Is Phil’s job at risk? (pic: Microsoft)

A reader feels that buying Activision Blizzard is essential for the future of Game Pass and the job security of Xbox boss Phil Spencer.

What a couple of weeks it’s been for Xbox. The news cycle surrounding Xbox over the last few weeks really has been less than favourable. Just blow after blow, between the CMA slapping down the Activision Blizzard deal, the soaring PlayStation sales and plummeting Xbox numbers, and of course the abysmal launch of Redfall.

A high profile string of failures such as this will inevitably draw Phil Spencer’s leadership into question, prematurely or not. In the eyes of some particularly upset fans, weighing the good grace garnered from games like Pentiment and Hi-Fi Rush unfortunately does not stand up to the failure that Redfall is shaping up to be. The notion that this could be the end for Phil is overly sensational and reactionary, he’s been largely successful as a strategist for the Xbox brand.

We are still a ways away from curtains for Phil but should Starfield be another failure, the pressure may begin to ramp. Contrary to Phil’s recent statement about exclusives not selling consoles, PlayStation have all but proven that this is the case over the past two generations.

As the leader of Xbox Phil doesn’t just answer to the fans, he answers to the shareholders. Shareholders whose primary concern will not be Redfall running at 30fps on the Xbox Series X but the CMA stumbling block. I feel that the Activision Blizzard deal isn’t dead, there is simply too much money involved in these things for it not to get through eventually. When it comes to regulatory decisions, every decision can be appealed and reappealed, until you reach the gooey capitalist centre.

Microsoft will certainly need to spend more on legal fees and make concessions, but this strikes me as a regulatory body seizing an opportunity to justify their existence rather than a hard line stance. There has been a notion floating around that Xbox should spend the billions they were going to spend on Activision creating new studios. In a perfect world we would get new things and fresh ideas, but in the world in which we are currently living we get Call of Duty.

Shareholders exist and every penny spent by a corporation needs to be justified and new ventures will always be a gamble, whereas Activision Blizzard already exists and is already wildly profitable. And, more importantly, has the structure and expertise that Phil’s brainchild, Game Pass will most likely need to survive.

Game Pass has not been the golden bullet Xbox hoped for (pic: Microsoft)

Phil Spencer declared last year that Game Pass was profitable, but what does that mean? Does it mean that they are raking in the profit hand over fist? Highly unlikely, what it probably means is that they are making more than they are spending to keep the service running and stocked with new releases, but this doesn’t account for the opportunity cost associated with losing out on game sales.

It can absolutely be profitable but, games are expensive to make and the Game Pass model as it exists right now doesn’t take Xbox where they need to go. In my estimation the financial viability of Game Pass or PlayStation Plus Extra/Premium comes down to the live service titles they will be able to cram into their respective services.

If you really think about it, the game streaming platform and live service model is a marriage made in heaven, or hell depending on your vantage point. Sony have made no secret of their live service play, for a company that has single-player titles to thank for its success this is a very significant detour. There should now be an acceptance that single-player games sell systems but once you get the lemmings in the door, you need to bleed them for all they are worth and for that you need game economies and microtransactions.

Hard to say who started the microtransaction ball rolling but it’s fair to say that EA gave it a hearty kick on its way, introducing play-to-win mechanics in their marketplaces, all the while charging the same premium rate price tags as always. The general consensus is that we are okay with our sports games being pay-to-win but for a reason unknown to myself, when the same tactics occur with shooters the outcry is staggering.

Companies such as Epic and Activision learned quickly that there was a better way, and that remarkably the only thing deeper than the gaming public’s pocket is its vanity. Fortnite was the first to take advantage of this societal weakness and introduce cosmetic items. It is estimated that they have brought in somewhere in the region of $25 billion in revenue. To put this in perspective. It is believed that Skyrim and its near annual re-releases have made somewhere in the region of $1.6 to $1.8 billion all in.

The irony being that Bethesda are credited with being one of the first to do it, Oblivion’s golden horse armour was one of the first microtransactions ever. These numbers really do tell a story and it is not difficult to see why the industry is moving in this direction. The live service model is the North Star for gaming executives all around the globe, for better or for worse.

The microtransactions from games such as GTA Online, Fortnite, Call Of Duty, or anything EA touches are a major revenue stream for the console manufacturers and they are making but a fraction of the total amount as the marketplace operators. If you play on PC you will be painfully familiar with the fact that you need to have five different launchers installed for this exact reason.

You play an EA game, you have to buy the game from their store and purchase any add-ons through that same store, because in this way they can collect all of the profit. They also see the value in the subscription model because free-to-play would be overly generous, all the while charging their fanbase near double to play a couple of days ‘early’.

We will likely see both Microsoft and Sony migrate to a monetisation structure similar to this, albeit a less despicable one, hopefully. There have been attempts to implement this structure already with Halo from 343. The less said about Halo infinite the better, but it does show the value to be gained from adding Activision to Xbox Game Studios. This gives them access to the talent that has managed to find live service success at the highest level. If they can reach anything like the efficiency of collaboration that Sony has amongst its first party studios, the acquisition begins to work on multiple levels.

It’s telling that Sony’s reaction to this was to acquire Bungie, who have a well of live service experience, with the suggestion that Bungies products will remain multiplatform, this only serves to illuminate Sony’s intention all the more, plus they have come right out and stated that this is why they bought Bungie.

It is worth noting that Microsoft has yet to really merge the live service and Game Pass models. Forza Horizon 5 being a prime example of a title that could have been given the triple-A live service treatment and to their credit Xbox refrained. The in-game economy is entirely in-game, barring some car packs and the standard DLC, unlike PlayStation and Polyphony Studios who put the pedal to the metal in the microtransaction model, while still being a full priced PlayStation title.

The major difference being, the latter is the only real triple-A success of this generation for Xbox. There’s an argument to be made that PlayStation’s handling of Gran Turismo is just a perk of being the market leader and Xbox badly needed a winner unmarred by microtransactions.

PlayStation will drag their heels on their day one sales until the very end, but once we see some of their 10, supposedly in the works, live service titles land you can expect them to start utilising that weirdly tiered subscription service of theirs. The release of Starfield on a service like Game Pass only works if it is there as a loss leader. Xbox have made big promises around exclusives that are going to become harder and harder to keep if they do not have the earning potential of a Warzone to underwrite that lost revenue; the exclusive strategy may need to be revised if there is no breakthrough.

The landscape of monetisation during the digital era is ever changing, and change it will. Free-to-play may become a remnant of the past. If you think about it from the perspective of the men and women with their hands in our pockets, it would be much nicer to package all of that unlimited earning potential of their free-to-play live service into a neat monthly package of $12.99. Make no mistake, we will see some variation of this in the near future and Xbox’s success likely hinges on the Activision Blizzard acquisition making it through the regulatory ringer.

By reader Michael Byron

The reader’s feature does not necessary represent the views of GameCentral or Metro.

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A reader feels that buying Activision Blizzard is essential for the future of Game Pass and the job security of Xbox boss Phil Spencer.