Microsoft has a hit on its hands with Xbox Game Pass, and analysts are starting to notice

Kareem Anderson

Back in 2013 when Microsoft unveiled its Xbox One and the promise of an always connected and primarily digital gaming experience, the company was roundly mocked and panned for its seemingly overreaching ambitions.

At the time Microsoft proposed its online gaming distribution platform, companies such as Gamestop and other ambitious 3rd party studios looking to make a similar play denounced the company’s pitch.

Fast forward a few years, a couple of fundamental user-focused business strategies and advancements in the company’s cloud infrastructure and Microsoft seems to be revisiting a reality in which the Xbox platform evolves into a more digital gaming experience to a much more receptive audience.

While Microsoft’s Xbox Game Pass isn’t quite the cloud-based initiative proposed during the Xbox One unveiling, or like Sony’s actual cloud-based solution with PS Now, its implementation does offer Microsoft a platform expansion that should worry competitors.

The launch of Xbox Game Pass has been a relative success for the company as Microsoft chalked up a 44% growth in its gaming revenues annually. The growth of the Xbox division helped add an additional 9% or $2.74 billion to the company’s bottom line, making it the third fastest growing sector in Microsoft’s portfolio.

Microsoft’s Xbox One hardware hasn’t been flying off the shelves in any noticeable way as of late thus isolating the gains in Xbox revenue to software related initiatives such as an increase in Xbox Live and Game Pass subscribers.

What this means is, that Microsoft isn’t going to be walking away from Xbox Game Pass anytime soon, and in fact, is already strategizing ways to expand the ecosystem.

Xbox Game Pass

Over the past year, Microsoft has continued to blur the line between where it wants its gamers to enjoy their gaming experiences as it pitches both Windows PCs and Xbox’s as destinations. Microsoft’s gaming obfuscation can be viewed as a shrewd business strategy that’s leveraging its presence in both PC and console ecosystems, but the reality is that on-demand entertainment services are a trend that is crossing over into the casual gaming experience.

According to a report from the Motley Fool that uses a Newzoo survey to canvass the number of subscription gamers that exist today the data shows an increase in EA Access and Xbox Game Pass subscribers. EA Access garners 15% of family gamers subscriptions while Game Pass is a close second with 14%.

While Microsoft undoubtedly plans to use its upcoming Project xCloud platform to further entrench itself in digital and cloud gaming platforms, EA is looking to launch stave off the competition with its recently reported cloud service for Origin Acess.

Electronic Arts is also reportedly developing a new cloud service for Origin Access. That integration would allow subscribers to choose between downloading or streaming games, allow EA to expand the Origin Access ecosystem to tablets and smartphones, and possibly merge the two Access platforms on the Xbox One.

As both Microsoft and EA continue their strategic business tango with one another, companies such as Valve are left in the middle to fret about Microsoft or EA pulling their games from Steam to prioritize their very similar distribution platforms.

Whatever the outcome, investors are finally beginning to perk up at the potential of Microsoft’s digital gaming ecosystem as well as competitors taking notice of pervasive expansion happening within the confines of Microsoft’s Xbox platform.