Microsoft has stated that its aware the Xbox Game Pass subscription service potentially “cannibalizes” regular game sales. While Xbox Game Pass has missed its subscriber goal for two years in a row, the service has still proven to be incredibly popular and successful among fans of Microsoft hardware. It allows gamers to play on console, PC, or mobile at will, with progress saved to the Xbox Cloud and generally accessible from any platform.
In January 2022, Microsoft announced its planned acquisition of Activision Blizzard for $68 billion. This inevitably gave rise to controversy, not only among gamers concerned about the future availability of their favorite franchises, but also among government bodies that regulate anti-competitive behavior. One of these regulatory agencies is the UK’s Competition and Markets Authority (CMA), which thus far doesn’t seem strongly inclined to allow the Activision Blizzard deal to go through.
In response, Microsoft has been providing documentation to defend its right to acquire Activision Blizzard, and the CMA has released occasional updates about its ongoing investigation. In one of the latest CMA reports, which was made available on February 8, it was revealed that Microsoft’s own internal documents admit that Xbox Game Pass “would lead to the cannibalization of B2P sales,” B2P meaning Buy-to-Play or games purchased the traditional way.
The significance of this statement, according to the CMA report, is that Microsoft’s subscription-based services like Xbox Game Pass and Xbox Live Gold may lead to a decrease in Activision’s regular game sales, which are currently a key source of revenue for the publishing giant. Activision has occasionally considered making its games available on a service like Game Pass but has so far decided that doing so would “severely cannibalize B2P sales.”
However, the CMA document goes on to state that multi-game subscription (MGS) services like Xbox Game Pass will likely remain a smaller part of console gaming offerings when compared to B2P games, at least for the foreseeable future. Echoing this sentiment, Take-Two CEO Strauss Zelnick has said that subscription services are not significantly impactful and do not cannibalize that company’s core business. The CMA's statements were made particularly in reference to Activision potentially adding Call of Duty and other titles to Xbox Game Pass.
Either way, some analysts believe that, despite the roadblocks erected by some government regulators, the Activision Blizzard acquisition will ultimately happen. But if the deal somehow falls through, even the CMA acknowledged in its February 8 report that Microsoft already has a “strong gaming ecosystem” that consists of consoles, subscription services, and 24 game development studios.
Source: Competition & Markets Authority (PDF)