- Game Pass Ultimate now costs US$29.99/month, up from US$19.99, with added perks like Ubisoft+ Classics and Fortnite Crew
- Microsoft (NASDAQ:MSFT) aims to boost revenue per user, but faces backlash and increased cancellations from subscribers
- Regulatory scrutiny intensifies, as critics argue the price hike validates concerns over market consolidation post-Activision acquisition
- Microsoft stock (NASDAQ:MSFT) opened trading at US$518.61
Microsoft (NASDAQ:MSFT) announced a significant overhaul of its Xbox Game Pass subscription service, raising the price of its top-tier Ultimate plan by 50 per cent, from US$19.99 to US$29.99 per month. Even though company brass promised they wouldn’t raise prices, this move comes in the face of broader changes to the Game Pass ecosystem, including new tier names, expanded game libraries, and added perks like Ubisoft+ Classics and Fortnite Crew subscriptions.
This article is a journalistic opinion piece which has been written based on independent research. It is intended to inform investors and should not be taken as a recommendation or financial advice.
Key changes to Game Pass
Microsoft now offers three tears … I mean, tiers:
- Essential (US$9.99/month): 50+ games, cloud gaming, and multiplayer access.
- Premium (US$14.99/month): 200+ games, Xbox-published titles within a year, and expanded PC access.
- Ultimate (US$29.99/month): 400+ games, 75+ day-one releases annually, Ubisoft+ Classics, Fortnite Crew, and enhanced cloud streaming.
PC Game Pass also saw a 40 per cent increase, rising from US$11.99 to US$16.49/month.
Business rationale
Microsoft’s rationale centres on “adding value” to justify the price hike. The Ultimate tier now bundles third-party subscriptions worth nearly US$28/month, including Ubisoft+ Classics (~US$16) and Fortnite Crew (~US$12). On top of this, the company promises improved cloud gaming performance and a revamped rewards system.
Xbox President Sarah Bond confirmed that Game Pass is profitable, generating nearly US$5 billion in revenue in fiscal 2025. However, internal reports suggest that the streaming model has not delivered the explosive growth Microsoft anticipated, especially after its US$69 billion acquisition of Activision Blizzard.
This is the same company that jacked up the price of its current X-Box models twice this year and is going to release a US$1,000 gaming handheld device later this month.
It is also worth mentioning that some retailers that sell Game Pass on prepaid cards, like Game Stop (NASDAQ:GME), are continuing on with the previous price, even going as far as using this drama as a marketing campaign of their own.
Now Microsoft is fielding rumors it is getting out of the hardware business as several U.S. retailers, like Costco (NASDAQ:COST), have either discontinued carrying the Xbox series console or have it on steep clearance discount, like Walmart’s (NYSE:WMT) Sam’s Club.
Investor implications
1. Revenue growth vs. subscriber churn
While Game Pass has been a revenue driver, the steep price hike risks subscriber attrition. Reports indicate a surge in cancellations following the announcement, with the Game Pass website crashing due to high traffic from users attempting to unsubscribe.
2. Margin pressure from streaming
Streaming blockbuster titles like Call of Duty on Game Pass has reportedly cost Microsoft over USUS$300 million in lost unit sales last year. This raises concerns about the long-term sustainability of bundling high-cost games into a flat-rate subscription.
3. Market consolidation scrutiny
Regulatory bodies, including the FTC and UK’s CMA, previously warned that Microsoft’s acquisition of Activision could lead to price increases and reduced competition. The recent hike appears to validate those concerns, drawing renewed criticism from former FTC Chair Lina Khan.
4. Shift toward platform-agnostic gaming
Microsoft is increasingly positioning Game Pass as a device-agnostic platform, emphasizing cloud gaming and PC access over traditional console sales. This aligns with broader trends in gaming but may alienate core console users, especially amid rising hardware costs.
Outlook
Microsoft’s Game Pass strategy reflects a pivot toward premium monetization and ecosystem expansion. While the service remains profitable, the aggressive pricing could test consumer loyalty and slow subscriber growth. For investors, the key will be monitoring:
- Subscriber retention rates
- Revenue per user (ARPU)
- Developer engagement and content pipeline
- Regulatory developments
If (that’s a big IF) Microsoft can maintain its subscriber base while increasing ARPU, the move could bolster margins and reinforce its leadership in the gaming-as-a-service space. However, if cancellations mount and consumer sentiment sours, the strategy may backfire.
About Microsoft
Microsoft Corp. develops and supports software, services, devices and solutions. The company’s segments include productivity and business processes, intelligent cloud and more personal computing.
Microsoft stock (NASDAQ:MSFT) opened trading 0.82 per cent higher at US$518.61 and rose 1.15 per cent last week, with 24.26 per cent growth since the beginning of the year.
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