How Microsoft’s Zenimax Exclusivity Conundrum Could Play Out

I think this is fairly spot on. However I will add a couple of my own thoughts on Microsoft’s approach here:

1. Microsoft’s business model across all divisions is subscription based, which provides them with a high amount of predictable revenue. It is public that MS was considering selling the Xbox division, but Phil Spencer convinced Nadela that it was a good investment. My guess is this was the vision Phil sold.

2. I don’t anticipate the price increasing for a couple of years. Game Pass is still in customer acquisition mode. Even then the strategy is to increase the price slowly—a dollar or two at a time—to measure any revenue loss from unsubscribe.

3. I think Microsoft would love everyone to subscribe to Game Pass, and I think most Xbox games will forego going on a Sony platform, but remember Microsoft happily sells games on Steam right now and if you look at the Steam top selling games three of the top ten are full price Microsoft games that are included in Game Pass. Microsoft isn’t precious about their Xbox platform.

4. Sony increased game prices on PS5 to $70. This plays into Microsoft’s hands. One game on PS5 costs almost the same amount as six months of Game Pass Ultimate. If you buy an average of two games or more per year it benefits you to get GamePass.

Microsoft is changing the game here and I cannot help but think Sony has been caught flat footed.