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The Editor
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The Room Where It Happened
Microsoft should go into business as a close-up magician, as the last few months have seen it pull off the best trick of misdirection that the games industry has ever seen.
The focus has been on the hardware of late – the delayed console dates and prices. And then Microsoft, impossibly, whips out a 300lb rabbit, from its perfectly-tailored sleeve. In a single deft move, with no hint of foreshadowing, it lands goliath-like in front of us, and reminds us all that content is king.
The EA Play to Xbox Game Pass deal is among the biggest in gaming history. It redefines the gaming space, it reminds us of the kind of deals that are possible, it makes us wonder, if this, then what next?
There’s a song from the musical Hamilton, you’ve probably heard it, called ‘The Room Where It Happened’ where one of America’s founding fathers is distraught that he missed the meeting where the greatest political deal of the era was hammered out.
More so than anything, I want to be in the room where the Xbox-EA deal happened. To know how it began, what both parties wanted and what the final deal consisted of. And while we can only speculate, we can certainly see big advantages for both sides.
Xbox Game Pass exists in a semi-walled garden, built from console hardware. Yes, consumers can get it on PC but Game Pass largely brings people into the Xbox ecosystem, buying hardware, accessories, and of course more content from the Xbox Store. The EA deal will bring a yet more people into Microsoft’s garden and just as they were deciding where to spend their money for the next seven years or so.
So just how much is Microsoft paying EA for this privilege? Maybe not as much as we might think. Oh yes, I’m sure the figure would make headlines, it’s a huge, huge deal. But remember that EA makes a massive part of its revenue from microtransactions.
Putting its games on Game Pass hugely increases the reach of many of those titles and therefore the amount EA can earn from those ongoing transactions. And a cut of those profits will help to offset the overall cost to Microsoft in the long-term.
Then there’s xCloud access. EA would love to reach console-less consumers with its premium titles today. It’s potentially a huge new market, and Microsoft looks to be better positioned to throw off the shackles of console hardware. More money for both again.
Still Microsoft undoubtedly will be paying handsomely for the privilege of having EA titles on Game Pass, whichever way you cut the cake, or whoever gets what share of which pie. So how does Game Pass make money today? It probably doesn’t.
Netflix lost money year after year for a long time, while Amazon reinvested all of its profits for many, many years too. It doesn’t matter if you spend to get the top in a global digital media format, it only matters that having spent, you do get there.
And this was the single biggest step to date in what is increasingly looking like Microsoft’s ascension to that throne. I only wish I’d been in the room where it happened.
