Xbox Game Pass is generating billions of dollars in revenue.
Microsoft has heavily pushed a subscription-based gaming model with its popular Xbox Game Pass service. It seems to be paying off for the company. Xbox Game Pass generated $2.9 billion in revenue for Microsoft in 2021.
Due to its pending acquisition of Activision Blizzard, Microsoft reported Xbox Game Pass revenue. Specifically, they reported the revenue to Brazil’s Administrative Council for Economic Defense as it seeks regulator approval for the merger.
The $2.9 billion may seem impressive, but it’s only a fraction of Microsoft’s total gaming business. Xbox revenue topped $16 billion in 2021. Hardware sales alone racked up $3.7 billion in revenue while another $12.5 billion was from Games and Services.
Once you account for Xbox Game Pass revenue, that leaves about $9.6 billion for Microsoft’s other gaming ventures. That includes physical game sales, online marketplace sales, royalties, and Xbox Live Gold. In other words, Game Pass is about a quarter of Games and Services revenue. So people are apparently still buying games on Xbox even with a Game Pass subscription.
25 million subscribers and growing
Microsoft is betting on Xbox Game Pass to become the Netflix of gaming. Although it is without a doubt the largest gaming subscription service, it has a long way to go to catch Netflix (which coincidentally is dabbling in gaming with a new internal studio). Netflix generated over $29 billion worth of revenue in 2021.
Even more impressive though is the number of active subscribers and the growth. The service stands at 25 million subscribers as of Q3 2022. That’s up from just 10 million subscribers at the end of 2020. Where will it be in another couple of years? 50 million subscribers seem conceivable given that Microsoft is pursuing a platform-agnostic strategy that allows gamers to play on Xbox consoles, PC, and mobile devices.