"Game Pass relies on third-party content. I want it to be that way. I want our third parties to have success. One of the things, going back to previous CEOs, Bill always had this good point of view that you're not really a platform until other developers make more on your platform than you do. That's one of the fundamental definitions of a platform. I think it's very smart to look that way. I think about Game Pass as a platform. It's not just a subscription on a platform.
"I want third parties to see the distribution and monetization capability of Game Pass as something that is accretive to their business and important to them. I, obviously, as the owner of Game Pass, [will] invest earlier than third parties will, both when I put games on the service, and the number of games that I need in order to create the flywheel that gets it to scale. We're investing in content because we're early in Game Pass, and frankly, in xCloud. I need to have great content as an attractor to customers into Game Pass and xCloud and our consoles as well.
"When I play it out, I want to get to the world — you've seen developers, it's been great as Game Pass has grown, start to come out and say, look, Game Pass is actually a critical part of the discovery process of my game. It's actually created business opportunity for me. Which isn't true in video and music today. Because when certain people try to call Game Pass the Netflix of, or the Spotify of, there is a fundamental difference that ..."
I was seconds away from doing it. I'm excited for this answer.
"Yeah. These games are all for sale. What we've seen because, one, some games have a business model inside of themselves and there's retail availability at the same time, and all these other platforms that games are on. One of the big issues that some of the mid-tier and smaller games deal with is, how do I just get known? How do I actually create either that Twitch moment that you see with something like Fall Guys, or just that it's live on so many people's social graph, because people are playing that, people just see it.
"Game Pass has been a real avenue for that, because we have over 15 million subscribers and a very consumptive base of players. Everybody sees what everybody is playing on Xbox Live. When a game hits in this curated marketplace of Game Pass, it becomes more discovered on the network, which is just such huge viral marketing for the game that's out there. That's what I need to get to with Game Pass. We invest in first-party, and we're seeing it. We're right at the inflection point of that really being true. It's definitely true for a lot of developers already.
"We invest in our first-party [games] as a catalyst for growth. In the end, I do know that most of the games, just like most of the games that are played on an Xbox, should be third parties. Those third parties have to build a healthy business on Game Pass. Otherwise, it doesn't work"
Let me make the Netflix comparison just to have done it, just to check the box.
The Netflix business model started with a bunch of third-party content. They were licensing TV shows from networks that had no streaming capability of their own. It was just free money because it was on this thing called Netflix. Then TV networks realized, "Oh crap, they're eating our lunch," and Netflix started pouring money into originals to increase and maintain the value proposition of your Netflix subscription. They're still spending a lot of money, when the TV networks are saying, "we're all going to build our own streaming platforms now."
You're describing the opposite of that. You're saying, "I'm going to spend all the money upfront to make people come onto the service. Then the game developers who are not going to build their own subscription bundles, they're going to come on to Game Pass and make a lot of money."
"That's our goal. That's absolutely our goal. We see it, and not in all cases. This is all learning every day, but we see it. Even things like EA Play coming on to Game Pass was us working with our partners at EA to say, it's not about a per-title thing, let's actually bring the channel that you guys want to go drive and grow value in, called EA Play. Let's bring that to Game Pass on console and PC, so you see growth in people's attachment to your service through the distribution power of Game Pass. That's real strength for them.
"Actually, for a content partner like EA or someone else, it helps them create the kind of moat around their content that says, "No, this EA Play thing has value." We love that.
"Now that's at a portfolio level. There are certain teams that are just, let's do that with our game. If I think about Studio Wildcard with ARK, a game that does really, really well in Game Pass, it's a good example. If they've got a whole ecosystem around what it means to be in ARK and the business model behind that, they can use Game Pass as a great way for them to grow and find new customers who might not choose the game just on an open marketplace, or might never find it.
"We can actually raise the visibility of the content. That's just not true in the video space. There's definitely some third-party series that I've found season 1 and 2 on Netflix. Then I'll go to watch [it] on the studio's service or even on broadcast, if it's something that's on broadcast. I just don't think the video companies were there to catch that growth in Friends. You think about something like The Office or Friends or these things that were critical parts of Netflix growing, I think the opportunity that was missed there, and I'm not disparaging anybody, but if you're going to grow a bunch of interest in Friends because it hit Netflix, what do you do with people's interest when they get to the last episode that's on Netflix?
"Gaming knows how to do that. Our gaming partners, whether it's an annualized franchise that comes out so you're building an audience for the next release, or it's an ongoing perpetual game, [like] Destiny 2 is in Game Pass right now. Those developers know how to continue to manage and grow communities. That's what I would say in the video space. If you want to use Netflix for distribution, absolutely, but make sure you know how to catch the signal of fans for you as the content creator when it comes out.
"We enable that. We've got a storefront. We've got discoverability you can bring. You can have your social, whether it's Uplay, or EA, or other things on our platform. You're building a direct-to-consumer relationship for you as a publisher. Those are all critical, critical components of Game Pass. Even more important with xCloud is, we start taking this content to a device that's never seen your game in a part of the world that's never going to own a game console or a gaming PC, how do you, as a publisher, build that strong, direct-relationship customer, either around your portfolio or around your game?"
www.resetera.com
