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Can Microsoft’s Xbox All Access Plan Help Its Online Gaming Unit?

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Sep. 6 2018, Updated 6:30 a.m. ET

Promoting the new plan

To drive its subscription-based Xbox Live gaming business, Microsoft (MSFT) intends to launch a new Xbox All Access plan. To promote its new plan, the tech giant plans to offer its gamers monthly subscriptions to Xbox Live and Xbox Game Pass along with free Xbox hardware. The new plan comes with a two-year lock-in period. After the completion of the term, the user can keep the hardware at no cost.

The All Access plan with Xbox One S hardware would cost the user about $22 per month, and it would cost $13 more with the powerful Xbox One X hardware. Initially, the new plan is expected to be rolled out in the United States.

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Steps to drive Xbox Live monthly active users

From the graph above, we can see the number of Xbox Live monthly active users for Microsoft in the last five quarters. During the same period, the number of Xbox Live subscribers grew at a CAGR (compound annual growth rate) of 1.8%. The company exited the fiscal fourth quarter with 57.0 million Xbox Live subscribers, up 7.5% YoY (year-over-year).

On June 1, 2017, Microsoft launched the Netflix-styled (NFLX) Xbox Game Pass streaming service in 31 markets for a monthly fee. The user would have access to more than 100 games from its library and can download them to play later. The company charges $10 per month for this service.

Long-term goal

Microsoft’s strategy to combine Xbox Game Pass, Xbox One, and Xbox Live into a complete package may drive the user experience and boost its subscriber growth. The $100.0 billion gaming industry, which is growing at 10.0% per year, is gradually shifting toward OTT (over-the-top) and cloud-based games.

Microsoft’s strong Azure cloud distribution platform is expected to drive its cloud-based gaming business. It may also help the tech giant reduce the gap with Sony’s (SNE) video game business in terms of revenues. In the last five quarters, Microsoft generated ~$12.0 billion from its Gaming segment, whereas Sony garnered ~$22.0 billion in revenues in the same period.

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