Game Pass: How Xbox Game Pass may have reduced base game sales

Microsoft’s Xbox Game Pass is not only a popular online gaming subscription service but is also a major revenue stream for the company. The tech giant announced its decision to acquire Call of Duty developers — Activision — in January 2022. Since the announcement, the $68.7 billion deal has been under the scanner of multiple countries and their regulatory watchdogs. Currently, this acquisition deal is under scrutiny by the UK Competition and Markets Authority (CMA). During the investigation, CMA recently released provisional findings report (spotted by GameSpot) that reveals details about how Xbox Game Pass affects base game sales.
Xbox Game Pass reduces base game sales
According to CMA, Microsoft has agreed that base game sales decrease after being included on Xbox Game Pass. The UK regulatory states: “Microsoft also submitted that its internal analysis shows a [redacted]% decline in base game sales twelve months following their addition on Game Pass.”
In an interview in 2018, Microsoft Gaming chief Phil Spencer previously claimed that Game Pass encourages the sales of the base game. He said: “When you put a game like Forza Horizon 4 on Game Pass, you instantly have more players of the game, which is actually leading to more sales of the game. Some people have questioned that, but when the State of Decay 2 launched, you saw if you looked in the US at the NPD you saw this game selling really well the month it launched on Game Pass.”
In the CMA report, internal Microsoft documents have also recognised that Game Pass ‘cannibalise’ direct purchases of games sales. These purchases are termed buy-to-play or B2P in the report. This report has been formulated by the redaction of three different figures available in the internal documents. So, the report couldn’t reveal the exact decrease. CMA has concluded that it has discovered that “console B2P and MGS are within the same product market” but there is some differentiation between the two.

Microsoft’s reaction
In the report, Microsoft argued that subscription services like Game Pass (MGS) don’t belong to a separate market from B2P. however, the company considers Game Pass and other subscription services as a different type of payment. Microsoft has also explained its argument by submitting evidence about players frequently switching between the two different “payment methods.”
The company explains: “Between [redacted]% and [redacted]% of Xbox gamers continue playing games purchased on a B2P basis in the 12 months after unsubscribing from Game Pass. Between [redacted]% and [redacted]% of gamers purchase a game on a B2P basis within a year after unsubscribing from Game Pass.”

CMA’s conclusion
In this provisional report, CMA has also offered a comment about the acquisition deal. It says that the buyout “could result in higher prices, fewer choices, or less innovation for UK gamers.”
CMA has also offered suggestions for Microsoft to get approval on the buyout. This includes dropping the Activision unit and Call of Duty from the merger. The CMA’s final report will be released on or before April 26.
Apart from CMA, Microsoft is also currently facing a lawsuit from the FTC regarding the Activision Blizzard deal. Rumours suggest that the EU is also preparing to impose an antitrust warning on Microsoft. The EU is set to share its decision by April 11.