Xbox chief reveals more about how developers earn money through Game Pass

Phil Spencer says Microsoft's deals with developers are 'all over the place.'

(Image credit: Microsoft)

A major part of Microsoft's current Xbox strategy rests on Game Pass, a premium subscription service that runs cross-platform. It's so important that one of the big questions about Xbox's new hardware has been whether it's worth the outlay when that ecosystem, more or less, is now on PC. It's a fascinating gamble, with potentially huge returns, and its success depends on whether Microsoft can build a platform attractive enough to developers and, in turn, players.

Phil Spencer has been doing the rounds during the launch of Xbox Series S/X, and speaking to the Verge he addressed the question of how developers get paid. "Our deals are, I’ll say, all over the place. That sounds unmanaged, but it’s really based on the developer’s need. One of the things that’s been cool to see is a developer, usually a smaller to mid-sized developer, might be starting a game and say, 'Hey, we’re willing to put this in Game Pass on our launch day if you guys will give us X dollars now'," he said.

"[In] certain cases, we’ll pay for the full production cost of the game. Then they get all the retail opportunity on top of Game Pass. They can go sell it on PlayStation, on Steam, and on Xbox, and on Switch. [...] Sometimes the developer’s more done with the game and it’s more just a transaction of, 'Hey, we’ll put it in Game Pass if you’ll pay us this amount of money.'"

"Others want [agreements] more based on usage and monetization in whether it’s a store monetization that gets created through transactions, or usage. We’re open [to] experimenting with many different partners, because we don’t think we have it figured out. When we started, we had a model that was all based on usage. Most of the partners said, 'Yeah, yeah, we understand that, but we don’t believe it, so just give us the money upfront.'"

I need some of those partners in my next salary meeting.

This kind of flexibility obviously depends on both seriously deep pockets and a willingness to back a range of projects. Indeed it's hard to see what other approach would work in an industry where budgets can range from the low thousands to hundreds of millions.

The usage model Spencer references is most often linked with Spotify, and usually in a negative light from the perspective of music artists. Every possible take on the situation is already out there, but this year's lockdown and the knock-on effect on the usual revenue streams open to musicians has brought fresh focus to a system that leaves many of its partners unhappy with how payments are calculated (this recent Wired piece is an excellent breakdown).

"My hope is we will get there, and maybe not 100 percent, maybe some hybrid model, which I think could work. We already have a revshare relationship with most of the content creators because we have a store [...] I’m hoping we can get to a model where as we see upside, they see upside. There’s some downside risks that we can help cover which gives us certain capability with the content, but also helps them go do some things that maybe they couldn’t get greenlit on a pure retail model," Spencer said.

"The thing that’s been heartwarming to me, as somebody who’s been building games for so long, is to see games come to the service that wouldn’t have been built [without it]. When the team, if they’re just out there pitching the publishers on a retail game, if it doesn’t fit into some Excel spreadsheet that tells you what the retail outcome will be, then it doesn’t get green-lit. You see this in things like Netflix. There are clearly shows on Netflix that would have never been greenlit by NBC or CBS, or ABC in the old model, and frankly, can have real success. And my hope is that Game Pass can get to that same level."

The full interview is well worth a read, if only to see how eager Xbox is to be everybody's friend. Spencer regularly makes a point of complimenting the competition, and does so here, while trying to get away from the like-to-like comparisons of console generations past. It's not quite PC Gamer's beat but interesting to note his tougher language about the more toxic elements of console fandom, and the wish to see your opponents fail: "I’ve said before, that I find it distasteful, but maybe that is too light. I just really despise it."

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