Why Xbox Game Pass Was Created: Microsoft’s Reasons

Since 2022, Xbox, Microsoft’s Gaming subsidiary, has been carrying out an expansion plan in its software business. That is, he has dedicated himself full time to buying video game studios to integrate them into Xbox Game Studios. This happened with small developers like ZeniMax Media (Bethesda Softworks) and also with gigantic multinationals in the market like Activision Blizzard (Call of Duty).

However, far from being a reason to think that the green X is experiencing its best years since it entered this industry in 2002, many of the acquisitions have been to disintegrate entire work teams. That was the case of Arkane Austin (Prey y Redfall), Tango Gameworks (Hi-Fi Rush and the series The Evil Within), Alpha Dog Studios (Mighty Doom) and Roundhouse Studios; leaving successful games without sequels.

Then came the unusual increase in the price of the Xbox Series X (black) and Xbox Series S (white) consoles. Some market analysts called it inappropriate. First, it alienated players, who already did not prefer the Xbox over the PlayStation 5 (PS5) or the Nintendo Switch 1, and second, it was a strange move, since after their launch, the platforms tend to go down in price, not up.

However, the “lid” came with the sharp rise in the cost of the Xbox Game Pass subscription service. In the beginning, this membership was synonymous with accessibility, as it offered up to 14 days of free trial and discounts that in some regions of the world dropped to USD 1. But all that ended when the Ultimate plan went from costing COP 38,900 to COP 80,900 for one month.

There was so much rejection from a large number of players that that same day many decided to cancel the service. There were so many people who did it at the same time that the Xbox page collapsed until no more cancellations were allowed. The company even backed down and allowed those who already had active memberships to maintain the original price. But what are these actions in the green X due to?

Why did Xbox rise in price so much?

Bloomberg, a media specialized in technology, has revealed that Microsoft, the multinational behind Xbox and founded by Bill Gates, imposed a 30% profit margin on Xbox. What does this mean? That at the end of all its commercial operations, the Gaming brand must obtain profits of 30% on its income figures after having subtracted all the expenses associated with the operation.

Why is it relevant that they ask a video game company for a 30% profit margin? First, because it is an unusual figure in this industry and second, because this financial indicator is lower for the other three market giants. PlayStation achieved an operating profit margin of 16% during the first quarter of fiscal 2025 and Nintendo of 23.93% throughout that fiscal year.

If you take into account that both Sony, with its PS5, and Nintendo, with its Switch 1 and 2, sell more gaming systems than Xbox, the economic gap that the green X must fill is gigantic. Which would explain, according to Bloomberg, the decisions of the American company a couple of years ago. Exactly, since 2023 when Amy Hood took control as Microsoft’s CFO.

What other things has Xbox “fucked”?

In addition to everything previously said, the video game multinational, at the head of its parent company, has canceled several projects, including some as important as the second part of Hi-Fi Rush. In addition, it also removed more than 600 people from their positions in September 2025. All this without counting the 9,000 layoffs that Microsoft has carried out globally since January 2024.

Who will do the work of so many people? The short answer is artificial intelligence (AI). The technology company has strongly embraced collaboration with this type of tools. However, it must also be taken into account that before AI does all the work on its own, human hands are needed and will be needed in the future to train it and reduce its calculation and execution errors.

Returning to Xbox, in the short term it seems unrealistic that it can meet the goal of a 30% profit margin. According to a report by S&P Global Market Intelligence, between 2018 and 2024 the average profit margin of the Gaming industry fluctuated between 17 and 22%. This takes into account not only the sale of consoles, but also games, accessories, services and other types of products.

What will Xbox do to make it to the end of the month?

It seems that now the green X’s priority is low-cost video games with a quick return on investment, two of the most distinctive characteristics of games as a service or Free-To-Play. Of course, the task is not easy at all, because judging by the profitability of the brand during 2022, just 12%, there is a long way to go that Xbox must travel to be able to meet the goal imposed by Microsoft.

All of the above could explain, at least from a fiscal point of view, the increase in the prices of consoles, games and services, even though most of the measures are designated as “anti-consumer.” Even the most recent statements from the green X confirm the company’s stance for the future. “Balance creativity, innovation and sustainability. Aim high, but remain flexible.”

Finally, Sarah Bond, president of Xbox, has said that the company’s next generation of platforms will be “a very premium, high-end experience.” Which makes more than one think now, more than two years after the launch of the new consoles, that this will translate into even higher prices, justifying the product, but also tightening the multinational’s financial belt.