by Jeff Grubb, Venture Beat
On Friday morning, Microsoft announced it was increasing the price of its Xbox Live Gold subscription service. By Friday evening, it reversed that decision and then some. In an update to its news post about the price change, the company explained that it had “messed up.” And according to sources familiar with the matter, Xbox leadership came to that conclusion quickly after a loud public outcry from gamers — but also from feedback within other Xbox teams.
Going forward, new and existing Xbox Live Gold subscribers can join the service for the current price. That means $10 per month, $25 for three months, $40 for six months, and $60 for a year. That’s opposed to the now-abandoned plan to increase prices to $11 per month, $30 for three months, and $60 for six months. On top of that, you will soon no longer need an Xbox Live Gold membership to access online features for free-to-play games.
“We are working hard to deliver this change as soon as possible in the coming months,” reads the blog update.
This is an exciting change for people who want to play Fortnite or Call of Duty: Warzone with friends. But dropping the paywall for free-to-play games was already on Microsoft’s roadmap for later this year. The company is simply accelerating those plans.
“The [free-to-play] announcement has been in the works for months and that announcement was dropped today to help offset the backlash from the original price increase announcement,” Niko Partners analyst Daniel Ahmad tweeted Saturday, January 23.
I can corroborate that claim.
But what else happened here? What, specifically, got to Microsoft to convince decision-makers to so quickly reverse this decision? It was a combination of factors that you likely already know if you were one of the many people complaining about the price hike on social media.
Xbox is scared of losing the value narrative
It was obvious that many key people on the Xbox team were putting in extra hours to deal with the fallout from the pricing decision on Friday night. Xbox executives and communications specialists tweeted references to their long day of work after the update hit the blog post at around 9 p.m. Pacific time. The crew put in a team effort to figure out how to respond, but they all felt like they had to do something.
The reason this was such a dire situation for Microsoft is because the public perception of the price increase threatened the foundation of the future of Xbox. The company didn’t launch the Xbox Series X/S with Halo, so it is putting all of its focus on Game Pass. And Game Pass works because it’s “such a great deal,” according to anyone who has ever talked about it.
Microsoft needs to maintain that momentum while its development teams slowly create games to grow the service. Any dent in the value perception is something that could potentially derail the entire business model.
And the outcry against the Xbox Live Gold increase was more than dent.
Microsoft was particularly concerned about a couple of responses. For one, internal decision-makers hated seeing people point out that it would cost $120 per year to play Fortnite on an Xbox while it is free on PC, mobile, and all other consoles.
This also hurt the value perception of the Xbox Series S, which Microsoft wants people to view as an inexpensive path to get into next-gen gaming.
But the bigger concern was that the Xbox Live Gold pricing could taint the perception of Xbox Game Pass. Without Halo: Infinite or any other massive games on the market, Game Pass is a crucial offering. But if consumers assumed that Microsoft is only trying to hook players to the service so they could double the price in a few months, all of that positive sentiment could evaporate in an instance.
Xbox leadership instantly sensed that pitfall, and that left them with no question about reversing the Gold price hike.