LEVELLING UP IN THE MARKET

Group 1
Achint Kaur - 112027222 - akaur690@myseneca.ca
Lynn Haffar - 119421220 - lhaffar@myseneca.ca
Disha Mundhra - 167549229 - dmundhra@myseneca.ca
Aarepha Akbarbhai Raj - 139810212 - aaraj@myseneca.ca
Mikaela Reyes - 153469226 - mareyes8@myseneca.ca

BMK 810
Professor Duncan Reith
24 June 2024

1
 The Xbox Game Pass has been stagnant in the market - this speaks to our need to pursue growth opportunities that
would help sustain the brand in the long term

WHY ARE WE HERE?

The problem of Xbox now is that we are not growing at the pace we want to and we have no clear growth strategy in place. This affects the
company and its stakeholders as we have not been reaching our growth targets for revenue and capitalizing on the market opportunities, which has
resulted in us being stagnant in the market and effectively losing potential sales. A successful solution would result in boosting the Game Pass’
overall performance in the market by maximizing long term growth opportunities for the service in terms of both revenue and subscribers.
● Subscription-based services for gaming reached its peak during the pandemic as people spent more time at home, which gave them more
access to console and PC gaming - this also means they needed and wanted more games to play.
● We make most of our profits by selling games, making it important for us to promote the games that we offer both on Game Pass and
individual sales.

OBJECTIVES
Short-term:
● Increase actual subscriber growth by 40% within the next 2 years.
● Acquire and release new games to add into the Xbox Game Pass catalog.
● Along with subscriber growth, increasing revenue is a clear short-term goal. The revenue has lagged behind expectations.

Long-term:
● Be the leading subscription-based service in the industry in the next 5 years.
● Continue to expand to new markets to increase profitability and reach for the Xbox Game Pass.

Customers:
● Investing in the Xbox Game Pass has been a great decision. It surpassed all my expectations and gives me the best gaming experience, every
gaming session.
● I love Xbox Game Pass, it has every game I need and it gives me the chance to play games I never would have thought of.

Publishers:
● Thanks to the Game Pass, more people have been playing our games - it is a good investment to be working with Xbox. 2
In order to understand how we can grow in the market and what opportunities we can pursue, we must identity which
market we serve
DEFINING OUR MARKET

Video Gaming An electronic entertainment medium that engages players through interaction with a user
interface or input device. These devices, which include joysticks, controllers, keyboards, and
motion sensors, provide visual feedback on various display screens such as televisions,
computer monitors, flat-panel displays, touchscreens on handheld devices, or virtual reality
headsets.

Console Gaming Video games which have a dedicated gaming device called the console which is connected to a
monitor or screen . These consoles are designed for gaming and come with proprietary
hardware and inbuilt software which enhances the gaming experience

Digital Home Entertainment Xbox offers a variety of media consumption choices (popular streaming services such as
Netflix, Disney+, Hulu, and Amazon Prime Video) social media integrations in addition to
games. It turns the Xbox system into a multipurpose entertainment center where users can
enjoy social gaming, music, movies, and more from the comfort of their own homes.

E-Gaming Any interactive game operated by computer circuitry. The machines, or “platforms,” on which
electronic games are played include general-purpose shared and personal computers, arcade
consoles, video consoles connected to home television sets, screens and handheld devices

Visual Entertainment Any type of entertainment that uses visual components to captivate an audience. This covers a
broad range of media.

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 The Xbox Game Pass operates under the Video Gaming industry as the games are our primary offering which is why we also have
the Game Pass on PC, this also entails that we are and should be able to grow into other channels with in the video gaming
industry.

Criteria / Is it how Is it big enough? Is it growing? Is it strategically Does it address Summary

Alternatives consumers view
the market?
Yes, consumers see Xbox
primarily as a video gaming
platform.
Video Gaming
Yes, they separate it
as a well-known
subset of video gaming
that relates to
Console Gaming game experiences on
specialized gaming
consoles.
No, customers don't
generally associate xbox
with digital entertainment
Digital Home despite its capability of
Entertainment doing so
relevant to the similar customer
decisions we needs/ Solutions to
have to make? the same job?
Yes, video game market is Yes, the demand for Yes, Xbox's strategic Yes, video games meet the Xbox has great potential in the very
big enough. It has a large video games has been objectives and the video needs of Xbox's target market relevant and growing video game
customer base across the increasing specially after game industry complement for entertainment by providing business. It is sizable, expanding,
globe the pandemic each other well, offering a variety of gaming and closely in line with Xbox's
room for expansion and experiences to suit a wide strategic goals.Xbox can capitalize
innovation in the gaming range of tastes. on its strengths,satisfy customer
industry. wants, and keep innovating in a
recognizable and growing market
by concentrating on video games.
Yes, it is substantially Yes, especially No, since it limits to Yes, Specifically caters Despite its need on specialized
big and has a loyal as it has broadened consoles, to the needs of moderate hardware,
and dedicated gender and age future decisions on and hardcore players console gaming is a substantial
audience groups across gamers, expansion to any other that want console gaming. and
medium would limit us well-supported area of the gaming
market that appeals to a wide and
devoted audience. However, there
may be less room for growth
in this market.
Yes and covers a Yes, customers want No, not as specific as a Yes, meets some gaming Despite being a sizable and
wide range of something which can gaming strategy, needs while also taking expanding
digital entertainment give all in one digital but still somewhat into account more industry, digital home
formats. entertainment relevant due to the offering general entertainment tastes. entertainment
is less focused on gaming which
weakens
the strategic emphasis on
game-specific experiences.

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Criteria / Is it how Is it big enough? Is it growing? Is it strategically Does it address Summary
Alternatives consumers view relevant to the similar customer
the market? decisions we needs/ Solutions to
have to make? the same job?

Yes, consumers Yes, e-gaming is a Yes, e-gaming No, even while No, even though Xbox has a large and
E-Gaming
acknowledge Xbox as sizable sector of business is seeing e-gaming has an e-gaming satisfies profitable market
e-gaming as it is a the economy with constant growth impact on digital some gaming needs, it share in e-gaming because
major a sizable global due to entertainment, does so across a variety of its widespread
source of enjoyment audience. technological consumer goods, and of appeal to consumers.
on developments, technology, it isn't platforms and However, may limit its
a digital platform increased necessarily communities, which strategic relevance
accessibility of strategically relevant may lessen the to certain Xbox decisions
gaming platforms, to the particular emphasis on the for future
and the expansion gaming selections essential Xbox-only expansions
of player made for Xbox. gaming experiences.
demographics.
No, Passive content Yes, it is big as it Yes, specially after No, not directly No, as movies and Despite its popularity and
Visual
consumption like consists the pandemic. relevant as media growth,
Entertainment
movies, of not just games People it does not align will have to solve for visual entertainment is less
is the main focus and but also movies spend a lot of time closely with gaming. other appropriate
is and media on jobs like relaxation for a targeted gaming as
generally seen as visual it's too broad.
separate from gaming. entertainment It does not fit with the
immersive
and main aspects of
gaming. 5
 The Xbox Game Pass is a leading product as a gaming subscription service; however, growth has been slow for the
service over the past few years
XBOX GAME PASS IN THE MARKET
Market Standing Subscribers and Revenue Product Pricing
● Started as the leading ● By 2024, we have gained a ● The Game Pass works as ● The Game Pass starts
subscription service total of 34M subscribers a supplementary product prices at $9.99 with access
among all video game to the Game Pass, which to the Xbox along with to >400 games; even with
providers, making us the shows a slow growth from individual game sales, its value-driven price
most sought after service our high of 25M in 2022 effectively creating a lock compared to buying an
by consumers, especially from the pandemic now in strategy that we individual game that retails
due to our strong brand that more people are less execute well. at $70, consumer norm is
and technical expertise invested in playing a ● Entryway for users to gain still to purchase one off.
● Touted as a must-have rotation of console and access to over 400 games ● Though profit is huge for
subscription service as of PC games. including some of the both even with the same
October 2022, which ● Game Pass over recent biggest games in the profit sharing rate with
speaks to our product years has been profitable, industry, like Halo and publishers - with this
leadership that we take on having generated $2.9B in Forza, that align with our pricing, we would still have
from Microsoft revenue in 2021, which is product leadership. better gross margins selling
● This is supported by 15-20% of Xbox’s total ● The Game Pass has been individual games.
exclusive game designs revenue of $16.3B - effective in reaching a ● However, even with this, the
and ability to partner with however, it has not been a wider audience and Game Pass is a technically
renowned developers, revenue driver for deeper usage for games successful product and
which have allowed us to Microsoft Gaming as we (15x player increase, 40% helps Microsoft as a tool to
provide a compelling still get most of our profits more titles played) - with market and eventually sell
rotation of games that from individual game the overarching business individual games, making it
allow us to attract more sales. strategy of using it as bait a good supplementary
users. for users product in their line
Statista. (2023, May 3). Must-have vs nice-to-have gaming subscriptions in the U.S. 2022. https://www.statista.com/statistics/1357837/us-households-must-have-gaming-subscriptions/ 6
Brahma, N. (2023, September 22). As per reports, PlayStation scores the lowest in profitability as compared to Xbox and Nintendo, but rules in revenue. EssentiallySports.
https://www.essentiallysports.com/esports-news-as-per-reports-playstation-scores-the-lowest-in-profitability-as-compared-to-xbox-and-nintendo-but-rules-in-revenue/
 Varying spending behaviors across user segments like "Whales," "Dolphins," and "Minnows," impacting subscription and
revenue dynamics, which calls for a new strategy in place.

● As consumers looked for at-home entertainment during the pandemic,

there was a spike in the type of games available and the number of
subscription sign-ups.
Low engagement- Moderate 0.2% of market share but
● As limitations relaxed, a lot of players went back to their typical pattern of typically play for engagement- play generate 85% revenue
playing fewer games at once, which resulted in a decline in interest in the shorter periods and regularly but not
massive game libraries that services like Xbox Game Pass provided. Spend significant time
occasionally excessive
gaming, almost daily and
● In today’s time, casual gamers prefer playing not only on PC and traditional prefer a narrow selection
Price Sensitive Willing to spend in of games
consoles – but also on Mobile platforms such as smartphones and tablets, moderate amounts on
and through Social Media They value gaming and Willing to invest in
accessibility, subscriptions. premium subscriptions
● The spreading of these new platforms has broadened gender and age And buying games
affordability and
groups across gamers, increasing the consumer base and has led to the
simple games Have diverse
development of new and different types of products They value
preferences and value
high-resolution, fast load
● Our main customers of game pass are price sensitive. They are used to a multiplayer and social
times and seamless
paying a certain amount, so the slightest increase would make them gaming aspects
multiplayer experiences
unsubscribe, especially because switching to Sony and Nintendo is
possible They look for value for Early adopters to
money technology
● Game pass ultimate targets the Whales (superior gaming experience) and
standard targets Dolphins (who are looking for value) and Minnows (who
How can we retain this How can we retain this How can we retain this
game causally and don’t prefer high upfront cost) segment? segment? segment?

● The necessity of platform adaptability is highlighted by the increased Creating options which do They look for value for Provide new tech, all
demand for gaming across many devices by customers. A larger audience no require a significant money. Bundling product inclusive top tier games
may be reached by bringing Game Pass to mobile devices, but doing so cash commitment. & providing better and a good gaming
would present technological and revenue-sharing difficulties. gaming experience can ecosystem investment7
The video games market - Digital Bros. (2024, May 27). Digital Bros. https://digitalbros.com/group/the-video-games-market/ help in retaining & lock in opportunity.
 The gaming subscription service is meant for beginner to intermediate players who casually play games which is why
they need variety, more than hardcore gamers who focus on just one game
Xbox Game Pass Customers' Needs
Functional Needs:
● Job to be done: Ensuring games can be played seamlessly
on consoles, PCs, and mobile devices.
● Opportunities for Growth: Improve device compatibility
and performance to ensure seamless gaming experiences
across different platforms.
Emotional Needs:
● Job to be done: Providing thrilling and enjoyable gaming
experiences.
● Opportunities for Growth: Curate a diverse and engaging
game library that provides thrilling and enjoyable
experiences to keep players excited and invested.
Social Needs:
● Job to be done: Facilitating multiplayer and cooperative
gaming experiences.
● Opportunities for Growth: Enhance multiplayer and
cooperative gaming features to facilitate better
matchmaking and social interactions, catering to social
gamers' preferences.
Target Customer Profile
A gaming subscription allows for access to multiple games at a
more affordable price instead of buying multiple games
individually. Because of this, the service is most attractive to:
● Minnows - gamers looking for a wide array of games to
play as they are not heavily invested in just one game and
would like to have a service that provides them with good
value for their money, they seek access to games and their
convenience but are still cost conscious
● Dolphins - frequent game players who also seek to have
access to a range of games that truly interest them - these
are also attractive to them as they allow for access to
multiple best-selling, exclusive game titles for a lower price
than if they bought them individually, having a subscription
service would be most cost-efficient for them
● Although there are some hardcore gamers/Whales that
also find gaming subscriptions appealing, they prefer a
more selected and targeted list of games that they play for
hours on end and eventually master
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 Xbox Game Pass maintains a competitive edge through its affordable pricing, expansive gaming catalog, and
broad hardware compatibility, despite robust competition from PlayStation, Nintendo, and other industry players.

Overall, competition in the category is intense as we go head to head with fellow big names in the industry like Nintendo and PlayStation, with
each service providing unique advantages tailored to different segments of the gaming community.. Because of this, users are given a wide
range of choices for games, but are still limited by their loyalty to brand exclusives. However, with video gaming becoming a standard in today’s
time, this works positively in favor is the industry, making it attractive to participate in. Xbox and the Game Pass in particular have been a
formidable player here as they fare quite well in the following aspects vs competitors.

Price vs other video game subscription services in 2024 Gaming Catalog vs other video game subscription services in 2024

1. Xbox Game Pass offers a tiered pricing model starting at 1. Xbox Game Pass features over 100 high-quality games,
$9.99 per month, with the Ultimate version at $16.99 per including new releases on day one, catering to a wide range of
month. This provides a balance between affordability and gaming preferences. This extensive and diverse game library
premium offerings, including EA Play membership, online positions it as one of the most attractive options for gamers.
multiplayer, and cloud streaming. 2. PlayStation Plus: Offers a robust selection of games, including
2. PlayStation Plus: Starts at $9.99 per month for the exclusive PlayStation titles and a rotating selection of free
Essential tier and goes up to $17.99 per month for the monthly games. The Extra and Premium tiers add more games
Premium tier and streaming options.
3. Nintendo Switch Online: Starts at $3.99 per month, with 3. Nintendo Switch Online: Includes a growing library of NES and
options for quarterly or annual subscriptions and a family SNES titles, along with exclusive games like Tetris 99. While its
plan. catalog is not as extensive, it appeals to fans of retro and
4. EA Play: Competitively priced at $4.99 per month, wit.h a Nintendo-exclusive games.
Pro version available for $14.99 per month 4. EA Play: Focused primarily on EA games, the service includes
popular franchises like FIFA, Madden, and Battlefield. While
Statista. (2023). Top gaming services subscription rate among gamers in the USA in May 2023. Statista. Retrieved from
narrower in scope, it offers depth in sports and EA-specific
https://www.statista.com/statistics/1275802/top-gaming-services-subscription-rate-among-gamers-usa/#:~:text=A%20May%202023%20surve
y%20found,ten%20percent%20subscription%20rate%20each genres. 9
Statista. (n.d.). Xbox Game Pass and PlayStation Plus usage per country. Retrieved June 24, 2024, from
https://www.statista.com/chart/30725/xbox-game-pass-and-playstation-plus-usage-per-country/
 The Xbox Game Pass is the most widely compatible and available gaming subscription service on the market,
integrating itself in different hardwares and channels, aligning with one of the goals of Microsoft.

Hardware Compatibility vs other video game subscription

services in 2024

1. Xbox Game Pass is available on Xbox consoles, PC, and

through cloud gaming on mobile devices, ensuring wide
accessibility and enhancing the overall value of the
subscription.
2. PlayStation Plus: Limited to PS4 and PS5, with some
titles available for streaming on PC. It remains a strong
option for dedicated PlayStation users but lacks the
cross-platform compatibility of Xbox Game Pass. Xbox Game Pass is the most popular, with 13% of
3. Nintendo Switch Online: Available only on the Nintendo gamers subscribed, indicating its strong position in
the market. PlayStation Plus Premium and Nintendo
Switch, limiting its reach compared to services that
Switch Online both have a significant share of 10%,
support multiple platforms. However, it provides essential showing they are also preferred choices among
features for Switch users like online multiplayer and cloud gamers. Google Play Pass holds 9%, suggesting it
saves. has a substantial user base. These insights suggest
4. EA Play: Available on PlayStation, Xbox, and PC, making it that while Xbox Game Pass is the leader, there is
widely accessible. The Pro version is limited to PC but robust competition, with several services
provides additional perks for dedicated EA gamers. maintaining a significant presence in the market.

Statista. (2023). Top gaming services subscription rate among gamers in the USA in May 2023. Statista. Retrieved from
https://www.statista.com/statistics/1275802/top-gaming-services-subscription-rate-among-gamers-usa/#:~:text=A%20May%202023%20surve
y%20found,ten%20percent%20subscription%20rate%20each
Statista. (n.d.). Xbox Game Pass and PlayStation Plus usage per country. Retrieved June 24, 2024, from
10
https://www.statista.com/chart/30725/xbox-game-pass-and-playstation-plus-usage-per-country/
 Partnerships and acquisitions with/of Game Publishers are essential to our model as it enhances our catalog and value
in the eyes of users.
OUR COLLABORATORS
● Game Publishers make up a big portion of Game Pass’ content library - we have been partnering with different developers and publishers
to have exclusive access to their titles, with our most notable ones being Riot Games, ZeniMax, and Yakuza to enhance the value of Game
Pass as it ensures a diverse lineup of games for subscribers
○ Although we have our own studios that develop equally compelling games, we are still heavily supported by other game
publishers, making it an increased priority for us to maintain and foster a good relationship with them as our collaborators.
○ Whether through Game Pass or individual game sales, we apply a 70-30 profit sharing scheme that favors publishers
■ This way, we are able to form strategic partnerships with them that contribute to our competitive advantages.
■ Even with this system in place, we are still making a profit on game sales as there are low operating costs for us when
selling the games, making it a win for both sides.
■ The relationship of Xbox with game publishers is also mutually beneficial as Xbox Game Pass increases their library of
games and their subscribers, while publishers get more people to play their games and a boost in sales
● Seemingly our most important acquisition to date - the Activision Blizzard King acquisition brings us immense power in the industry
○ This acquisition brings in heavy hitters in the form of Minecraft, the Call of Duty franchise, and Candy Crush, some of the most
profitable and sought after games in the market in PC, console, and even mobile - having these games makes our catalog more
attractive and opens up the opportunity to expand to newer markets.
■ Minecraft, along with being the 2nd best selling video game of all time, has the fourth highest player count among all
games with 160 million average monthly players. Call of Duty: Warzone comes in at ninth with 57 million
■ In the mobile space, Candy Crush has an average player count of 272 million and is the sixth highest grossing mobile
game of all time
■ Acquiring these franchises not only allows Xbox to make money off of deals with the likes of Sony and Nintendo by
allowing them to have access to these games and franchises, but it also gives us power to control where they will be
available in the future

Behan, D. (2021, January 10). Xbox Has Reportedly Approached Every Major Publisher About Game Pass Partnerships. Game Rant. https://gamerant.com/xbox-reportedly-approached-every-major-publisher-game-pass-partnerships/ 11
Button, C. (2022, June 15). How much do game developers make from their games? – GamesHub. GamesHub.https://www.gameshub.com/news/features/how-game-prices-digital-distribution-and-xbox-game-pass-affects-developers-10912/
 There is a wide market for video gaming as it has been continually growing over the past few years, more and
more people have shared a deep interest in it as a form of entertainment.

WHAT’S HAPPENING IN THE VIDEO GAMING MARKET IN THE US

Current Market Overview: The video gaming industry has become a dominant form of entertainment, especially in North America. In 2022, the
video game market in the United States alone generated revenues of over $85 billion, a substantial increase from $61.11 billion in 2020, indicating
an impressive annual revenue growth of 12.7%. This surge reflects the growing popularity of video gaming across all age groups.

Gaming Expenditure Trends in the United States: The COVID-19 pandemic has caused a surge in consumer spending on video games. In 2021,
the average annual U.S. household spending on video game hardware and accessories decreased to $34.61 from $40.29 the previous year. Over
half of U.S. gamers are subscribed to at least one gaming service, with Xbox Game Pass leading the market, followed by PlayStation Plus
Premium and Nintendo Switch Online.

Demographics of U.S. Gamers: In 2022, there were around 212 million gamers in the U.S. Women make up 48% of the gaming population. 36% of
U.S. gamers are between 18 and 34 years old, and those 18 years and younger account for 20% of the gaming audience.

User Engagement and Activities: The popularity of gaming has increased across all age groups, including seniors. Many U.S. gamers play one to
ten hours weekly, with the primary motivations being filling time and stress relief and considering gaming a hobby.

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 Mobile gaming and Cloud gaming have been leading the charge in the market and are gradually becoming the
newest leading channels of gaming

Mobile Gaming: The digital gaming revenue stream in the United States is largely dominated by mobile gaming, especially in casual gaming
genres. The wide accessibility of mobile gaming, featuring low entry barriers and a variety of genres and apps, makes it appealing to a broad
audience.

Esports, Cloud Gaming and Streaming: Cloud gaming is gaining traction, allowing players to stream games on various devices without
high-end hardware. Streaming platforms like Twitch and YouTube Gaming create a communal experience for gaming fans. Esports, or
competitive video gaming, is also thriving in the U.S., which has the largest competitive player base in the world.

Subscription Services: Subscription-based platforms such as Xbox Game Pass, PlayStation Now, and Apple Arcade are experiencing a surge
in popularity. Nevertheless, these services encounter challenges related to pricing strategies and sustaining subscriber growth.

Clement, J. Video gaming in the United States - Statistics & Facts. 18 December 2023. https://www-statista-com.libaccess.senecapolytechnic.ca/topics/8739/video-gaming-in-the-united-states/#topicOverview 13
 With time spent on mobile gaming increasing over the past few years, it is has become an attractive market to target
and explore.
Time Spent on Gaming Platforms in Covid vs Present in US
Daily time spent per capita with a game console in the United Increase in time spent video gaming during the COVID-19 pandemic Weekly time spent gaming by gamers in the United States as of
States from 1st quarter 2018 to 1st quarter 2020 among PC gamers in the United States as of June 2020, by genre March 2024, by platform

● Daily time spent per person with a game console in the United States from the first quarter of 2018 to the first quarter of 2020. In the
most recent period measured, the average time spent by adults in the United States on a game console was 14 minutes.
● In 2020, due to the COVID-19 pandemic, many individuals resorted to video gaming for entertainment during extended lockdown
periods. A survey in the United States conducted in June 2020 revealed that PC gamers reported a 24 percent increase in time spent
playing fighting games.
● A study carried out in March 2024 found that at least 71 percent of adult computer gamers in the United States dedicated more than
one hour weekly to gaming across all platforms. Among all respondents, mobile gamers were the most likely to spend time gaming,
with 20 percent stating that they spent over 10 hours per week playing on smartphones or tablets.
● These data show us how the trend in the industry is moving towards mobile gaming, which can be a good way for us to expand in the
market.

Vorhaus Advisors. "Weekly Time Spent Gaming by Gamers in The United States as of March 2024, by Platform (in Hours)." Statista, Statista Inc., 15 May 2024,
https://www-statista-com.libaccess.senecapolytechnic.ca/statistics/195746/distribution-of-time-spent-on-video-games-by-platform-in-the-united-states/
Simon-Kucher & Partners. "Increase in Time Spent Video Gaming during The Covid-19 Pandemic among Pc Gamers in The United States as of June 2020, by Genre." Statista, Statista Inc., 21 Aug 2020, https://www-statista-com.libaccess.senecapolytechnic.ca/statistics/1188561/pc-gaming-genres-covid/ 14
Nielsen. "Daily Time Spent per Capita with a Game Console in The United States from 1st Quarter 2018 to 1st Quarter 2020 (in Minutes)." Statista, Statista Inc., 13 Aug 2020, https://www-statista-com.libaccess.senecapolytechnic.ca/statistics/317227/time-spent-game-console-usa/
 Overall, Xbox Game Pass is a well rounded gaming subscription which has the potential to capture higher market share
with the help of right strategy in place.

Reason to believe

As per reports, Xbox pass covers a Xbox pass has Today, gamers play
Xbox game pass wide range of the potential to not only on PC and
holds the highest offerings like cover a wide traditional consoles
share of gamers in 1. Hundreds of range of but also on Mobile
2023 in the United high-quality games on gamers platforms such as
States. Which console, PC, and through it’s tier smartphones and
suggests, the cloud based offering tablets, and through While currently, we're seeing a decline in subscription rates
customers value the 2. New games on of standard, Social Media and and revenue, there's an opportunity to turn this around due to
current benefits and rotation core and Microsoft has the potential of Xbox game pass.
pricing of the 3. Member deals, ultimate. already made
subscription packs discounts, and Perks investments in We can draw in new subscribers and keep hold of current
4. Multiplayer games XCloud, which ones by implementing the right growth strategy. Furthermore,
5. EA play allows us to expand by broadening our ecosystem, we can provide a greater
membership from tech aspect choice of solutions and increase our revenue
Which makes it an
attractive game pass
15
 Xbox Game Pass is strategically designed to offer comprehensive value through a diverse game library and cross-platform
accessibility, effectively targeting various gamer segments and positioning itself for future growth, including the mobile market
expansion.

Key Partners Key Activities Value Proposition Customer Relationships Customer Segments

- Game - Content Acquisition and - Wide Game Selection - Subscription Model - Casual Gamers (Minnows)
Developers and Licensing - Cross-Platform Play - Community Interaction - Moderate Gamers (Dolphins)
Publishers - Platform Development - Affordability - Comprehensive Support - Hardcore Gamers (Whales)
- Technology and Maintenance - Convenience
Providers - Marketing and User
- Platform Acquisition
Integrators - Customer Support and
Community Engagement

Key Resources Channels

- Extensive Game Library
- Cloud Infrastructure - Digital Platforms
- Brand Strength - Online Marketing
- Skilled Workforce - Retail Partners

Cost Structure Revenue Streams

- Game Licensing and Development - Subscription Fees

- Technology and Infrastructure - In-Game Purchases
- Marketing and Promotions - Partnership Deals
- Customer Support

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 Subscription models rely on consumers building a habit out of their service, making it increasingly important for us to
consistently deliver value to our audience to keep them hooked.

WHAT MAKES A GOOD SUBSCRIPTION MODEL?

● A successful subscription model is defined by the habits that they create within their users - in order for this model to thrive, we have to
ensure repetitive use so consumers can see the value of the service they’re paying for leaving them with no logical choice but to keep
being subscribed as it has already been integrated into their lives.
● We have to keep consumers hooked - this can be built through the following actions:
○ Trigger - what gets the user to use the service
○ Action - the habit
○ Variable Reward - what points satisfy the user’s need for the service
○ Investment - what makes the service more valuable to the user as they continue to use it
● Ticking all these boxes allows a subscription model to truly understand their value to their consumers - from this, we can also derive that
the following benefits make a consumer more attracted to a subscription model:
○ Ease of Use
○ Product variety and novelty
○ Stored value - or how they can keep getting use out of the service
● Our goal for the Game Pass is to be able to consistently deliver on these benefits, which is what we have been investing on as we keep
improving our model and offerings
○ We make it easy for consumers to access and use the service by making it available in multiple platforms and channels
○ We secure exclusive game titles, partner with established publishers and developers, and even create our own high value games
○ We consistently upgrade our selections and systems to keep users engaged and to see the wide variety of options that the Game
Pass can bring, opening up doors to new gaming experiences.

17
Eyal, N. (2022, October 11). 3 reasons subscription services fail. Harvard Business Review. https://hbr.org/2022/10/3-reasons-subscription-services-fail
 Xbox Game Pass utilizes a subscription-based model that integrates several key elements to ensure value delivery and
sustainable growth. The core of its success lies in its extensive game library, cross-platform accessibility, and strategic
partnerships.

WHY THE GAME PASS AS A SUBSCRIPTION IS SUCCESSFUL

● Cross-Platform Accessibility: Xbox Game Pass provides smooth cross-platform gameplay, enabling gamers to access games via cloud
gaming on Xbox consoles, PCs, and mobile devices. This adaptability makes a wide variety of game scenarios accessible, which
improves the user experience. Because they may switch between devices without losing their progress, the service is more appealing and
convenient.
● Integrating Strategically with Microsoft's Ecosystem: By utilising Microsoft's Azure cloud infrastructure, Xbox Game Pass is able to
provide reliable and excellent streaming services. This integration offers a major competitive advantage by guaranteeing a dependable
and seamless gaming experience across various devices. Furthermore, using the current Microsoft infrastructure lowers operating
expenses, allowing for further investments in technology and content.
● Consistent Revenue Streams and Cost Efficiency: Recurring and predictable revenue streams are provided by the subscription model,
which is crucial for long-term planning and financial stability. Taking advantage of Microsoft's current infrastructure, such Azure,
facilitates cost management and enables ongoing enhancements and content updates. Sustainable growth and profitability are
supported by this dual emphasis on cost effectiveness and revenue predictability.
● Strong Customer Relationships and Community Engagement: By interacting with the community on social media, in forums, and at
events, Xbox Game Pass cultivates a devoted following of users. Reducing churn and preserving high levels of customer satisfaction
depend on this involvement. Xbox Game Pass is able to better understand user needs and preferences thanks to ongoing community
involvement, which makes quick updates and enhancements possible.
● Targeted Segmentation of Customers:The gaming market is efficiently targeted by the tiered subscription model. Each of the three
gaming groups—casual, moderate, and hardcore—has subscription options that are specifically designed to fit their demands and
financial constraints. By maximising user engagement and market reach, this segmentation strategy increases loyalty and lowers churn
rates.

TechCrunch. (n.d.). Xbox Game Pass. Retrieved June 23, 2024, from https://techcrunch.com/tag/xbox-game-pass/
Tassi, P. (2024, May 11). Xbox Game Pass is running out of wells to dig up new subscribers. Forbes. Retrieved June 23, 2024, from https://www.forbes.com/sites/paultassi/2024/05/11/xbox-game-pass-is-running-out-of-wells-to-dig-up-new-subscribers/ 18
Tassi, P. (2023, October 24). Why has Microsoft put Xbox Game Pass subscription numbers in a black box? Forbes. Retrieved June 23, 2024, from
https://www.forbes.com/sites/paultassi/2023/10/24/why-has-microsoft-put-xbox-game-pass-subscription-numbers-in-a-black-box/
 Xbox Game Pass utilizes a subscription-based model that integrates several key elements to ensure value delivery and sustainable
growth. The core of its success lies in its extensive game library, cross-platform accessibility, and strategic partnerships.

ENHANCING THE SUBSCRIPTION MODEL

● Content Overload and User Fatigue Drawback: The extensive library can overwhelm users, leading to choice
paralysis and decreased user engagement. Implement personalized recommendations and curated playlists
based on user preferences and play history to simplify game selection and enhance user experience.
● High Operational Costs Drawback: Maintaining a vast and diverse game library, including day-one releases
and exclusive titles, incurs significant costs. Introduce tiered content access where exclusive and premium
titles are available at higher subscription tiers, and leverage in-game purchases and microtransactions to
offset operational expenses.
● Limited Mobile Gaming Integration Drawback: Although Xbox Game Pass supports cloud gaming on mobile,
it hasn't fully penetrated the mobile gaming market. Enhance mobile game offerings by integrating more
mobile-friendly titles and improving the mobile user interface.

TechCrunch. (n.d.). Xbox Game Pass. Retrieved June 23, 2024, from https://techcrunch.com/tag/xbox-game-pass/
Tassi, P. (2024, May 11). Xbox Game Pass is running out of wells to dig up new subscribers. Forbes. Retrieved June 23, 2024, from https://www.forbes.com/sites/paultassi/2024/05/11/xbox-game-pass-is-running-out-of-wells-to-dig-up-new-subscribers/ 19
Tassi, P. (2023, October 24). Why has Microsoft put Xbox Game Pass subscription numbers in a black box? Forbes. Retrieved June 23, 2024, from
https://www.forbes.com/sites/paultassi/2023/10/24/why-has-microsoft-put-xbox-game-pass-subscription-numbers-in-a-black-box/
 Xbox Game Pass leverages Microsoft's robust ecosystem, strategic acquisitions, and innovative technology to offer a diverse and seamless
gaming experience, establishing a high barrier for competitors and continuously enhancing its value through integration and frequent updates.
Leveraging Microsoft for Competitive Advantages
● Extensive Ecosystem: Uses Microsoft’s Azure cloud for
high-quality streaming and cross-platform play
● Strategic Acquisitions: Ensures exclusive and popular game
titles through acquisitions like Bethesda and Activision
Blizzard King.
● Established Brand Loyalty: Microsoft's strong brand
recognition and loyal customer base enhance the appeal of
Xbox Game Pass.
● Integration with Other Microsoft Services: Seamless
integration with Windows and Office adds additional value to
the subscription
Differentiation From Competitors
● Game Library: Diverse, including day-one releases and
exclusives.
● Cross-Platform Play: Seamless gameplay across consoles,
PCs, and mobile devices using Azure
● Bundled Services: Offers additional benefits through
integration with other Microsoft services, providing a
comprehensive package.
● Frequent Updates: Regularly updated content keeps the
service fresh and engaging, which is a significant
differentiator
Developing Further Competitive Advantages
● Mobile Gaming Expansion: Enhance mobile game offerings to
capture the growing mobile gaming market.
● Exclusive Content: Invest in first-party game development to
reduce reliance on third-party content.
● AI and Machine Learning: Implement AI to personalize
content recommendations, increasing user engagement and
satisfaction.
● Enhanced User Interface: Improve the user interface for better
navigation and user experience across all platforms
Imitability of the Xbox Game Pass Business Model
Because Microsoft has a distinct set of resources, cutting-edge
technology infrastructure, and a well-established ecosystem, it is difficult
to replicate Xbox Game Pass. The combination of a large game library
and seamless streaming with Azure builds a strong foundation that is
challenging for rivals to duplicate. A substantial financial outlay is
needed to create comparable content libraries and infrastructure. Xbox
Game Pass also enjoys the advantages of being the first to market,
having established a strong brand and a devoted member base early on.
By utilising brand loyalty and tactical improvements, Xbox Game Pass
leverages constant innovation and updates to stay one step ahead of
20
possible competitors.
 Xbox Game Pass demonstrates a robust subscription model, blending continuous value delivery with diversified revenue streams,
despite challenges from traditional gaming market dynamics.

Successful and Sustainable Subscription Model of Xbox Game Pass
Xbox Game Pass satisfies the requirements for a successful and
sustainable subscription business model by continuously providing
value through a vast library of often updated games. Financial stability
is ensured by its ongoing and predictable income sources, and the
service's cost effectiveness is increased by utilising pre-existing
Microsoft infrastructure. Tailored subscription options and high levels
of customer involvement appeal to different gamer segments,
increasing loyalty and decreasing turnover.
This analysis highlights the importance of continuous innovation and
strategic expansion. To ensure sustained growth, Xbox Game Pass
should focus on expanding into mobile gaming and enhancing cloud
gaming capabilities. Additionally, investing in exclusive content and
improving personalized user experiences through AI and machine
learning can further strengthen its market position. Expanding into
emerging markets and exploring partnerships to offer bundled
services can also drive new subscriber growth and enhance
profitability

Xbox Game Pass represents less than 20% of revenues for Xbox primarily due to several factors specific to its business model:

1. Diverse Revenue Sources: Xbox generates significant revenue from hardware sales (consoles and accessories) and traditional game purchases.
These revenue streams have historically been robust and continue to contribute a substantial portion to overall earnings.
2. Game Development and Licensing Costs: Maintaining a diverse and high-quality game library, which includes day-one releases and exclusive
titles, involves substantial upfront costs in development and licensing. Despite recurring subscription income, these costs impact the
proportionate revenue contribution from Xbox Game Pass.
3. Market Dynamics in Gaming: Unlike video and music streaming, where subscription models dominate, the gaming market remains varied. Many
gamers still prefer purchasing games outright or engage in free-to-play models with in-game purchases. This diversity in consumer behavior
limits the subscription revenue share from services like Xbox Game Pass.
21
 There are 8 possible alternative for us to assess to improve the Xbox Game Pass Business Model, how they impact us and what
necessary changes are needed for execution.
Expand Game Pass To Mobile Platforms
Extending Xbox Game Pass to mobile platforms to broaden its reach,
allowing users to access games on smartphones and tablets via cloud
gaming (xCloud) anywhere.
Support from current model: Game Pass supports cloud gaming on mobile
devices through XCloud, which suggests technical feasibility. Microsoft has
already made investments in XCloud, a cloud gaming infrastructure that
enables mobile gaming. This offers a solid basis for bringing Game Pass to the
iOS and Android operating systems.
Modifications Required: seamless integration would be required to ensure
the best experience is delivered on the mobile platforms. However, with past
experience on Xcloud with IOS and Android, the modification required
wouldn’t be a lot but has to customized
Feasibility: Microsoft has historically found success by releasing its
well-known apps, such as Office, on a variety of operating systems, including
iOS and Android. Adding Game Pass on mobile platforms is in line with the
"embrace and extend" strategy, which could increase engagement and
subscriber numbers.
Impact: High revenue growth opportunity for game pass- with around 2
billion users vs Xbox Live's 100 million active users, the mobile gaming market
is far bigger than the console gaming market. Microsoft has a great chance to
reach a sizable new audience with this.
Build A Next Generation Xbox Store
Redesigned online storefront that works with Activision Blizzard and
Microsoft games, runs on various hardware platforms, including mobile
devices, helps improve user experience and content discoverability.
Support from current model: Game Pass is already linked with the current Xbox
Store, making it easier to access a large selection of games, creating a good base for
creating a next-generation store that can deliver a flawless user experience across
many devices through this integration.
Modifications Required?: developing user friendly interface, insure it works on
various hardwares and IOS and Android, acquisition of game publisher Activision
Blizzard, Microsoft to scale the Xbox Store and attract gamers to a new Xbox mobile
platform
Feasibility: Building a new Xbox Store will be difficult because Google Play and the
iOS App Store are so popular and have large user bases and strong brand loyalty. It
would take enormous marketing campaigns and substantial financial outlays to
directly compete with these well-established platforms and encourage user
transfer.
Impact: High in technical capacity & resource availability, yet this choice is risky and
difficult due to operational and strategic challenges. The potential advantages of
opening a new store may be outweighed by the time and money needed to change
user behavior especially because of App Store and Google Play. Moving them is also
a challenge and this can impact game pass negatively, if they out out from switching 22
over to a new store
Raise Prices & Modify Tiers Leverage Xbox All Access Family/Group Membership Plan
Modification of tiers and re-adjusting the price & To boost game pass subscriptions and drive console Offer a family or group membership option that
the benefit it provides and increasing the current sales, bundle Xbox consoles with Game Pass enables upto 3 users to share a single Game Pass
pricing of the standard game pass Ultimate memberships, expand the Xbox All Access subscription inside a home or group.
program and reprice it if needed
Support from current model: The current model
Support from current model: Since game pass does not support sharing of game pass. It is limited
already has few tiers like game pass ultimate, they Support from current model: Game Pass Ultimate is
to 1 person.
can accommodate various other tiers like as well already bundled with consoles by Xbox All Access,
offering a simple way to increase subscriptions and
Modifications Required?: New integration which
Modifications Required?: Each tier needs to have a console penetration. allows sharing of one pass with upto 3 members
unique structure, price should match benefits and and a revised pricing strategy for this offering
we need to convey the value proposition of new Modifications Required?: Minor modifications
tiers and price adjustments to existing users required. Pricing structure will have to be
Feasibility: Technically possible and can be a source
restructured and enhanced marketing efforts would
to generate additional revenue due to higher pricing
Feasibility: From moderate to high. Although there be required to convey the benefits and could result in lock
are technically possibilities, price increases have in
the past encountered strong opposition, Feasibility: A lock in of 24 months may not be well
Impact: Medium Revenue Growth Opportunity.
highlighting the need for a well-thought-out plan of perceived by all users, besides that it doesn’t create Offering a reasonably priced option for a family or
action. an opportunity for existing users who already have
group membership plan can boost overall
consoles.
subscriber count and lower churn rate. It offers a
Impact: introducing tiers can increase the significant chance to increase the number of Game
competitiveness and generate more revenue, Impact: Combining console purchases with
Pass subscribers, but it necessitates careful
however there was a backlash with price increase subscriptions, can excite new customers to make an
preparation to guarantee profitability and efficient
when it was done last time, so doing so could create investment in the Xbox community, which may boost maintenance of user accounts.
backlash for game pass if not communicated well recurring business. This can solve for two issues- low
sales of consoles and subscription rate for game pass
23
 Expanding to Mobile and Leveraging All Access provide us with a high incremental growth opportunity as we target
emerging segments
Expand Game Pass To Mobile Platforms
Relative size of the incremental revenue
growth opportunity- MEDIUM TO HIGH (as
the demand for hardware may not increase)
Market Penetration: The mobile gaming
market is on the rise and is larger than the
console gaming market
Revenue diversification: By distributing Game
Pass across a variety of platforms, you can
lessen your reliance on console sales and
lower your chance of experiencing volatility in
the console market.
Cross-Platform Play: By allowing
cross-platform play across mobile, PC, and
console platforms, Game Pass value
proposition is improved, making it a more
attractive choice for players that utilize a
variety of platforms.
Playing to our advantage: product leadership,
Microsoft and X-stream
Build A Next Generation Xbox Store
Relative size of the incremental revenue growth
opportunity- MEDIUM
1. While having a single store for all hardware
platforms can improve user experience, it can be
difficult to compete with well-known retailers like
Google Play and the iOS App Store.
2. The transition of moving gamers will be difficult
3. It is less attractive due to challenges vs other
alternative which are straight forward
Leverage Xbox All Access
Relative size of the incremental revenue growth
opportunity- MEDIUM TO HIGH
1.Locks in customers for 24 months but also for a
lifetime because they end up with the hardware, ie
the console
2.Increase in sales of software and hardware
3.Bundling opens up high-end gaming to more
people, drawing in new customers who would have
been turned off by the initial expense of a console.
Raise Prices & Modify Tiers
Relative size of the incremental revenue growth
opportunity- LOW
1. Past attempts at slightly increasing price resulted
in a lot of backlash, so it could potentially lead to
loses and not revenue generation
2. Higher rate could result in higher churn rates
3. Having price and tiers as parity can easily be
immediate by competitions
4. Incremental price increase will not provide revenue
as much as other alternatives like market penetration
& all access
Family/Group Membership Plan
Relative size of the incremental revenue growth
opportunity- MEDIUM
1. Group plans have the potential to improve
retention by fostering a sense of shared value
among users, which can result in long-term
engagement
2.Since it’s cost effective, it can increase
subscriptions rates for game pass
3.Cancelling would require more than 1 person to
decide, which could lead to continued usage and 24
lock in
 Usage Based Pricing discourages users to spend more time in game, which is what we need them to be doing to be
more engaged in the service and to purchase more.

Usage Based Pricing

Charging more to the ones who play more. The
cost depends on how much you play hence it
varies from gamer to gamer
Support from current model: The current model does
not support usage based pricing or captures value from
different segments of gamers

Modifications Required?: Usage tracking system and 3

tiers with different pricing has to be built. Minnows who
play less would ideally opt for the standard low pack vs
dolphins who would prefer the highest pack

Feasibility: Although technically possible, there can be

negative feedback since users have expectations,
especially from Whales who are used to fixed pricing
structures.
Impact: Microsoft can extract more value from its wide
range of users thanks to usage-based pricing. However,
downgrade from high end users could result in losses
and could also result in lower gaming = lower revenue if
gamers need to pay as per usage, which can impact the
current existing model
● This model pushes us to charge people who spend more time on the Game
Pass more than twice as much as we originally had - and although we expect
to gain $52M in incremental revenue from this model, the projected
retention rate stated is highly improbable given that Whales are not too keen
on getting a gaming subscription anyway and would much rather buy the
games that they are focused on individually.
25
 Discounts on purchases may increase retention, but the total cost of the subscription is still an issue, which might restrict
its efficacy in raising revenue despite the expected advantages for user engagement.

Usage Based Pricing With Member Deals &

Discounts

To draw in and keep members, usage-based

pricing structure in conjunction with special offers
and discounts for members only.
Support from current model: the current model doesn’t
have usage based pricing, however implementing it would
not be difficult due to tier level model

Modifications Required?: New pricing structure, tracker to

measure usage and a discount program for the tiered users

Feasibility: It is possible to implement usage-based pricing

with member specials and discounts by making certain ● Providing discounts in the Game Pass store may help with the retention rate
adjustments to the current tier-level approach. This include but is still not very compelling for the users as we still price the subscription
launching a discount program, monitoring consumption, itself high, similar to Alternative 5. Although retention rate is reduced, since
and designing a new pricing structure. we have discounts provided for purchases, our incremental revenue is also
not as high at $51M.
Impact: By matching price to user activity and providing
tier-specific benefits to encourage spending, usage-based
pricing combined with member specials and discounts can
maximize revenue and grow the subscriber base for game
pass
26
 By Incentivizing engagement through rewards and points, this alternate aims to increase loyalty and reduce
churn rates for the loyalty program

Improve Profitability By Increasing Usage & Retention

Through A Loyalty Program
Establish Xbox Rewards, a loyalty program that offers rewards for usage and
sustained engagement, to lower churn rates and boost retention among
subscribers. Three options exist for subscribers to collect points: 10,000
"Welcome Points" upon joining Xbox Game Pass, one "Play Point" for each
minute spent playing games, and 20,000 "Anniversary Points" for each full year
of subscription. By allowing users to exchange these points for games, gear, and
other goods, subscribers are encouraged to stick around and be active.

Support from current model: Loyalty program can be embedded with the
current model

Modifications Required?: 1. a new inbuilt feature to know your standing 2.

points system to track and buy if needed (X-Currency) 3. Redemption system
● Reducing churn rate effectively builds consumer lifetime and
Feasibility: From moderate to high. Ensuring that the rewards are both
cost-effective and appealing. It can help with lowering churn rates to 4.5% for
minnows, 3% for dolphins, and 2% for whales. However, Point vesting periods,
can get annoying for few gamers
Impact: Reduced churn rates, high lifetime value and higher engagement. With
x-currency it could also be a potential revenue stream. However, for some tier
and points wouldn’t make a difference
extends it from 20 to 22 months, because of this, there is more
time spent on the service for users to purchase games or items,
and in this case, redeem rewards - however, the incremental
churn rate (ranging from 0.5%-1%) is not as substantial, gross
incremental revenue is presented to be high, but qualitatively
seems unlikely to happen.
27
 Expanding to Mobile and Leveraging Xbox All Access can pave the way for long term growth as we target a
multi-channel approach

Criteria
PERCEPTUAL MAPS AND POSITIONING
Does it align Will it support
Does it appeal Can we tell a Does it fit our Will
with current long term
to our target compelling competitive competitors Summary
industry growth?
audience? story with it? advantages? react?
macro-trends?
Alternatives

Yes. Targets Yes. Reflects shift Yes. Enhances Yes. Leverages Yes. We will be the Yes. Expands Expanding Xbox Game Pass to
mobile gamers and towards mobile and accessibility and Microsoft's exclusive first among them to subscriber base mobile via xCloud taps into
mobile gaming trends, boosts
Expand to extends reach to cloud gaming. convenience with games and cloud be on mobile. and recurring
accessibility, and leverages
Mobile new xCloud technology - gaming infrastructure. Competitors may revenue Microsoft's cloud gaming
demographics. adding a new way to adjust mobile opportunities. expertise for sustained growth
access Game Pass gaming strategies. in a competitive market.

Yes. It enhances Yes. It aligns with Yes. It emphasizes Yes. Leveraging Yes. With No. It would be Difficult to execute for Xbox as it
user experience trends favoring convenience, wide Microsoft's ecosystem enhancements to difficult for us to would have us in competition
and accessibility digital distribution game selection, and and potential their own stores and shift consumers with Apple and Google as
across multiple and cross-platform seamless integration. acquisitions. exclusive content. from the App Store channels on top of Sony and
Xbox Store
devices. gaming. and Google Play. Nintendo.

No. Risks No. Subscription No. Adding tiers and No. It can enhance Yes. It may provoke No. If perceived Not ideal for Xbox Game Pass
backlash without models have been raising prices does revenue and competitive value justifies price as it does not appeal to the
Raise prices clear benefits, evolving, but price not account for a competitiveness if adjustments. adjustments and target audience and does not
secure long term growth.
and modify consumers are increases are not compelling story. executed well, enhances revenue
already sensitive favored in the leveraging existing streams.
tiers
about price. industry. tier flexibility.

28
 Criteria
PERCEPTUAL MAPS AND POSITIONING
Does it align
Does it appeal Can we tell a Does it fit our Will Will it support
with current
to our target compelling competitive competitors long term growth? Summary
industry
audience? story with it? advantages? react?
macro-trends?
Alternatives

Yes. By offering a Yes. As subscription Yes. By emphasizing Yes. Leveraging Yes. With potential Yes. By potentially Leveraging Xbox All Access
cost-effective entry bundling and affordability, value, Microsoft's competitive increasing both console to bundle consoles with
into the Xbox hardware/software and the immersive ecosystem bundling offers or sales and Game Pass Game Pass Ultimate can
Xbox All ecosystem with integration are Xbox experience with strengths and adjustments to subscriptions locked in capitalize on trends,
Access bundled growing trends. integrated hardware encouraging their own for 2 years. enhance value perception,
subscriptions and and software. deeper customer subscription and drive growth through
consoles. engagement. models. increased hardware sales
and subscriptions.

No. It discourages No. Most gaming No. It may be difficult No. It could Yes. They may No. It risks user Usage-based pricing could
long time user play services offer fixed to justify the value undermine the capitalize on user dissatisfaction and lead to negative feedback,
and alienates users pricing models and proposition to users value proposition of dissatisfaction and potential churn, user dissatisfaction, and
Usage based do not promote accustomed to fixed unlimited access. especially among heavy potential churn, making it
pricing who drive offer fixed pricing
usage based prices and users. less viable despite its
profitability to the pricing. discourages as a more potential to extract more
Game Pass. attractive option. value from users.

No. Still has the No. Usage-based Yes. The value No. It leverages our Yes. They may No. It can drive initial Discounts may serve as a
same effect on models are less proposition of paying ability to offer highlight their fixed engagement but may way to soften the blow of
Usage based users - may appeal common, but for what you use and diverse content but pricing models as face challenges in heightened prices, but is still
to budget discounts and getting discounts can risks alienating simpler and more retention and satisfaction not enough to be a
pricing + conscious users member deals align be compelling. heavy users. user-friendly. among heavy users. compelling solution or
discount but could alienate with industry trends. attract our audience.
heavy users.

29
 Criteria
Does it align Will it support
Does it appeal Can we tell a Does it fit our Will
with current long term
to our target compelling story competitive competitors Summary
industry growth?
audience? with it? advantages? react?
macro-trends?
Alternatives

Yes. Appeals No. Aligns with Yes. Highlights Yes. Utilizes Yes. Likely to No. Supports Implementing Xbox
to gamers with trends in Xbox's Microsoft's prompt sustained Rewards enhances
rewards for enhancing commitment to technical competitive growth by retention, aligns with
industry trends, and
usage and engagement rewarding loyalty expertise and reactions in reducing churn
Loyalty strengthens Microsoft's
engagement. and loyalty. and enhancing user base for loyalty program and increasing
Program competitive edge by
user experience. stronger enhancements. lifetime value. rewarding gamers and
retention. maximizing lifetime value
through incentives and
engagement.

Yes. It appeals Yes. Yes. It offers Yes. It leverages Yes. No. It is not a A family/group membership
plan can attract new users,
to families and Subscription cost savings and Microsoft's Competitors strong driver
Family/Group increase subscriptions, and
groups who sharing is a convenience for infrastructure to may offer for long term reduce churn by offering
Membership
want to share a growing trend in families and offer shared similar plans to growth. shared access, but is not a
Plan strong solution for the long
subscription. the industry. groups. access. retain their
term.
market share.

30
 Mobile Gaming is the future of the industry - we have the right tools and capabilities now to capitalize on growing in
this segment

FOR LONG TERM GROWTH: WE SHOULD EXPAND TO MOBILE

● Following our launch in 2017, we have only seen a tremendous increase in subscriber count during the pandemic when consumers were
locked in their homes and had all the time in the world to play and explore video games on PC and console, which was the prime time for a
gaming subscription to peak.
○ As we transition out of the pandemic, this rate stagnated as we went back to the consumer norm of playing games one/two at a time
without the need for much variety - this is also evidenced by the recently high churn rates that we’ve been seeing
● Mobile gaming is touted as the future of the video gaming industry, especially as we see more and more people use this as their main
platform for casual gaming.
○ Mobile gamers need and want a lot of games available to them as they play them everywhere and use them to pass time - which is
why the model would be effective
○ Now is also the perfect time to grow Game Pass and expand to a new emerging market with our latest acquisition of Activision
Blizzard Kind, which gives us the rights to big user base games like Call of Duty, Minecraft, and Candy Crush, among others
○ As we optimize our model and expand to mobile, the mobile version of these games (which have been listed as some of the most
downloaded mobile games of all time) shall no longer be free to download on the App Store/Google Play and instead be moved to the
Game Pass, giving us free reign and control over these titles.
● Although the Game Pass has been fairly effective in just console and PC, it is still not enough to sustain profitability in the long run simply
because of market trends and user behavior on these channels
○ Game Pass should still be on console and PC as it is still a good option for players to widen their options, it serves as their entry way
to games and to improve on getting games recognized but opening up the market would take it to the next level
● In order to secure long term profitability, our best approach would be to expand our services to mobile as we give users more flexibility and
more ways to access the Game Pass, and we meet them where they are/where they’re headed, allowing us to grow further in this space
○ We also make the most use out of our competitive advantages as this approach also opens up Cloud Gaming for mobile, a feature we
can leverage thanks to our cloud computing business
○ Our gaming catalog also effectively increases and attracts more users because of our ability to collaborate and acquire new
publishers that allow us to host the biggest games in the market, which further supports our value discipline.

31
 Gaining new subscribers for the Game Pass also requires us to go back to our roots with the Xbox, locking interested
users in for a prolonged period of time gives us the opportunity to convert them into avid players and purchasers.

SUPPLEMENTARY ALTERNATIVE: LEVERAGE XBOX ALL ACCESS

● Our overall strategy for growth is to gain new audiences and subscribers - we can proceed with a two-pronged approach: (1)
Expanding to Mobile, (2) Introducing a more competitive offer for the Xbox All Access - this way, we are able to cover all our
bases in the market, attracting a new market in mobile and attracting new console gamers to get the Xbox, or PC gamers to the
Xbox
● The Xbox All Access is an attractive offering for new users of the console as it provides a low barrier to entry, given that we
bundle the console with a 24 month subscription to Game Pass.
○ This can target 2 main markets:
■ PC Gamers: This would allow them to get Game Pass on their existing PC and provide them with a new Xbox
console, where Game Pass is also compatible
■ Beginner console gamers: This would let them have better financing over getting a console that they’ve always
wanted, and adds the benefit of having a wide array of games that they can pick and choose from, especially
since we have such a compelling and diverse gaming library
○ The 24 month lock in commitment would also be good for (1) Xbox as a console, and (2) Xbox Game Pass as it assures a
set number of people subscribed for a 2 year long period which reinforces our business model, and it increases our
penetration into the gaming market with our hardware.
● All Access is currently priced at $24.99/month for the series S and $34.99 for the series X - a more competitive pricing on this
would be more attractive to consumers, especially for those who are more price sensitive
○ With the Game Pass Ultimate priced at at $14.99 per month, we are able to accumulate $240 for the Xbox console (series
S) which originally retails at $379.
○ Although we sell the hardware at a loss (similar to our original razor-razorblade model), with more people subscribed and
locked in to Game Pass, we can expect them to use the service more frequently and eventually make more purchases
with the service, which is what drives our profitability.
○ We want to drive growth in multiple channels for Game Pass - and this would be a good way to lock in consumers in our
original channel. 32
Value Discipline

Product Leadership As a brand under Microsoft, we are inherently a product leader - we offer exclusive games under
our belt that we have developed using Microsoft’s technology and we continuously strive to
innovate. We are also able to work with different publishers that allow us to exclusively house
best selling games.

Customer Intimacy We do not necessarily fit into the customer intimacy discipline as we do not offer any
personalized services, and we do not see this as a primary focus.

Operational Excellence Although we are very efficient with our operations, this is not the basis of our business. We are
more inclined to give the best product available than to lower down costs to bring prices down
for the consumer.

Lock In The ecosystem that we have set in place both for Microsoft and Xbox allows us to build a lock in
value discipline - though this is not our primary discipline, we have been able to leverage our
product leadership to be able to apply customer lock in.

33
 VRIO Analysis
Core Competency Is it valuable?
Yes. Drives console sales
and subscriber retention.
Exclusive Game Design
Yes. Builds trust and
Brand Recognition and customer preference.
Loyalty
Yes. Enhances user
convenience and
Integration with
cross-platform capabilities.
Microsoft Ecosystem
Strategic Acquisitions Yes. Brings new capabilities
and market access.
and Partnerships
Capability
Technical Expertise (in Yes. Expands gaming
community and user
Cross-Platform Play engagement.
and Compatibility)
Yes. Enhances gaming
performance and supports
Cloud Computing streaming.
Ability
Yes. Microsoft's financial
strength enables extensive
investments in R&D,
Financial Capability acquisitions, and global
expansion, crucial for
innovation and market
leadership.
Is it rare?
Yes. Requires substantial
investment and studio
acquisitions.
No. Strong brand identities
are common among
competitors.
Yes. Deep integration with
broad ecosystem is
uncommon.
No. Acquisitions and
partnerships are common
strategies.
Yes. Full cross-platform
compatibility is relatively
rare.
Yes. Leveraging cloud at
scale for gaming is rare.
Yes. Microsoft's financial
capability is rare among its
competitors.
Is it hard/costly to
imitate?
Yes. Time-consuming and
requires significant
financial investment.
No. Requires consistent
quality and engagement.
Yes. Requires extensive
investment in cloud
infrastructure.
Yes. Requires substantial
financial resources and
negotiation skills.
Yes. Complex technical
solutions and agreements
needed.
Yes. Requires extensive
cloud infrastructure and
expertise.
Yes. Replicating Microsoft's
financial capability requires
long-term profitability,
strategic foresight, and
substantial economic
resilience.
Are we organized to
exploit it?
Yes. Actively acquires
studios and invests in
exclusive content.
Yes. Invests in marketing
and community
engagement.
Yes. Leverages Microsoft's
resources for seamless
integration.
Yes. Strategically acquires
studios and forms
partnerships.
Yes. Invests in technology
and agreements for
cross-platform play.
Yes. Integrates cloud
capabilities into gaming
services.
Yes. Microsoft effectively
utilizes its financial
resources to drive growth
across diverse sectors like
cloud computing and AI.
Is it a competitive
advantage?
Yes. Enhances Xbox's
ecosystem and customer
loyalty.
Yes. Strengthens customer
loyalty and repeat
purchases.
Yes. Attracts users within
Microsoft's ecosystem.
Yes. Access to exclusive
content and capabilities.
Yes. Appeals to gamers
seeking flexibility and
community
Yes. Faster load times and
superior gaming
experiences.
Yes. Microsoft's robust
financial capability sets it
apart, enabling superior
investments and
positioning in the global
tech market.
Summary
Drives sales and retention with
rare, costly-to-imitate content.
Organized for strategic
acquisitions, enhancing
ecosystem and loyalty.
Boosts market presence and
consumer trust through
effective branding and
engagement strategies.
Enhances user convenience with
rare, costly-to-imitate
cross-platform capabilities.
Organized for ecosystem
integration, securing
competitive advantage.
Expands capabilities and market
reach through effective deals,
enabling exclusive content and
tech advancements.
Expands community and
engagement with rare,
technically complex features.
Organized investments ensure
flexibility and competitive edge.
Improves performance and
streaming with rare,
costly-to-implement cloud
infrastructure. Maintains
competitive edge through
innovative solutions and user
experience enhancements.
Microsoft's robust financial
capability is both valuable and
rare, making it difficult for
competitors to imitate. The
company strategically leverages
this advantage, positioning it as
a cornerstone of its competitive
strength and future growth
prospects. 34
 Jobs to be Done Analysis

Parameters
Jobs to be done Frequency Importance Frustration
Needs
High High Low
Ensuring games can be Improve device compatibility and
Functional Needs played seamlessly on Daily use. Flexibility to play If there are performance to ensure seamless
gaming experiences across
consoles, PCs, and on different compatibility or
consoles, PCs, and mobile devices.
mobile devices. devices is crucial. performance issues on
certain devices.
High High High Curate a diverse and engaging
Providing thrilling and game library that provides thrilling
Emotional Needs
enjoyable gaming Daily to weekly Central to the If games are repetitive and enjoyable experiences to keep
players excited and invested.
experiences. play sessions. gaming or not engaging
experience.
High High High Enhance multiplayer and
cooperative gaming features to
Facilitating multiplayer facilitate better matchmaking and
Weekly to daily Essential for social If matchmaking or
Social Needs and cooperative gaming social interactions, catering to
play sessions. gamers. multiplayer features
experiences. social gamers' preferences.
are poor.

35
 Details
Business Canvas Element
(no more than 3 - 5 bullet points)
∙ Game Developers and Publishers: Partnerships with major game developers and publishers like EA,
Bethesda, and Activision Blizzard King to ensure a diverse and extensive game library.
∙ Technology Providers: Microsoft Azure for cloud gaming infrastructure to support streaming
Key Partners
capabilities.
∙ Platform Integrators: Collaborations with PC and mobile device manufacturers to optimize Game
Pass performance across various hardware.
∙ Content Acquisition and Licensing: Continuously acquiring and licensing new and exclusive games
to keep the library fresh and appealing.
∙ Platform Development and Maintenance: Ongoing development and maintenance of the Xbox
Game Pass platform across console, PC, and mobile devices.
Key Activities
Business Model ∙ Marketing and User Acquisition: Extensive marketing campaigns and promotional activities to
attract and retain subscribers.
Analysis ∙ Customer Support and Community Engagement: Providing comprehensive customer support and
engaging with the gaming community through forums, events, and social media.
∙ Extensive Game Library: A vast and continually updated library of over 100 high-quality games,
including exclusive titles.
∙ Cloud Infrastructure: Microsoft Azure cloud platform to support game streaming and seamless
Key Resources cross-platform play.
∙ Brand Strength: Strong brand recognition and loyalty within the gaming community.
∙ Skilled Workforce: Teams specializing in game development, marketing, customer service, and
technology.
∙ Wide Game Selection: Access to a diverse and extensive library of games, including new releases on
launch day.
∙ Cross-Platform Play: Ability to play games on Xbox consoles, PC, and mobile devices through cloud
gaming.
Value Proposition
∙ Affordability: Cost-effective subscription pricing with various tiers to cater to different needs and
budgets.
∙ Convenience: Download and play games offline, stream games on-the-go, and enjoy seamless
updates and additions to the game library.
∙ Subscription Model: Regular updates and new game additions keep subscribers engaged and
reduce churn.
Customer Relationships ∙ Community Interaction: Active engagement with the gaming community through events, forums,
and social media. 36
∙ Comprehensive Support: 24/7 customer support to assist with technical issues and inquiries.

Business Canvas Element
Channels
Customer Segments
Cost Structure
Revenue Streams
Details
(no more than 3 - 5 bullet points)
∙ Digital Platforms: Xbox Game Pass is primarily distributed through digital channels such as the Xbox
store, Microsoft store, and Game Pass app.
∙ Online Marketing: Online advertising, social media campaigns, and influencer partnerships to reach
a wider audience.
∙ Retail Partners: Physical retail partners that sell Xbox consoles and Game Pass subscription cards.
∙ Casual Gamers (Minnows): Individuals who enjoy a variety of games and play occasionally.
Price-sensitive and value accessibility, affordability, and simple games.
∙ Moderate Gamers (Dolphins): Regular gamers who are willing to spend moderate amounts on
gaming and subscriptions. They have diverse preferences and value multiplayer and social gaming
aspects, seeking value for money.
∙ Hardcore Gamers (Whales): Dedicated gamers looking for the latest and most popular titles. They
spend significant time gaming and prefer a narrow selection of games. Willing to invest in premium
subscriptions and buying games.
∙ Game Licensing and Development: Significant costs associated with acquiring and developing new
games.
∙ Technology and Infrastructure: Investment in maintaining and upgrading the cloud gaming
infrastructure and platform development.
∙ Marketing and Promotions: Costs related to advertising campaigns, promotions, and customer
acquisition strategies.
∙ Customer Support: Ongoing costs for providing customer service and support.
∙ Subscription Fees: Monthly and yearly subscription fees from various tiers of Game Pass.
∙ In-Game Purchases: Revenue from in-game purchases within Game Pass titles.
∙ Partnership Deals: Revenue from partnerships with other companies for exclusive content and
promotions.

• Strategic Acquisitions Strengthen Offerings: Activision Blizzard King and other large game publishers have been acquired, greatly
enhancing Xbox Game Pass's game library and drawing in more members with their exclusive, in-demand titles.
• Flexibility with Cross-Platform Integration: Xbox Game Pass can provide a smooth gaming experience across consoles, PCs, and mobile
devices by utilising Microsoft Azure for cloud gaming. This meets a variety of consumer needs and improves user engagement.
• Adaptation to Mobile Gaming Trends: By incorporating well-known mobile games within its subscription service, Xbox Game Pass is
well-positioned to profit from the expanding mobile gaming sector. This move reflects a calculated response to consumer and market trends.
• Targeted Customer Segmentation: By offering customised subscription tiers, the service successfully targets the casual, moderate, and
hardcore gaming segments, optimising attractiveness and income by meeting each group's unique needs and spending patterns. 37
 6 Forces Analysis
The Video Gaming industry is attractive because of its strong growth potential especially with the positive influence of complementary goods and
complementors, which are extremely positive drivers for the industry and its profitability. However, due to the intense competitive rivalry and high
threat of substitutes present, there is a strong need for continuous product differentiation and value - making it essential to have a good strategy
behind our product line in order to ensure long term profitability.

Strength of Force Positive or negative

Force Rationale
(H - M - L) impact on profitability

The video gaming market is highly competitive, with major players like Sony,
Competitive Rivalry H Microsoft, and Nintendo continuously innovating. Intense marketing strategies Negative
and exclusive game titles also heighten rivalry.
Consumers have a wide variety of gaming options for video games. However,
Bargaining Power Of Buyers M brand loyalty and exclusive games reduce their bargaining power to some Neutral
extent.
Key components like processors and graphics cards are supplied by a few
dominant players (e.g., AMD, NVIDIA). However, large companies like Sony and
Bargaining Power Of Suppliers M Neutral
Microsoft can negotiate favorable terms due to their purchasing and channel
power.
The industry in itself is a system of complementary goods from accessories to
Force Of Complementary Goods H games to devices that are crucial for enhancing the gaming experience, driving Positive
additional revenue, and increasing consumer loyalty.
Video gaming has become a standard hobby and form of entertainment, to the
point where many dedicated gamers have been able to make it their careers, this
Force Of Complementors H Positive
increased interest in the space makes it a positive complementor for the
industry.
The presence of alternatives like Netflix as a form of entertainment or regular
Threat Of Substitutes H Negative
sports/games as a form of recreation pose a significant threat to video games.
High barriers to entry due to the significant capital investment required for R&D,
Threat Of New Entrants L manufacturing, and marketing. Established brand loyalty and exclusive game Positive
ecosystems further deter new entrants.
38
Financial Analysis - Alternative 5

39
Financial Analysis - Alternative 6

40
Financial Analysis - Alternative 7

41
 Additional resources supporting our final recommendation

https://clients-mintel-com.libaccess.senecapolytechnic.ca/report/console-and-pc-gaming-product-in
novation-canada-2024

Digital Bros. (2024, May 27). The video games market - Digital Bros.https://digitalbros.com/group/the-video-games-market/

Mobile gaming (on tablet and smartphone) generated

almost $ 90 billion in revenue in 2023, while Console and
PC video games should generated $94.0 billion combined
(+3.1% YoY).

Additional References
Topic: Video game industry. (2024, May 16). Statista. https://www.statista.com/topics/868/video-games/#topicOverview

42
Group Work Distribution

43