Why Xbox Game Pass Has Yet to Become the Netflix of Video Games?

In a special episode of Decoder, David Pierce, editor at The Verge, takes the reins while Nilay Patel takes a well-deserved break. This episode shifts away from current political topics to focus on the video game industry, specifically the challenges facing Microsoft and its Xbox division. This year, Microsoft celebrates its 50th anniversary, and Xbox has been a key part of its hardware and software business for nearly half of that time. The first Xbox console was launched in 2001, establishing the brand as one of the three giants in console gaming alongside Sony and Nintendo.

However, Xbox has been going through tough times. Among the difficulties are essential issues in software distribution. With rising production costs for video games and increasing demand for quality and size, the company faces the challenge of developing successful titles that entice consumers to purchase their hardware. Additionally, there are considerations about how to finance those games and how to reach an audience that, in many cases, is unwilling to invest in a new Xbox or pay up to $70 for a game.

While Nintendo and Sony seem to have successful strategies in the market, since 2017 Microsoft has also tried to change its business model by launching Xbox Game Pass, a subscription service similar to Netflix but for video games. Phil Spencer, CEO of Microsoft Gaming, conceived a plan to focus their strategy on cloud computing and the profits generated by their software, attempting to blend subscription-based video games with cloud streaming.

Years later, the results have been less successful than expected. Xbox remains a distant third compared to its competitors, with estimates suggesting its hardware sales are less than half of Sony's PS5. Despite multimillion-dollar acquisitions of video game studios, the situation has not improved significantly. In contrast, Nintendo finds itself in a strong position, with over 150 million Switch units sold and an anticipated launch of the Switch 2 that also promises to be a hit.

While Game Pass has seen some success, it has not revolutionized the market as Netflix did in the film industry. The current trend still leans towards buying games, often in physical format. The idea of streaming games via the cloud has yet to take off significantly. In this context, David invites Ash Parrish, a video game journalist, to discuss the challenges facing Xbox and Game Pass and to speculate on the future of the video game industry.