What you need to know
- Microsoft Gaming CEO Phil Spencer recently appeared on WSJ Live to discuss the Xbox business.
- Spencer conceded that, while it hadn't yet raised prices, it may have no choice in the near future.
- Energy market disruption has seen Microsoft's cloud overheads soar in Europe to the tune of $800 million dollars.
During Microsoft's financials yesterday, the company conceded that energy costs in Europe could raise prices for its cloud provision by anywhere up to $800 million dollars. For services like Xbox that are powered almost entirely by data centers, either for selling digital games, content, or even streaming games via services like Xbox Game Pass, these kinds of overheads are starting to eat into profits.
To that end, Phil Spencer emphasized that the company "may not be able" to keep prices as they are today.
"For us running the business, we have to look at the return on our business, the cost of the business. We've held price on consoles, and held price on games, and our subscription. I don't think we'll be able to do that forever." Spencer said, while emphasizing that price increases will likely not come until after this Holiday period. "I do think that at some point, we'll have to raise some prices on certain things, but going into this holiday, we thought it was really important to maintain the prices that we have because consumers, right now, are more uncertain than they have been in a long time."
"We've held price on our console, we've held price on games... and our subscription. I don't think we'll be able to do that forever. I do think at some point we'll have to raise some prices on certain things..." pic.twitter.com/jRt5ifKpE5October 26, 2022
In the same interview, Spencer said that Xbox Game Pass is indeed profitable for the company, despite mountains of speculation to the contrary. Spencer said that Xbox Game Pass is between 10 and 15% of overall Xbox revenue while conceding that growth has begun to slow down on console. During the earnings call yesterday, Microsoft CEO Satya Nadella noted that PC Game Pass was up 159% year-over-year, showcasing the opportunity Microsoft has to build its gaming business beyond its traditional console base.
Microsoft is currently attempting to complete a $69 billion-dollar acquisition of Activision-Blizzard-King, which the firm says will help its aspirations in the mobile gaming space. Activision is known for games like Candy Crush Saga and Hearthstone on mobile, but more recent titles like Call of Duty: Mobile and Diablo Immortal have also produced stunning results for the company as well. Activision is also known to have several other mobile games in development based on popular franchises in its stable, including the Warcraft universe.
There are also rumors that Microsoft is gearing up to build out its very own gaming mobile store to take on Apple's App Store and Google's Play Store, although it remains to be seen how they will circumnavigate platform rules to get those experiences into mobile gamers' hands. It seems entirely likely that a subscription service for mobile based on Xbox Game Pass would be on the cards too in that scenario, although as overheads continue to spiral owing to global energy market disruption, a question of price remains.
Jez Corden is the Managing Editor for Windows Central, focusing primarily on all things Xbox and gaming. Jez is known for breaking exclusive news and analysis as relates to the Microsoft ecosystem while being powered by caffeine. Follow on Twitter @JezCorden and listen to his Xbox Two podcast, all about, you guessed it, Xbox!
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