Microsoft changes the deal

XBox Game Pass, already not the best deal in gaming, has just become a worse deal. As reported by Polygon:

Microsoft has announced sweeping changes to the pricing and structure of its Game Pass subscription service. There are price rises across the board; Xbox Game Pass Ultimate is going up to $19.99/month, an increase of $3. And the basic console tier is to be phased out and replaced with a new Xbox Game Pass Standard tier that will not include day one releases like the forthcoming Call of Duty: Black Ops 6.

The changes were reported by Windows Central and confirmed by Microsoft on an official Xbox support page.

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Here’s how the various tiers of Game Pass stack up now, with their new pricing:

• Xbox Game Pass Ultimate is going up from $16.99/month to $19.99/month. This tier includes day one releases, the full game catalog, online multiplayer, cloud gaming, EA Play membership, and access on both Xbox consoles and PC.
• Xbox Game Pass Standard will cost $14.99/month when it launches. It will include online multiplayer and access to a back catalog of hundreds of games on console, but won’t include day one releases.
• Xbox Game Pass Core remains $9.99/month, but a 12-month subscription is going up from $59.99 to $74.99. This tier includes online multiplayer and a small catalog of over 25 games.
• PC Game Pass is going up from $9.99/month to $11.99/month. This tier includes day one releases and access to the full game catalog on PC.
• Xbox Game Pass for Console costs $10.99/month for existing subscribers, but you can no longer sign up for it. If you turn off automatic payments and your membership lapses, you will lose access and need to join a different plan. You can continue to redeem codes for this tier and stack them to ensure continued access, but from Sept. 18 the maximum extension limit for the Console plan will be 13 months. This tier includes day one releases and the full game catalog for console, but excludes online multiplayer.

This means that Game Pass, often touted as the best deal in gaming in spite of not being a good deal for the average consumer, is now an even worse deal. That said, since the math has now changed for the worse, it's time to revisit that cost-benefit analysis. Let's start with some ground rules.

1. Only Game Pass Ultimate will be considered for this analysis. A version of the service which includes no new games is not what anybody was wanted from this kind of service, and is clearly not what Microsoft is even trying to sell. They don't want you paying for GP-Standard to get access to their back catalogue; they want you paying for GP-Ultimate, which is $19.99 per month, or $240 per year. And GP-Core, which limits even back catalogue access, is also not a serious offer to any consumer that cares about value for money.
2. I will not be doing separate analyses for month-to-month customers versus annual-purchase customers. The trend for subscription services of all kinds is not loyalty, but churn: subscribing to a service for a single month to get access to a single perk for a limited time, and then bouncing. This pattern is not what consumers have historically done after signing up for subscriptions, but it is the scenario that Game Pass apologists always cite when making their case for the service's value, and years of over-saturation in the subscription service space seems to be starting to shift consumer behavior on this point.
3. I will still be assuming that subscribers tend to stay subscribed. Churn may be the trend, but it is not yet the norm; until it is, we will assume the worst case: not enough loyalty to see people signing up for full-year discounts, as consumers pretend that they're keeping their options open, but less actual churn than would make even a one-month subscription into something I'd be comfortable recommending.
   
4. I will not be doing any sort of analysis for PC Game Pass. GP-PC is always going to be more expensive than the least expensive way to get games on PC, which is the Epic Game Store that gives games away for free. Only slightly more expensive than the free games that are available on PC are the bundles - for a new PC gamer looking to build a library, Humble Bundle is a fantastic value. And if you have a little more money still, the deals available in every Steam seasonal sale are still bananas. PC Game Pass was DOA before, and nothing has changed.

Napkin math time!

1 year of Game Pass Ultimate costs US$240, and the full-price AAA games that subscribers are hoping to access cost US$70, so the number of games that must be bought each year in order to break even is 3½. We're halfway through this console generation, so the number of games that would need to be accessed this gen to break even on GP-U is 14.

VGChartz helpfully maintains a list of all-time Tie Ratios by platform, which puts PlayStation4 in the number one spot with a lifetime TR of 12.11. 

The all-time top 20 consoles by Tie Ratio

That's already 2 points short of our break-even point, but remember that a platform's TR will cover its entire 8-year life cycle; divide that in half to approximate the 4-year half-cycle that we're using for this analysis, and the all-time Tie Ratio champion is nearly 8 points short of break-even.

The historical average Tie Ratio for a game console is 6.4 for its generational life cycle, with a standard deviation of 3.23, putting its 99th percentile value at 12.00 -- two full points short of our half-gen break-even point. If we double our break-even value to simulate an entire console generation of consumption, the resulting Tie Ratio of 28 is so far past the end of the bell curve that its percentile score isn't even meaningful.

Even if Microsoft offer a discount on the 1-year cost of Game Pass Ultimate, e.g. charging US$200, our break-even point barely drops: $200 $$÷\$70\; =\; 2.86,\; or\; a\; half-gen\; break-even\; point\; of\; 11.42,\; more\; than\; five\; full\; points\; higher\; than\; PS4\text{'}s\; half-gen\; tie\; ratio\; of\; 6.05.\; Or,\; if\; you\; prefer,\; 4700\; basis\; points\; short\; of\; break-even,\; since\; the\; PS4\text{'}s\; TR\; is\; only\; 47\%\; of\; our\; break-even\; value.$$

$$Game\; Pass\; was\; never\; a\; good\; deal,\; and\; Microsoft\text{'}s\; just\; made\; it\; even\; worse.$$$$Why?$$

$$Clearly,\; Microsoft\text{'}s\; Game\; Pass\; strategy\; is\; a\; failure,\; and\; they\text{'}re\; now\; trying\; to\; rebuild\; a\; business\; around\; traditional\; game\; sales\; which$$$$had$$$$already\; been\; rebuilt\; around\; cloud-based\; subscription\; services\; instead,\; but\; Game\; Pass\; isn\text{'}t\; the\; only\; consumer-focused\; cloud-based$$$$subscription\; service\; that\text{'}s\; failing\; to\; thrive.\; Even\; NetFlix,\; still\; the\; most\; successful\; of\; the\; subscription\; services,\; is\; seeing\; more\; churn\; than\; growth\; and\; raising\; prices\; to\; keep\; the\; line\; going\; up.\; This\; entire\; business\; model\; seems\; to\; be\; slowly\; running\; itself\; of\; the\; rails\; in\; real\; time,\; as\; we\; rubber-neck.$$

$$My\; hypothesis\; is\; that\; all\; of\; these\; corporations,\; accustomed\; as\; they\; are\; to\; investor-friendly,\; buzzword-driven\; decision\; making,\; have\; entirely\; lost\; touch\; with\; the\; way\; consumers\; make\; decisions.\; Microsoft\text{'}s\; main\; business,\; their\; bread\; and\; butter,\; is\; selling\; subscription-based\; services\; to\; The\; Enterprise\; -\; larger\; corporations\; whose\; incentives\; are\; all\; focused\; on\; keeping\; board\; members,\; institutional\; investors,\; and\; venture\; capital\; firms\; happy.\; This\; decision-making\; can\; be\; clearly\; seen\; in\; the\; way\; so\; many\; companies\; are\; claiming\; to\; be\; all\; in\; on\; AI.\; Before\; AI,\; it\; was\; blockchain;\; before\; that,\; it\; was\; VR.\; And\; before\; VR,\; it\; was\; the\; Cloud.$$

$$For\; Enterprise\; decision-makers,\; the\; argument\; in\; favour\; of\; cloud\; computing\; seems\; to\; make\; some\; kind\; of\; sense.\; Why\; not\; take\; all\; your\; server\; hardware\; and\; software,\; and\; its\; maintenance\; and\; upkeep,\; and\; offload\; all\; of\; that\; responsibility\; and\; complexity\; onto\; tech\; companies\; whose\; highly\; technical\; people\; specialize\; in\; exactly\; that.\; Sure,\; it\; costs\; more,\; but\; you\text{'}re\; paying\; for\; the\; service.\; You\text{'}re\; paying\; for\; the\; piece\; of\; mind\; that\; comes\; from\; having\; the\; experts\; in\; the\; field\; watching\; over\; your\; assets.\; You\text{'}re\; paying\; to\; have\; a\; single\; throat\; to\; choke\; when\; things\; go\; wrong.$$

$$But\; Enterprise\; customers,\; who\; are\; large\; and\; wealthy,\; can\; realistically\; be\; expected\; to\; choke\; that\; throat\; when\; necessary.\; They\; can\; expect\; to\; have\; a\; three\; trillion\; dollar\; behemoth\; like\; Microsoft\; pay\; attention\; to\; them\; when\; they\; have\; an\; issue.\; Individual\; consumers,\; by\; contrast,\; cannot.\; When\; Walmart\; can\text{'}t\; access\; Azure,\; Microsoft\; pays\; attention.\; When\; an\; individual\; gamer\; can\text{'}t\; access\; their\; XBox\; library,\; Microsoft\; pays\; less\; attention.$$

$$Consumers\; are\; wary\; of\; The\; Cloud.$$

$$Average\; consumers\; have\; been\; slower\; to\; embrace\; the\; cloud.\; Oh,\; sure,\; some\; early\; movers\; like\; NetFlix,\; YouTube,\; and\; Spotify\; have\; managed\; to\; build\; a\; solid\; customer\; base,\; but\; those\; customers\; were\; mostly\; embracing\; a\; combination\; of\; low\; costs\; and\; convenience.\; As\; long\; as\; costs\; are\; low\; enough,\; and\; convenience\; is\; high\; enough,\; consumers\; will\; ditch\; DVDs\; for\; NetFlix,\; or\; CDs\; for\; Spotify.$$

$$But\; there\text{'}s\; a\; ceiling.\; At\; a\; certain\; point,\; all\; the\; consumers\; that\; are\; OK\; with\; cloud-based\; services\; will\; become\; jaded\; when\; seven\; other\; big\; corporations\; approach\; with\; hands\; out,\; selling\; subscriptions\; for\; services\; that\; cost\; more\; money,\; deliver\; worse\; service,\; and\; demand\; all\; of\; the\; consumers\; time\; and\; attention.\; They\; start\; to\; churn.$$

Gamers are particularly cloud-averse, which is weird when you thing of how popular services like Steam have become. But it turns out that gamers like to own their consoles, and to own the games that are played on them. They won't want to pay a monthly fee to access content that can be taken away at any time. Gamers love the tangible.

$$This\; sets\; up\; a\; fundamental\; conflict,\; between\; a\; Microsoft\; whose\; entire\; business\; model,\; corporately,\; is\; to\; convince\; deep-pocketed\; customers\; pay\; extra\; money\; every\; month\; for\; services\; they\; may\; never\; access\; properly;\; and\; individual\; consumers\; who\; want\; to\; own\; things,\; and\; who\; don\text{'}t\; want\; to\; pay\; extra\; money\; for\; functionality\; that\; can\; be\; accessed\; more\; realiably\; by\; just\; owning\; the\; things.$$

$$Gamers\; are\; also\; cost-conscious,\; and\; so\; the\; framing\; of\; Game\; Pass\; as\; "the\; best\; deal\; in\; gaming"\; is\; pretty\; solid\; positioning,\; but\; the\; actual\; product\; isn\text{'}t\; the\; best\; deal\; in\; gaming.\; And\; so\; brand\; loyalty,\; the\; partisan\; divide\; between\; PlayStation\; fans\; and\; XBox\; fans,\; gives\; way\; to\; the\; practicalities.\; Game\; Pass\text{'}s\; growth,\; never\; rapid\; since\; the\; service\; is\; tied\; to\; a\; console\; that\; nobody\; wants\; to\; buy,\; now\; stops\; cold.\; Loyalty\; gives\; way\; to\; churn.$$

$$But\; Game\; Pass\; can\text{'}t\; exist\; in\; a\; state\; of\; churn\; and\; still\; add\; Call\; of\; Duty\; as\; a\; free\; day-and-date\; perk.\; A\; new\; Call\; of\; Duty\; release\; typically\; pulls\; a\; billion\; dollars\; of\; revenue;\; to\; give\; that\; up,\; Microsoft\; would\; need\; to\; see\; Game\; Pass\; growing\; much\; more\; rapidly\; than\; they\; are\; at\; present.\; They\; would\; need\; to\; see\; growth\; of\; a\; kind\; that\; will\; make\; back\; a\; billion\; dollars\; of\; lost\; sales\; revenue\; in\; the\; following\; year.$$

$$Microsoft\; clearly\; aren\text{'}t\; seeing\; that\; possibility\; in\; their\; future.\; Unable\; to\; convince\; individual\; consumers\; to\; pay\; more\; money\; for\; less\; service,\; service\; thatn\; they\; were\; previously\; getting\; for\; no\; added\; cost,\; they\; can\text{'}t\; grow\; Game\; Pass.\; That\; leaves\; only$$enshittification, the rapid decay of a service that didn't even have time to establish itself before the frog-boiling properly got underway.

$$What\text{'}s\; next\; for\; Game\; Pass?$$

$$My\; predictions:$$

1. $$intensifying\; churn,\; and\; possibly\; even\; a\; decline\; in\; the\; number\; of\; users\; as\; rising\; prices\; prompt\; subscribers\; to\; reassess\; the\; amount\; of\; money\; they\text{'}re\; spending\; on\; these\; sorts\; of\; expenses;$$
2. $$increasing\; enshittification\; as\; more\; functionality\; is\; carved\; off\; lower-tier\; offerings\; to\; pad\; the\; value\; proposition\; of\; the\; Ultimate\; offering;$$
3. $$more\; project\; cancellations,\; layoffs,\; and\; restructuring\; as\; the\; Microsofts\; in\; the\; gaming\; space\; come\; to\; the\; realization\; that\; they\text{'}re\; all\; basically\; fucked;$$
4. $$declining\; sales\; as\; consumers,\; tired\; of\; companies\; making\; their\; products\; worse\; because\; they\; can\text{'}t\; bear\; to\; just\; work\; with\; a\; regulator,\; shift\; to\; indie\; games\; of\; the\; sort\; that\; are\; readily\; available\; for\; almost\; nothing,\; free-to-play\; games\; which\; are\; (you\; guess\; it)\; free\; to\; play;\; and\; low-or-no-cost\; options\; like\; the\; Epic\; Game\; Store\text{'}s\; ongoing\; weekly\; game\; giveaway.$$

Game Pass is doomed, XBox is equally doomed, and Microsoft Gaming will go down in business history as a hundred-billion-dollar boondoggle.