Xbox is putting the new Call of Duty on Game Pass, Day one. One year ago, when the FTC challenged Microsoft’s acquisition of Activision Blizzard in US courts, the very idea of an annual Call of Duty on Game Pass had players over the moon. But now, the monkey’s paw is spinning.
Earlier this week, Xbox announced that it would be raising the price of Xbox Game Pass Ultimate from $16.99 per month to $19.99 per month in the US, with similar price increases in all other markets. That would have been annoying enough, but Xbox is also introducing a new “Standard” tier at the original Game Pass Ultimate price point that doesn’t include day-one game access and has a more limited library. And Xbox is closing subscriptions to its Console-only tier, meaning the tier as a whole may not be long for this world. The grand “day one on Game Pass” promises of previous years are slowly starting to fall apart.
It’s a disappointing turn of events for Xbox fans. But according to analysts, at least, all this was inevitable. Xbox’s Game Pass changes, they say, are almost a business reality ANY subscription the service there it’s similarly sandwiched between inflation, slowing consumer adoption, and demand for constant, unrelenting growth.
Why is Xbox raising Game Pass prices again?
The reasons why Xbox is raising the price on Xbox Game Pass are neither shocking nor new, analysts tell me. We already went through this once last year, and Xbox’s rationale likely hasn’t changed so much as evolved. Nor Ampere Analysis’ Piers Harding-Rolls points out in his writing on this subject, the cost of making and releasing games has gone up, and Xbox wants to make money, plain and simple. Xbox needs its subscribers to pay more to offset the costs of licensing games in general, as well as the cost of adding an important annual premium version (Call of Duty) to Game Pass Ultimate.
Harding-Rolls, as well as other analysts I’ve spoken to over the past year, have repeatedly pointed out to me the reality of Xbox’s position with Game Pass: subscriber numbers have dropped to a much smaller volume than as much as Xbox hoped. As Circana analyst Mat Piscatella tells me, the subscription market has generally flattened in recent years. US spending on video game subscription services is down slightly year-to-date in 2024 from a year ago, to $2.2 billion, and cloud game subscription offerings haven’t been met with plenty of gamers. As a result, Xbox – which entered TOUGH into a subscription business in a way that its competitors didn’t—it needs to make changes if it wants to meet its long-term goals. But there are a limited number of possible changes it can make in this scenario.
“When you need to grow revenue – as Xbox bosses do – you only have a few levers when it comes to Game Pass,” Simon Carless, author of GameDiscoverCo explains. “It’s either volume or yield. And it’s clear that the volume has been down for some time, both in Game Pass Core (formerly Xbox Live Gold) and the current Game Pass.
“Xbox has done a good job of gradually moving their subscribers from the cheaper Live Gold to Game Pass. But now they have to keep growing — and/or keep paying for the bigger division they’ve created with all these acquisitions. So the new changes are moving Game Pass subscribers into higher tiers — while creating select intermediate tiers for those who don’t want Day 1 games.”
Joost van Dreunen, NYC Stern School of Business professor and author of the SuperJoost playlist, added an observation I hadn’t considered. whether The average gamer buys two to three premium games per year, with a total spend of between $140 and $210, Game Pass Ultimate now costs a lot more than that. But Xbox doesn’t seem to be targeting the average console gamer anymore — not with Game Pass Ultimate, anyway. Game Pass Ultimate is for die-hard fans, gamers who generally play more games, for longer, and use more of Xbox’s services and infrastructure. “Meeting them for the privilege makes financial sense,” notes van Dreunen, saying that such players also tend to be less sensitive to price increases – a point that Piscatella also makes.
“Now price sensitivity can change over time, of course,” Piscatella continues. “Even the most loyal customers will change their minds about continuing to subscribe to a service if it fails to deliver an acceptable level of value or service. But for now, the bet is that current subscribers will mostly continue to subscribe. Call of Duty coming to the service could also lead to new subscribers (although I personally doubt it will result in millions of new subscribers, but who knows). I also see the $14.99 Game Pass Standard tier acting more as a price anchor than a service they want people to subscribe to (“Wait, for just $5 more a month I get games on day one? !? What a deal!”)”
Ampere Analysis estimates that 74% of current Game Pass subscribers on consoles have the Ultimate version of the service, meaning roughly a quarter of subscribers are on the lowest tiers. That includes the Console tier, which will soon be closed to new subscribers, and Xbox wants as many of those lower-tier subscribers to upgrade as possible. Hence the decision to limit day one access to the game to specific levels…and more specifically, to dangle Call of Duty as a carrot to attract new subscribers as well as upgrades.
What happens next?
Okay, so Xbox is raising prices and changing tiers in September. Big. What happens next? Will it raise prices again after raising them two years in a row? Will it add more levels? Will we eventually see Xbox go the way of Netflix and introduce a lower priced ad tier?
Well… perhaps all of these, analysts say! Jijiashvili thinks the Xbox price hike was and continues to be “inevitable” due to ongoing inflation as well as the aforementioned slowdown in subscription growth. Xbox needs to increase its “average revenue per user,” or ARPU, specifically in an effort to offset sales of a new copy of Call of Duty that will inevitably be lost to Game Pass. And Harding-Rolls reminds us in his article that Xbox is still busy building out a mobile app store, so there could be a mobile-focused version of Game Pass on the way that includes bonuses for King games like Candy Crush Saga .
But mobile or not, Harding-Rolls is predicting that the Xbox gamble will ultimately be successful. Ampere estimates that global Game Pass ARPU will grow by 5.4% this year, but then grow to a 15.3% increase in 2025. And Ampere expects global consumer spending on Game Pass as a whole to reach $5.5 billion in 2025. Whether that will be enough for Xbox is another question.
Van Dreunen came up with an even more spicy prediction: an ad-based version of Game Pass. He expects such a level to be added sometime next year, comparable to what has been seen on other services like Netflix. I asked him to elaborate on what he thought an ad tier for a gaming service would look like:
“If you recall, Xbox previously set a revenue target for 2030 that included $1.4 billion in ad sales as part of its ambition to sign up 100 million Game Pass subscribers,” van Dreunen explained. “There will be three phases, approximately. Initially, I expect the ads to appear as banner ads within the Xbox and Game Pass menus. Mostly as a test case, it will start slowly. However, once Microsoft develops this capability over the next few years, I foresee interstitial ads (for example during loading screens) as a second phase. Finally, and assuming this works out well for its ecosystem, Microsoft will likely make an acquisition in the ad tech space to gain the ability to facilitate programmatic advertising and a centralized inventory using existing industry metrics. advertising and toolkits. This last component is definitely more distant.”
Those I spoke with seemed confident that the trend of changing subscription service levels and increasing prices is likely to continue for some time. But there remained a lingering sense of uncertainty among analysts about the upcoming October release of Call of Duty: Black Ops 6 on Game Pass. Will subscriber numbers move as Xbox clearly wants? If it does, will it move enough to justify continuing what has already been praised one of the best deals in gaming? If not, what about Game Pass and Xbox’s broader business model?
No one seems to know for sure. Piscatella referred to Xbox’s strategy here as “pushing all the chips in,” and Jijiashvili used a similar analogy, saying it was “Microsoft’s biggest gamble on Game Pass so far. If it’s successful, Game Pass will see a wave of new subscribers and many lower-tier subscribers upgrade. But, he adds, if Call of Duty doesn’t move the needle on subscription growth, “then nothing else will.”
Rebekah Valentine is a senior reporter for IGN. Got a story tip? Send it to rvalentine@ign.com.