Xbox Game Pass Is “Unsustainable,” Developers Argue After Microsoft Layoffs

Xbox Game Pass has been billed as a great deal for customers and developers alike, offering access to a huge catalog of games for players and a built-in audience for the studios that make them. But after a massive wave of layoffs at Microsoft, some developers are debating whether Game Pass is worth the cost, or if it’s hurting the industry.

“I think Game Pass is an unsustainable model that has been increasingly damaging the industry for a decade, subsidized by Microsoft’s ‘infinite money,’ but at some point reality has to hit,” Raphael Colantonio, co-creator of Dishonored, wrote on social media. “I don’t think Game Pass can co-exist with other models, they’ll either kill everyone else, or give up.”

That kicked off a conversation between Colantonio and Larian Studios’ publishing director, Michael Douse, who said that “for smaller teams with new or riskier IPs it helped derisk,” but questioned what would happen when Xbox could no longer afford to add more games to the service each month.

“‘What happens when all that money runs out?’ is the most vocal concern in my network,” he wrote. Douse agreed with Colantonio that “the only way Game Pass can co-exist without hurting everyone” is to focus on providing a catalog of older games rather than continuing to add new releases.

It’s not the first time Game Pass has been criticized for giving developers a raw deal. Christopher Dring, former editorial head of GamesIndustry.biz, said earlier this year that developers can lose as much as 80 percent of sales by joining Game Pass. The developers of games like Revenge of the Savage Planet and Somerville have also warned against launching on Game Pass after doing so themselves, suggesting that it’s a bad deal for the entire industry.

“What we've seen is that content has been devalued and that people are less willing to pay for things, which in the long run will likely mean less games being made and a lot more studios going under," Alex Hutchinson, head of Revenge of the Savage Planet developer Raccoon Logic, told Gamer Social Club.

Colantonio’s initial comments, where he referred to Game Pass as “the elephant in the room,” came just days after mass layoffs from Microsoft. Around 9,000 developers lost their jobs in the industry’s latest wave of pink slips, as Microsoft cancelled games and shuttered entire studios like The Initiative, which had been developing a remaster of the Nintendo 64 shooter Perfect Dark.

"I recognize that these changes come at a time when we have more players, games, and gaming hours than ever before,” Microsoft Gaming CEO Phil Spencer wrote in a memo. “Our platform, hardware, and game roadmap have never looked stronger. The success we're seeing currently is based on tough decisions we've made previously. We must make choices now for continued success in future years and a key part of that strategy is the discipline to prioritize the strongest opportunities.”

As Spencer himself says, the layoffs aren’t due to Microsoft's revenue falling off. Instead, the job cuts are meant to finance other aspects of Microsoft’s business. That almost certainly includes Game Pass, which requires huge investments to continue growing its library. Microsoft has also gone all in on artificial intelligence, and pushing its Copilot AI requires a massive investment in chips and data centers.

Whatever role Game Pass investments had in the recent layoffs, it’s clear that not all developers see it as the great opportunity it once might have been. Even players aren’t getting as good a deal anymore, as Microsoft raised subscription prices last year while reducing game availability on some tiers. There may still be some value for players, but as more developers are beginning to argue, the toll it takes on the industry could be more than anyone bargained for.