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The original was posted on /r/gamingleaksandrumours by /u/YounqqFlee on 2025-07-08 07:32:54+00:00.

Original Title: [WindowsCentral] “In conversations with various Microsoft sources, I’ve been told that Microsoft performs calculations based on per-title retail forecasts, which includes things like Xbox, PC, and now PlayStation version game sales, among other factors.”

Does Microsoft really not factor in cannibalization when judging its internal studios’ performance? While I don’t doubt for a second that Chris Dring received the information from Microsoft sources, it contradicts what I’ve been told about how Microsoft calculates first party game sales against Game Pass profitability as of writing today.

In conversations with various Microsoft sources, I’ve been told that Microsoft performs calculations based on per-title retail forecasts, which includes things like Xbox, PC, and now PlayStation version game sales, among other factors. And then, it combines that information with the title’s Xbox Game Pass engagement. It then adds the net result to Game Pass profit and loss (P&L) statements for that title, essentially charging Game Pass for forecasted “lost sales” on Game Pass platforms. Engagement and reduced churn are factored as success indicators on top. What Microsoft spends on acquiring content and marketing Game Pass is also naturally factored into its P&Ls.

What Microsoft doesn’t do is factor in Game Pass cannibalization at the point of funding the game outright. Given that games are being built for a variety of endpoints and business models, sources argued that it wouldn’t make sense to put the entire dev costs of titles like Call of Duty or DOOM: The Dark Ages on top of Game Pass — unless the game was going to be fully exclusive to Xbox Game Pass as its only mode of sale and access. Microsoft performs the calculations after seeing how the title performed in the marketplace.

*Jez updated his article with more details

Just to further add, the business model around Xbox Game Pass revolves around engaging users who would otherwise only play freemium titles, or potentially only play 1-2 titles per year — which was the average per console user attach rate both before and after the advent of Game Pass. If an average user who typically does only pay for a couple of games per year stays subscribed for any length of time, they beat that average per-user profitability, while also adding value by engaging and potentially sharing content around those games.

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