Xbox's Game Pass price cut shows its big bet on Call of Duty didn't pan out

Xbox's decision to lower the price of Game Pass and remove Call of Duty games from its day-one offering is good business sense, good PR, and a short-to-medium term win for almost everyone.

It's a win for Game Pass subscribers, who get a healthy price cut on the best (and most popular) tier, Ultimate. As Michael McWhertor points out, in a world where the price of absolutely everything is going up, a substantial cut like this feels like a gesture of goodwill as well as an admission that Microsoft's sums weren't working.

It's a win for Microsoft's finance department, which no longer has to sacrifice hundreds of millions of dollars in lost Call of Duty sales for the questionable benefit of more Game Pass subscriptions. It's assumed that last year's big price hike for Game Pass was an attempt to claw back some of this revenue, and it's also apparent that didn't work; Microsoft wouldn't be reversing the increase if it hadn't caused the loss of more subscribers than it was worth.

It's a huge win for Microsoft Gaming's new CEO Asha Sharma, who made her feelings known about the price of Game Pass very soon after taking the top job, and can take the credit for this popular move as the first major decision of her tenure. Xbox fans will love it, and Microsoft shareholders will be down too, with the withdrawal of day-one Call of Duty providing a sensible rationale for the cut so it doesn't just look like giving away money.

It's maybe not a win for Call of Duty players on Xbox and PC who will have to go back to paying full whack for the game. But they did it before and will do it again, and for those who choose to keep Game Pass anyway, it's not necessarily more expensive.

The move does raise long-term questions, though — about the purpose of Microsoft's $69.7 billion acquisition of Activision Blizzard, about its long-term strategy for Game Pass, and about the future of Call of Duty.

Image: Sledgehammer Games/Activision

Microsoft bought Activision Blizzard for a lot of reasons. It wanted to own massive earners like Candy Crush and World of Warcraft as well as Call of Duty, but there's no doubt that Call of Duty was the biggest prize and absolutely central to the deal. And if the Microsoft team ever did seriously contemplate making Call of Duty Xbox-exclusive, which is doubtful, they didn't have to go very far into the regulatory process or their own financial due diligence to realize that was a non-starter.

The point of owning Call of Duty was to put it on Game Pass. This is not supposition; Microsoft made this argument strenuously to regulators and the public during the deal approval process, saying that putting Call of Duty and other Activision Blizzard games on Game Pass would expand choice for players and make gaming more affordable.

This turned out to be a false promise, or to put it more charitably, a strategic dead-end for Microsoft. When it acquired Activision Blizzard, and Bethesda before it, Microsoft had assumed that the potential market for Game Pass was way bigger than it turned out to be. The sums didn't add up; neither Call of Duty nor Game Pass was paying for itself. If Activision's shooter series is too big for console exclusivity, it turns out it's too big to fit in a subscription, too.

(Here's another potential winner of this announcement: Netflix, which might look at what's happened here and realize that it was right to back away from its acquisition of Warner Bros. Perhaps adding trophy franchises like Batman and Harry Potter to your subscription service actually isn't worth the vast cost.)

Image: Treyarch/Activision

Microsoft won't be sad to own Call of Duty now. It can still put older titles on Game Pass, and Call of Duty is a self-sustaining ecosystem that easily makes a financial and cultural case for itself at scale, much like Minecraft. But it seems unlikely Microsoft's leadership would have gone to the immense expense and trouble of the acquisition if they knew this would be the end result.

There's also the pervasive worry that Game Pass just doesn't make sense, and never has. If it can't sustain Call of Duty, what else can't it sustain? Elder Scrolls? Forza Horizon, even? Are the days of day-one releases of any sort on Game Pass numbered? It's hard to avoid the suspicion that Microsoft has spent the last decade chasing a chimera: a business and distribution model that fundamentally doesn't work for the majority of game developers or game players. Oh well, at least it's good value again.

Activision has its own self-examination to do. The Call of Duty teams will probably be happy no longer to be strategic pawns for Microsoft, and to define success on their own terms. But a different kind of scrutiny is coming. Last year's Black Ops 7 was judged a huge disappointment by the community, by critics, and by the market; it slumped in the face of a resurgent competitor, Battlefield. Game Pass no longer provides an excuse for declining sales, and Microsoft would be right to worry that its prize acquisition is past its peak. The series needs a new lease of life, and maybe a year on the bench. Hopefully this new focus will give Activision the motivation it needs to bring Call of Duty back from the brink, or Microsoft's $69.7 billion bet will look even worse than it does now.