO threads like this should be banned on gaf as this kind of stat says nothing of substance.

 

[Frank Horrigan]

This you ?

I stand by it.

Though since i said the stat says nothing of substance, posters have posted stats of substance. I know you're busy cleaning the offices at MSHQ but do try and keep up

 

[StreetsofBeige]

Wow so many people invested in caring about a companies finances, for a rental service . Unless you have stock why do you care? So many fanboy shills, it's disheartening.

When people run out of fanboy topics to talk about, it's come down to finances. Weird as hell.

 

[Topher]

When people run out of fanboy topics to talk about, it's come down to finances. Weird as hell.

Not really. When financial news is released or revealed, people talk about it. Why is that weird?

 

[IFireflyl]

Not really. When financial news is released or revealed, people talk about it. Why is that weird?

You misunderstand. It's weird when you ask questions or make statements that could potentially paint the wrong plastic box maker in an unfavorable light. It's not weird if you do that to the appropriate plastic box maker.

Spoiler

For the uneducated reading this, this is a statement that applies to both sides. Fanboys who lift up one plastic box as the one box to rule them all are a plague, regardless of which side they're on.

 

[Dolomite]

You realize this kills the talking points that MS has to "always" pay higher than Sony for exclusivity deals (service exclusivity deals in this case), and that Sony prevent Microsoft from acquiring content for GamePass by forcing 3P pubs to ignore the service, right?

Those were both points brought up by Microsoft in the Brazilian court documents and this single example shows that those points don't actually hold up (outside of instances of games Sony have marketing rights, exclusivity or co-funding to. In which case it makes sense they would try stopping GamePass from getting equal or preferred treatment on those games). IJS

Oh no, see my other posts on this thread. This deal means borderline nothing to me even as an Xbox gamer I haven't played COD in yrs. I'm hopeful that the acquisition will help bolster MS's " One 1st party game a month" Gamepass promise , but outside of that I'm here for the laughs. Whether or not the deal goes through, it's hilarious that everyone assumed GP was unsustainable in the long run. Now it's the Boogie man

This whole deal has everyone in such a bunch, the goalposts keep moving and the armchair executives have weighed with Financials

 

[mckmas8808]

Why should gamers give a shit about any of this? Are folks afraid of losing their games or something? I don't understand what you mean... But taking it at the face, why do they care about profits?

I've seen what happens to gaming companies that stop making profits. It's not a good sight.

 

[mckmas8808]

I honestly don't care about their profits, I care about what I am playing

I don't think I saw many people applauding Sony's increasing the price of the PS5 and say we should care about their profit

Wouldn't it be weird to applaud a price increase on a gaming console that you already own though?

 

[akimbo009]

I've seen what happens to gaming companies that stop making profits. It's not a good sight.

Sure but that's not really comparable to a platform holder with the backing of one of the most profitable businesses in the world, is it?

 

[coffinbirth]

Making literal billions while paying a measly 600k to devs for getting their content.
Between this and Sony starting to do that same subscription model, the industry is fucked.

Developers are getting fucked while gatekeepers make insane bank. Hopefully this info getting out will wisen up devs about accepting shitty deals for "exposure".

 

[transformer]

Making literal billions while paying a measly 600k to devs for getting their content.
Between this and Sony starting to do that same subscription model, the industry is fucked.

Developers are getting fucked while gatekeepers make insane bank. Hopefully this info getting out will wisen up devs about accepting shitty deals for "exposure".

Developers having another method of selling their games, which is completely optional and negotiated/agreed upon prior to selling, is “getting fucked”? Interesting take. While I can’t speak for developers, I’ve read numerous articles from developers praising gamepass and how much it’s benefited them.

 

[mckmas8808]

Sure but that's not really comparable to a platform holder with the backing of one of the most profitable businesses in the world, is it?

Yes it is. Have you heard of..............

- Zune
- MS Kin
- MS Lumia cell phones
- Windows Mobile OS
- MS Band

 

[akimbo009]

Yes it is. Have you heard of..............

- Zune
- MS Kin
- MS Lumia cell phones
- Windows Mobile OS
- MS Band

Are you suggesting Xbox and Gamepass are about to fail? Any evidence on that?

 

[DaGwaphics]

Yes it is. Have you heard of..............

- Zune
- MS Kin
- MS Lumia cell phones
- Windows Mobile OS
- MS Band

You bumped this old thread just to give us that nugget.

 

[mckmas8808]

Are you suggesting Xbox and Gamepass are about to fail? Any evidence on that?

No I'm saying, just because has a lot of money doesn't mean they are willing to never drop a product and cut their losses.

 

[DarkMage619]

No I'm saying, just because has a lot of money doesn't mean they are willing to never drop a product and cut their losses.

Do any of the products you listed have even a passing resemblance to Xbox or Game pass? Xbox has been a product for 20 years. How long was Zune or Windows Phone on the market?

 

[damidu]

Do any of the products you listed have even a passing resemblance to Xbox or Game pass? Xbox has been a product for 20 years. How long was Zune or Windows Phone on the market?

that doesn’t necessarily mean much,
they already considered shutting it off.
https://arstechnica.com/gaming/2020...ned-xbox-brand-after-the-xbox-one-launch/amp/

they are definitely making a bet with gamepass, it working out or not will surely have consequences

 

[mdkirby]

Hmm, but that goes against the narrative that Game Pass is hemorrhaging money and that Microsoft is using their Azure and Office money to sustain it

Not really, It's revenue not profit.

Sony spent $1billion specifically on game related R&D in 2021, Microsoft with all their recent acquisitions has about twice as many studios, so it could be as high as $2b for them for those costs (way more if and when they acquire Activision). Not sure how much it costs to run games pass itself but it won't be cheap, then you have the cost of adding all the third part IP to the service, which is apparently around 100mil/yr.

So very quickly those rosy looking revenue numbers look a lot less impressive vs what the profit will be. Making maybe what 200mil profit? Which still sounds not bad...But then we have how much have they actually spent to acquire the studios to get to them here, which in the last couple of years has been about 10billion. All those games then become 'free on games pass'. Sure, they'll be getting long tail sales on some titles from other platforms and non gamespass sales, but it won't come close to offsetting those costs. And if Activision goes through it'll be another 70billion expense on top. It'll take them decades and decades to get that service (when including expenses) to come out the other end into actual profit.

Until then they are a loss leader, leveraging their dominance in other markets to sustain and subsidise their gaming division (which is a key point in the current challenges to their Acti acquisition), in the hope that eventually after price increases and a multiplication of their subscriber numbers it'll start making them some real money...before all their current leadership die of old age.

 

[Cyberpunkd]

In many businesses profits while important are just aspect of business especially if you are trying to grow your subscription base and you have alternative revenue streams. Game pass is one such example. Speaking strictly about profits misses lots of what Game pass is about.

No, the only place that this is acceptable is with startup bros chasing that mythical “we flip the switch at some point and we become profitable”.

 

[akimbo009]

No, the only place that this is acceptable is with startup bros chasing that mythical “we flip the switch at some point and we become profitable”.

That's not true. Many companies have ventures that operate in the red as they grow the segment or market.

Doesn't matter - MS is attempting a $70B dollar bet on this business so they clearly see it's potential and aren't on the verge of shuttering anything which is being implied by that other post.

 

[Cyberpunkd]

That's not true. Many companies have ventures that operate in the red as they grow the segment or market.

Doesn't matter - MS is attempting a $70B dollar bet on this business so they clearly see it's potential and aren't on the verge of shuttering anything which is being implied by that other post.

Microsoft is insanely profitable from their main line of business, they can actually afford to take losses on gaming.

 

[mckmas8808]

Do any of the products you listed have even a passing resemblance to Xbox or Game pass? Xbox has been a product for 20 years. How long was Zune or Windows Phone on the market?

Again....I'm not saying MS will close the Xbox division at all. I posted those products to remind that poster that having alot of cash on hand doesn't mean that same company won't kill products that are losing money.