Key Takeaways
- Xbox Game Pass Ultimate price reduced 23% to $22.99 monthly from $29.99
- PC Game Pass sees 15% decrease to $13.99 per month from $16.49
- Call of Duty games will no longer launch day-one on Game Pass subscriptions
- Xbox gaming revenue declined approximately 10% compared to previous year, hardware down 32%
- Asha Sharma, Xbox’s new leader appointed February, drives pricing restructure
Microsoft’s gaming division faces headwinds. Last quarter, gaming contributed merely 7% to overall company revenue, standing as the sole major business segment experiencing decline.
The data painted a stark picture: console hardware sales plunged 32% following Microsoft‘s decision to cancel development on two anticipated titles, “Everwild” and “Perfect Dark.” Xbox content and services revenue fell short of internal projections, as CFO Amy Hood acknowledged during an analyst briefing.
Game Pass Ultimate had maintained a $29.99 monthly price tag since last October, when the company implemented a $10 increase. That pricing decision, as it happens, didn’t resonate well with consumers.
According to reports, Asha Sharma—Xbox’s newly appointed head—communicated to staff via internal memo that the subscription service had grown prohibitively costly. Sharma, previously an executive at Meta, assumed control from Phil Spencer this past February during a leadership reorganization that also included Sarah Bond’s departure.
Her solution: reduce pricing while maintaining content breadth. Game Pass Ultimate now costs $22.99 monthly—representing a 23% price drop. PC Game Pass falls 15% to $13.99. Both adjustments took effect without delay.
The Call of Duty Compromise
There’s a significant caveat. Upcoming Call of Duty releases won’t arrive on Game Pass at launch. Microsoft had leveraged the blockbuster franchise as a primary incentive for subscription growth, particularly following its massive $75.4 billion Activision Blizzard purchase in 2023.
Moving ahead, subscribers wanting immediate access to fresh Call of Duty installments must purchase them separately at $69.99. These titles will join the Game Pass catalog approximately twelve months post-release.
It represents a clear compromise—reduced subscription fees, but diminished launch-day content availability.
The company indicated these modifications stem from subscriber input. “Our players cover a wide breadth of geographies, preferences, and tastes,” Microsoft stated in an official blog announcement.
Game Pass reported 34 million subscribers throughout 2024. Microsoft hasn’t released updated membership numbers.
Competitive Headwinds
Xbox remains behind Sony and Nintendo in console market share and subscription service adoption. This competitive disadvantage has forced Microsoft to reconsider Game Pass’s value proposition and pricing structure.
The termination of console development initiatives and two game projects signals a more extensive reevaluation of the gaming division’s strategic direction. Online discussions have speculated about potential divestiture or closure of the Xbox business, though Microsoft hasn’t validated such rumors.
Amy Hood referenced an undisclosed impairment charge affecting the gaming segment during the most recent earnings discussion. The specific amount wasn’t disclosed.
MSFT shares advanced approximately 0.79% during after-hours trading following the pricing announcement.
Wall Street analysts maintain predominantly bullish sentiment toward Microsoft, with 34 Buy recommendations and 3 Hold ratings issued over the previous three months. Consensus price target reaches $581.61.
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