Forza Horizon 5 and Economics of Xbox Game Pass

Forza is currently the best racing franchise we have at the moment. There has been an incredible collection of games in the franchise released in the past few years. Forza Horizon 5 does not look like it is going to disappoint.

The best part is that since Xbox Game Studios (owned by Microsoft) is publishing the game, they are making the game available for Xbox Game Pass from launch!

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The following platforms are supported by Xbox Game Pass:

  • Xbox One OS
  • Android
  • iOS
  • Windows 10
  • Windows 11

Xbox Game Pass offers 100+ games (many of them AAA games) to players across devices starting at $9.99 per month. You need to pay $14.99 for the best deal which comes with Xbox Live Gold and EA Play membership.

I'm not sure about the complex implications for the video game developers and publishers. This is somewhat new territory for video games. I prefer attempts at projects like Xbox Game Pass instead of trying to stream AAA games from servers. The industry needs to learn to walk before they run. Those who can afford to have the high speed internet to stream AAA titles are likely going to be able to purchase gaming devices that can run those titles naively anyways.

Subscription based gaming brings something more useful and interesting. It is like having access to a book library or movie rental service. I have seen some titles get more exposure precisely because they were featured on service like Xbox Game Pass. This is very similar to what we have seen with obscure movies rising to prominence due to Netflix.

Finances Behind The Scene

Spencer has stated that Microsoft has multiple ways to compensate developers for games on Game Pass and there is no one single payback approach. The payback scheme ranges from a flat rate approach as to assure exclusivity on the Microsoft platform, to completely covering the costs of development, and includes various models based on usage and monetization approaches. Paradox Interactive's Fredrik Wester stated the terms they have had followed the Netflix model where the developer or publisher was paid a lump sum by Microsoft for their game on the service for a fixed period of time based on a perceived value, rather than the per-play royalty-based approach used by services like Spotify. The upfront approach, along with the large subscriber numbers, allows developers to select ongoing directions for their games. In the case of Obsidian Entertainment, they were able to consider additional downloadable content for their game Outer Worlds as they knew millions were playing it.

In a July 2020 interview, Xbox's marketing director Aaron Greenberg said that Xbox Game Pass is not necessarily meant to be profitable for Microsoft at the current time but is designed to help draw more players to use it through word-of-mouth by offering a large set of features as a seemingly under priced value, and in the long-term become valuable. This allows them to avoid high costs of advertising the service.

18 Million Subscribers by January 2021

Microsoft is already making over a two billion dollars through Xbox Game Pass. Most of the titles are not even developed by Microsoft. So far it looks like a great strategy as long as the costs can be contained. Being available on multiple platforms offers a unique advantage over other similar video game subscription services.

Announcement Trailer

First 8 Minutes

14 Minutes of Gameplay

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