Christopher Dring of The Game Business and previously of GamesIndustry.biz has occasionally dropped rumors and information that you would only be able to get from insider sources. He predicted that the Switch 2 would release on or after April 2025, which turned out to be closer to the mark than everyone who was certain it would come in 2024.
While we generally rely on journalists and game news editors for reliable sources, Dring isn’t particularly actively sharing frequent rumors or leaks, and so gamers aren’t always certain how accurate his claims are or not.
Yesterday he made a claim about how Microsoft’s accounting for Game Pass does not account for the costs of making first-party games. While this drove up a lot of speculation and assessment online, it turned out that Dring didn’t really provide the full picture then.
Dring has shared this update today on Twitter:
Ok, I need to correct/clarify something. First, Xbox Game Pass is profitable, even when you factor in the lost sales for its first-party teams, sources who would know have told me.
Over 18 months ago, I checked with Xbox about what’s included in the Game Pass P&L. Basically, I was looking to see if Game Pass’s costs factor in the impact to unit sales of their internal studios. I was told that first-party games have their own P&L separate to Game Pass as they make money via other means. I felt this piece of internal accountancy might mean Game Pass is profitable, but it sure does put pressure on the margins for its internal games and POSSIBLY means some studios don’t make as much profit (or any profit at all).
That doesn’t actually matter in real terms, but seeing the impact Game Pass was having on first-party games, and the amount of money Xbox was spending on studios, I wanted to check if the full impact of the service was being considered in their ‘Game Pass is profitable’ line.
(This was before Xbox started publishing fully on PS5. Studios can now make stronger margins on premium sales as a result of that move)
But regardless to all that. sources have reached out to tell me that even when you include lost revenue associated with first-party party games (not just unit sales, but microtransactions), Game Pass is still profitable. So… that’s great!
Of course, the reason this seems to even be up to debate at all is that Microsoft has been partly ‘hiding’ the information regarding their game division’s numbers in their financial reports. We basically rely on Microsoft to tell us when their games and products are profitable at all, and they do use their control of that information to their advantage.
And that situation extends to the mass layoffs that have occurred at Microsoft, starting last week. While we are certainly looking for explanations and rationalizations of their actions, it’s certainly easy to revert to common criticisms leveled against Microsoft. But if we rely on facts over emotions, we’re still waiting on Microsoft to officially confirm these layoffs and share their explanation. At this point, it looks like we’ll have to wait until their next financial report for that explanation, but if Microsoft values their reputation, they should be addressing these issues directly and immediately.
