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December 18, 2020

Game Pass revolutionizes video games industry during pandemic

By MarketLine

Competition in the video games industry is fierce, but Microsoft’s continued investment in Game Pass has paid dividends and has undoubtedly changed the way people consume video games forever.

This year’s engagement on the platform has highlighted the potential the company has for the platform to be a major money-maker in the long term.

Microsoft has been coy about the amount of subscribers it has on Game Pass since its inception, but in the company’s FY20 Q3 earnings call announced that it had over 10m subscribers. As the Covid-19 pandemic hit around the world which led to local and national lockdowns, people took to hobbies at home and this meant spending more time playing video games.

Game Pass subscribers increased earnings

In the company’s 2020 annual report, the amount of subscribers to Game Pass rose by 50% up to 15m. Covid-19 and the release of the company’s latest hardware, next gen consoles Xbox Series S and Xbox Series X had turned out to create a perfect storm for Microsoft’s Xbox content and services division.

In Q1 FY21, in its earnings release, the Microsoft disclosed that the division for Xbox content and services revenue was up 30%. As time goes by it is clear Microsoft will drip-feed the specifics of its Game Pass success in order to impress its current and potential investors, but as it stands, the few numbers they have released thus far remain mightily impressive.

A study was produced in August 2020 that noted there was a 39% increase in global spend on video games as a result of Covid-19, with an expected increase of 12-15% on the year compared with 2019, indicating a huge increase in audience engagement for companies like Microsoft.

Acquisitions and partnerships key to success

At the time of writing, Game Pass has over 250 titles. The company’s partnerships and acquisitions are indicative of its success. In September 2020, Microsoft acquired ZeniMax Media, parent company of the publishing giant Bethesda and therefore acquired the rights to its back catalogue which has since begun launching on Game Pass.

The acquisition was the second largest video games company acquisition ever with a total cost of $7.5bn, just behind Tencent’s acquisition of Clash of Clans developer Supercell and showed Microsoft’s true intent to make Game Pass its flagship platform.