Microsoft: Game Pass is profitable even without accounting for expenses incurred by internal studios

Recently, the editor-in-chief of The Game Business, Christopher Dring, mentioned that the profitability of Game Pass might be a result of skillfully juggling numbers. He suggested that Microsoft’s calculations do not include data from its internal studios. However, the corporation has since clarified that the subscription is profitable in any case.

According to Dring, the profitability scheme for the subscription is calculated as follows. When assessing revenue, Microsoft considers the costs of marketing and supporting Game Pass, as well as payments to third-party developers who agree to release their games on the service. Since Xbox’s internal studios do not receive similar compensations, their opportunity costs are ignored. As the journalist claims, he received this information directly from Microsoft.

Based on this math, Dring initially concluded that if Microsoft were to include the potentially lost revenue for their studios in the calculation, it might not be accurate to talk about profitability.

Soon after, Microsoft contacted Dring and explained that Game Pass generates profit even when opportunity costs for its studios are factored in—taking into account not only sales numbers but also microtransactions. However, they did not disclose specific figures.