Microsoft fails to hit Xbox Game Pass subscriber target for second year running

First reported by Axiosand according a new financial presentationMicrosoft has failed to meet its annual internal growth target for the popular subscription service, Xbox Game Pass. This is also said to be the only metric linked to CEO Satya Nadella’s pay, which is interesting, to say the least.

This is the second year in a row that Microsoft has not met its goal. The company initially planned a 72.8% growth rate for the fiscal year ending June 30, 2022. However, Microsoft was only able to achieve a 28% growth rate.

Microsoft exceeded its planned growth rate in 2020, but 2021 and 2022 have been less successful in reaching its goal for the service. We’re also now well aware that “Xbox gaming generated a staggering $16.28 billion in total revenue for Microsoft” during the calendar year of 2021, with Xbox Game Pass responsible for 18% of this.

So it doesn’t exactly look like Microsoft is doing poorly. Although, there may be trouble in paradise if the growth rate continues to drop; for example, the service growth rate in 2021 was 37%, which is 9% more than this fiscal year.

What’s more fascinating is what Phil Spencer, Microsoft’s head of gaming, had to say about Xbox Game Pass during the Wall Street Journal conference yesterday. The service, according to Spencer, is “profitable.” He also noted that the growth of Game Pass on PC is great, but has slowed down significantly on consoles.

Axios also noted that perhaps the slowing growth rate is due to a lack of major releases. Microsoft hasn’t dished out big games exclusive to its platform in a long time. We can expect Starfield to arrive next year, but there’s no telling when new installments from the Fallout or Elder Scrolls universes will arrive.

On top of all this, the UK Competition and Markets Authority is still concerned about Microsoft’s Activision deal, and Game Pass is one of them. For example, if Call of Duty were to become available on Game Pass after the deal, there are concerns that this would significantly reduce competition.

Of course, Microsoft insists that this won’t greatly affect its rivals and that Sony can compete simply by offering better exclusives.

As for what Microsoft CEO Satya Nidella had to say about Q1 earnings for fiscal 2023, he shared the following during Microsoft conference call on the matter: “In Games, revenue grew slightly and increased 4% in constant currency, above expectations driven by better-than-expected console sales. Xbox hardware revenue grew 13% and 19% in constant currency Xbox content and services revenue decreased 3 percent and increased 1 percent in constant currency, driven by declines in first-party content and third-party content, where we had fewer hours of engagement and higher monetization, partially offset by growth in Xbox Game Pass subscriptions.”

“PC Game Pass subscriptions are up 159 percent year over year. And with Cloud Gaming, we’re transforming the way games are distributed, played and watched. More than 20 million people have used the service to stream games to date.” date. And we’re adding support for new devices, like wearable devices from Logitech and Razer, as well as Meta Quest.”

“And as we look ahead to the holidays, we offer the best value in gaming, with Game Pass and Xbox Series S. Nearly half of Series S buyers are new to our ecosystem.”