Microsoft admits that Xbox Game Pass hurts game sales

Microsoft admitted, via a provisional report from the UK Competition and Markets Authority (CMA), that its Xbox Game Pass service hurts game sales around a year afterwards.

Xbox Game Pass allows customers access to a large library of Xbox and PC games for a relatively low monthly subscription fee. This is on top of of other benefits, including discounts on DLC and the ability to stream a number of games.

When Xbox Game Pass first launched in 2017, Microsoft’s Phil Spenser it denied that its Neftlix-like model would lead to a decline game sales. Rather, he stated that putting games on Game Pass would do the opposite. (Read: Microsoft confirms Xbox game price increase)

“When you put a game like Forza Horizon 4 on Game Pass, you instantly have more players of the game, which is actually leading to more sales of the game,” Spencer said to GamesIndustry in 2018. “Some people have questioned that, but when State of Decay 2 launched, you saw—if you looked in the US at the NPD—this game selling really well the month it launched on Game Pass.”

Meanwhile, in a different statement to Giant Bomb at E3 2018, Spencer called out Sea of Thieves and State of Decay 2 as selling better than predicted, despite both titles appearing on Game Pass.

However, these statements were from 2018. It’s likely that time and more data has shown that Xbox Game Pass does hurt game sales in the longer term.

A line from the UK CMA’s provisional report states the following.

Microsoft also submitted that its internal analysis shows a [redacted]% decline in base game sales twelve months following their addition on Game Pass.

The report does concede that Microsoft’s data comes with “some limitations,” specifically in regard to the time period that Microsoft used for its metrics. That said, the company’s Xbox division itself is noted as admitting in internal documents that adding games to Game Pass leads to the “cannibalization” of digital game sales.

In addition, the report states that Activision had not been too keen on including its games on Xbox Game Pass. The company stated that it believed that doing so would “severely cannibalize” game sales, especially of big new releases.

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