Xbox’s decision to lower the price of Game Pass and remove Call of Duty games from their initial offering is a good business case, good PR, and a short to medium term win for almost everyone.
This is a win for Game Pass subscribers, who get a reasonable price cut on the best (and most popular) tier, Ultimate. As Michael McWhertor says, in a world where the price of everything is rising, a massive cut like this feels like a gesture of goodwill and also an acknowledgment that the numbers Microsoft is throwing around aren’t working.
This is a win for Microsoft’s finance department, which no longer has to sacrifice hundreds of millions of dollars in lost Call of Duty sales for the questionable benefits of more Game Pass subscriptions. It was assumed that last year’s big Game Pass price increase was an attempt to claw back some of this revenue, and it doesn’t appear to have worked either; Microsoft wouldn’t have reversed the hike if it didn’t result in the loss of more customers than it would benefit.
It’s a big win for Microsoft Gaming’s new CEO, Asha Sharma, who expressed her feelings about Game Pass pricing soon after taking the top job, and can take credit for the popular move as the first big decision of her tenure. Xbox fans will love it, and Microsoft shareholders will be disappointed too, with Call of Duty’s day one withdrawal providing a reasonable rationale for the cut so it doesn’t look like it’s giving money away.
This may not be a win for Call of Duty players on Xbox and PC who will again have to pay top dollar for the game. But they’ve done it before and they’ll do it again, and for those who choose to stick with Game Pass, it won’t necessarily cost more.
But the move raises long-term questions — about the purpose of Microsoft’s $69.7 billion acquisition of Activision Blizzard, about its long-term strategy for Game Pass, and about the future of Call of Duty.
Microsoft bought Activision Blizzard for many reasons. He wants to have big earners like Candy Crush and World of Warcraft as well as Call of Duty, but there is no doubt that Call of Duty is the biggest and most important prize in this deal. And if the Microsoft team is actually considering making Call of Duty an Xbox exclusive, it’s doubtful, they wouldn’t have to go through much of their own regulatory process or financial due diligence to realize that it wouldn’t be anything new.
The point of owning Call of Duty is to get it into Game Pass. This is not a presumption; Microsoft made this argument forcefully to regulators and the public during the deal’s approval process, saying that putting Call of Duty and other Activision Blizzard games on Game Pass would expand choices for players and make games more affordable.
This turned out to be a false promise, or in other words, a strategic dead end for Microsoft. When they acquired Activision Blizzard and Bethesda previously, Microsoft assumed that the market potential for Game Pass was much larger than it actually was. The numbers do not increase; neither Call of Duty nor Game Pass pays for itself. If Activision’s shooter series is too big for console exclusivity, it turns out it’s also too big to include in a subscription.
(Here’s another potential winner from this announcement: Netflix, which might see what’s happening here and realize that canceling its acquisition of Warner Bros. was the right thing to do. Maybe adding trophy franchises like Batman and Harry Potter to your subscription service isn’t actually worth the huge expense.)
Microsoft wouldn’t be sad to have Call of Duty now. It can still include older titles on Game Pass, and Call of Duty is a self-contained ecosystem that easily delivers financial and cultural benefits at scale, as does Minecraft. But it seems likely that Microsoft leadership would not have gone to such great expense and difficulty in the acquisition if they had known this would be the end result.
There’s also widespread concern that Game Pass doesn’t make sense, and never has. If you can’t sustain Call of Duty, what else can’t be sustained? Elder Scrolls? Even Forza Horizon? Are the first days of release of anything on Game Pass numbered? It’s hard to avoid the suspicion that Microsoft has spent the last decade chasing a delusion: a business and distribution model that’s fundamentally unsuitable for most game developers or gamers. Oh well, at least his grades are good again.
Activision has a self-check to do. The Call of Duty team will probably be glad to no longer be a strategic pawn for Microsoft, and define success on their own terms. However, different checks will be carried out. Last year Black Ops 7 rated very disappointing by the community, critics, and the market; it slumped in the face of resurgent competitor Battlefield. Game Pass no longer provides an excuse for declining sales, and Microsoft is rightfully concerned that its rewards haul has passed its peak. The series needs new life, and perhaps a year on the bench. Hopefully this new focus will provide the motivation Activision needs to bring Call of Duty back from the brink, or Microsoft’s $69.7 billion gamble will look even worse than it does now.
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