Game Pass may not be as profitable as Microsoft says

Phil Spencer himself, head of the Microsoft Game Division, has already stated in the past that the Game Pass subscription service was profitable. However, there seems to be a great “but” in this statement.

According to journalist Christopher Dring, Microsoft itself confirmed that by calculating the profitability of Game Pass, it takes into account only the spending on Third-Party games (by third parties), ignoring the costs of First-Party titles (produced by Microsoft Studios) and the impact on sales of these games.

According to Dring, the service is really lucrative when considering only the costs to add third party games to the library and perform marketing. However, if the costs to include their own games were also taken into account, the scenario would be different:

“The costs considered in calculating the profitability of Game Pass include things such as paid fees to third party studios, marketing, and service operating costs. Based on these costs, the service is considered profitable. What is not being considered is the recipe that Xbox’s own studios are no longer winning their games on the service.

I imagine that if Microsoft’s own studios received equivalent compensation (as outsourced studios receive), perhaps this alleged profitability of the game pass did not actually exist. I asked for clarification on the statement that Game Pass is profitable, and I was told that its own studio game costs are not included. ”

For users contrary to Dring information, the journalist simply said it was “Literally what Xbox told me”.

So costs associated with the Game Pass business is fees paid to third-parties, marketing, service costs… and by that measure, it’s profitable.

What they don’t count is the lost revenue that Xbox’s first-party studios are seeing as a result of the service. I have to imagine if…

— Christopher Dring (@Chris_Dring) July 6, 2025