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"For the consumer, Xbox Game Pass is fantastic. For retail, it just kills us outright"

Independent games stores debate the impact of Microsoft's decision to add new first-party releases to its subscription service

Last week, Microsoft announced all new first-party releases would be included in the subscription-based Xbox Game Pass service from launch - including the upcoming Sea of Thieves, Crackdown 3 and State of Decay 2.

It's a bold move that prompted plenty of discussion around the platform holder's long-term strategy, with our own Rob Fahey suggesting this may help Xbox catch up to Sony's market-dominating PlayStation 4 while Chris Dring posited that this could be a sign of Microsoft preparing for a post-console future.

Another notable reaction was that of Austrian retailer Gameware, which declared it will no longer stock Xbox products as a result. The argument is that if every Xbox sale essentially equips customers with access to a service as increasingly comprehensive as Game Pass, repeat business with those customers is minimal - why would they head to Gameware when they can subscribe and receive new Xbox releases automatically?

"Essentially, it's made [our Xbox business] worthless overnight... Why should we support them if we're going to get very little out of it?"

Stuart Benson, Extreme Gamez

It's easy to dismiss this as an extreme reaction, but GamesIndustry.biz has been speaking to various UK independent retailers and many of these businesses are just as unhappy.

"Essentially, it's made [our Xbox business] worthless overnight," Stuart Benson of Leicestershire store Extreme Gamez tells us. "You've got the whole section sat there, and why would people buy a £12 to £15 second-hand game when they can just pay a tenner and get a massive catalogue of titles to keep them going? Effectively overnight they've wiped massive value off our company and made it not worth doing.

"Why should we support them and sell their consoles and accessories if we're going to get very little out of it? We don't make anything off their digital selection. It's pretty pointless. We might as well go where we're supported, which is Sony."

Like Austria's Gameware, Extreme Gamez now no longer plans to stock Xbox products.

Benson adds: "I've got no hardware left, no control pads - and I'm not going to do an order now. I would have restocked normally, but now there's no incentive for me to do so unless I get something dirt cheap.

"It's very frustrating, but we can see they don't care about retail business in the slightest. We got a lovely little plaque last year saying we're official Microsoft stockists, and that's a lovely token gesture - but for what reason, because they don't support us?"

new

The inclusion of new releases has made Xbox Game Pass more appealing to consumers, but damaged the business for some independent retailers

Stephen 'Stan' Stangroon of Cornish indie Stan's Games agrees, adding: "If they're going to do this, I won't bother [stocking Xbox]. You only make £3 or £4 on Xbox games like the new Monster Hunter, if you're lucky.

"They'll kill the second hand market. I reckon even the public won't like it in the end - I sold a Monster Hunter this morning and the bloke's already brought it back."

"It's tough justifying to a customer why a game is £49.99, and this isn't going to help."

Nick Elliott, Barkman Computers

Sholing Video's Paul Lemesurier says it's "hard to not have the same stance as the Austrian retailer", especially when he feels unsupported by companies such as Exertis, Xbox's UK distributor.

"Game Pass will have an effect on all first-party titles," he says. "We have already told Exertis we will not be stocking Sea of Thieves at all. Why bother when supermarkets will throw it out less then cost, online e-tailers will break street dates - which are a joke - and ship up to five days before release cheaper than us, and now Microsoft is throwing it on Game Pass for a tenner."

Chris Bowman from Console Connections in County Durham asserts that indie retailers "cannot remain profitable by selling Microsoft gift vouchers", and that he hopes Sony continues to support the High Street the same way it has in the past - something he believes will help grow their "already dominant market share."

"People still want boxed product but with the price of an Xbox Game Pass, how long will they continue to do so?" he says. "If Sony and Nintendo were to follow suit, it's game over."

Barkman Computer's Nick Elliott notes that while Microsoft hasn't "killed off boxed game sales overnight", the Game Pass has "certainly put a dent in the business". He argues that when retailers sell games hardware, it is largely an investment into a future customer that will hopefully return to the store to buy games for that system and perhaps accessories.

"Anyone with any sense could have seen something like this coming since Microsoft's fabled first press launch with their 'no second-hand games' policy"

Stuart Walker, Insane Games

"Without that possibility, there is little benefit in allocating our resources to a dead-end-sale," he says, adding that he also doesn't plan to stock Xbox products in future.

"We will only support manufacturers and publishers who support us. If a customer comes into a retail store, and the retailer has a choice between selling an Xbox where they would never sell them anything again or a PS4 where they had a chance of some attach rate, they would surely sell them a PlayStation."

Elliott also warns that, depending on the success of Game Pass, his store may not even stock certain third-party titles: "We'll be cautious about investing in software titles that are featured - or may be featured - in the scheme. We may insist on more favourable terms from the publishers.

"As a retailer, we do an awful lot of back catalogue. That's our mainstay, because chart is such a fragmented market. We do a lot of niche titles that obviously won't end up on Game Pass because they're a bit too specialist."

sea

Sea of Thieves' beta is only open to those who pre-ordered digitally, which indie retailers take as further proof of Microsoft's lack of support for them

Of course, a handful of independent retailers refusing to stock Xbox consoles and software is unlikely to damage Microsoft in the long-run. Lesmesurier suggests more extreme action may have more of an impact, calling on larger retailers to take a similar stand.

"The whole industry should stop stocking Microsoft products," he says. "But that won't happen when most answer to shareholders and only care about the end-of-year bonus.

"It's only a matter of time before publishers monopolise the direct sale of games. Ultimately consumer buying habits will dictate its success or failure, not retail."

Robert Lindsay, Games Centre

"They will be the ones to suffer the most when this industry is digital only. No one will walk into a store and pick up a digital copy when you don't have to leave your house to do so. As it is currently, people still want tangible copies, not a digital copy that - at Microsoft's discretion - can be blocked if you happen to fall foul of Xbox Live rules or fail to launch if servers are down."

It could be argued that Microsoft's decision to include new first-party titles day-and-date with Xbox Game Pass is perhaps a sign of dwindling confidence in its current line-up. By including the hard-to-define Sea of Thieves or the long-delayed Crackdown 3 in its service, consumers unwilling to invest full price in a standalone copy may try them through the service.

And Elliott argues this is even more likely now these games are included in the pass, with Microsoft essentially damaging its own launch sales.

"It devalues their products and their offering," he says. "If they're saying their products are only worth £10 per month, why not release it in a physical form at £29.99? It's tough justifying to a customer why a game is £49.99, and this isn't going to help.

"For every 20 PlayStation titles we sell, we only sell one or two Xbox titles. It's not going to hit our bottom line massively."

Christian Le Cornu, Seedee Jons

"I wonder who Game Pass is aimed at? Is it aimed at the hardcore gamer? It's quite a big ticket to get into. £10 per month is a lot. If you look at what people are charged for on a monthly basis: Amazon Prime, Netflix, Spotify, whatever your TV provider is - and you're already up to £20 to £30 with those. In the current economy, are you able to do another £10 per month?"

Christian Le Cornu, manager of Jersey-based indie Seedee Jons, believe it's only the "die-hard Xbox fans" who are likely to sign up to Game Pass, and because first-party releases tend to be few and far between, the real impact is unlikely to be as severe as some might think.

"If Microsoft's games line-up were stronger, if someone big like Ubisoft started doing this, then yeah, that would be a cause for concern," he says. "So I'm not overly worried about it. It's just a trend, it's where things are going forward."

pass

The Xbox Game Pass is primarily made up of back catalogue titles, which is what many indie stores rely on to stay afloat

Seedee Jons is one of the indies we spoke to that still plans to stock and sell Xbox - "We're not in the habit of cutting our nose off to spite our face," says Le Cornu. This is largely because these retailers don't believe even the complete loss of Xbox consumers would hinder their business significantly. The UK games scene is dominated by PlayStation - with UKIE revealing to GamesIndustry.biz that it accounted for half of all physical game sales last year.

"To be honest with you, our sales are quite predominantly PS4 - the ratio is something like 5 to 1," says Steve Walker of Somerset store Insane Games. "So yes, I can see it making quite a big impact to Xbox gaming in general, but I don't think it will affect our company as much."

"If they're going to do this, I won't bother [stocking Xbox]. You only make £3 or £4 on Xbox games like the new Monster Hunter, if you're lucky"

Stephen Stangroon, Stan's Games

Le Cornu agrees: "For every 20 PlayStation titles we sell, we only sell one or two Xbox titles. It's not going to hit our bottom line massively."

Regardless of where they stand on what the news means for the future of indie retail, most stores we spoke to remain unsurprised by Microsoft's decision, observing that it harks back to the very origins of its current console.

"Anyone with any sense could have seen something like this coming since Microsoft's fabled first press launch with their 'no second-hand games' policy," says Walker. "They've made it clear from the offset of the Xbox One that this is the route that they want to go down - it's only now becoming clear how they're going to go about doing that. They've started to put their cards on the table."

Bowman agrees: "It was Microsoft's intentions from the outset in this generation, but it is only now it has become a realisation. Look back at the launch and how damaging it was when they announced you couldn't share your games or even trade. The uproar from retail was huge - where would that leave indies that trade games to make up the margins? Independents have been shunned in favour of supermarkets and onliners. It is becoming apparent we do not figure in Microsoft's strategy any more."

Robert Lindsay, who heads up successful Scottish chain Games Centre, believes not only was this development inevitable for Microsoft's business, but also the games industry in general and fully expects more platform holders and publishers to follow suit.

"There is way more to this story than just the Xbox Game Pass. All the game companies are guilty of failing to support indies and offer a level playing field"

Paul Lesmesurier, Sholing Video

"Of course it will have an impact on traditional retailers, but digital sales have been steadily eating into physical sales for a long time now," he says. "It's only a matter of time before the publishers turn the screws even tighter and monopolise the direct sale of games. "As a retailer, we are always against anything that takes away business, but ultimately consumer buying habits will dictate its success or failure, not retail."

Le Cornu adds: "I think it's the way things are going. If you look at the trends of the last five or ten years in music, film, TV - we've seen Netflix, Apple Music, Spotify and even things like EA Access. It's just the way forward.

"Sea of Thieves is a good example - you only get to do the closed beta if you pre-ordered it digitally. So the beta doesn't account for indie sales. That's an example of how they're... not shutting us out exactly, but they're not making life easy for us."

xbox

Multiple retailers will no longer stock the Xbox One console, citing that they will be unlikely to sell more games to those customers in future

And while indie retailers understand the appeal of such a scheme from Microsoft's perspective, they also see why such a service could be beneficial to the customers they may or may not lose.

"From a consumer point of view, it's actually quite a good offering," says Walker. "We might see some people defecting from PS4 to Xbox One because of this - which would obviously hurt us going down the line."

Benson adds: "For the consumer, it's absolutely fantastic. For us in retail, it just kills us outright."

Lesmesurier concludes by highlighting Microsoft's Game Pass strategy as just the tip of the iceberg when it comes to the challenges indie retailers face. This single service may not have the detrimental impact some may predict, but the ongoing digital trend and lack of support for independent stores is making business beyond difficult for certain companies.

"We have been in this industry for 35 years, have seen the changes across all generations - there is way more to this story than just the Xbox Game Pass," he says. "All the game companies are guilty of failing to support indies and offer a level playing field. Give it a few years and it will be only supermarkets stocking FIFA and COD."

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Latest comments (10)

Klaus Preisinger Freelance Writing 3 months ago
Music stores had a culture of going there, listening to stuff and buying it.
This culture is gone.

Video rental stores had a similar culture.
Wiped out.

Video game stores are next on the list.
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Jeff Kleist Writer, Marketing, Licensing 3 months ago
@Klaus The tradition of ďbuying itĒ is the issue

Millennials grew up stealing everything. They value convienience, not ownership.

The malls are dying, and kids donít get drivers licenses because first and foremost, desperate adults have taken their entry level jobs, but because they have phones and Facebook and donít need to go anywhere to privately hang just with their friends.

The real issue of the digital culture is discovery. Without that record shop, and with the clustering of interests, itís hard for the new and unusual to penetrate without prior approval of the peer group. You u donít discover something new because the guy at the store put in a new CD (or equivalent). Browsing is dead, and thatís a real problem for the entire entertainment industry.

People need to remember, this was NOT Microsoftís goal in 2013

It was simple. All games would go through an online serial registration to lock a copy of the game to your account. This copy could be bought, sold, traded, or lent. The translations of buying and selling wee subject to fees to the seller, a potion of which would be returned to the studio in question, to defeat the Gamestop issue. Any retailer could sign up and be part of it This was #1 on the request list of developers and Sony panicked when their total lockout of used game discs through burning an RFID chip roved to be anti competiton for this system. This same POS integration Gamestop, Best Buy and Walmart had already signed up for had a big advantage for them. They could sell Xbox credit, Gold, and games directly into your account, eliminating the need to deal with inventory and customer confusion. Thatís #1 on their list, zero shelf space, zero stocking, nearly pure profit.

Frankly, I think the next big thing in this system should be download stations in stores, where users can acces the current updated game code which is then ďblessedĒ and completed in a comparably small download for those in bandwidth challenged areas. Since it canít store the entire library, youíd also be able to order games pushed to your local kiosk. Blessed, reusable 128GB USB keys would do it for most people. Big game releases and the store already has a bucket of them ready to swap for the blanks.
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Richard Browne VP Production, Leyou Technologies3 months ago
I spent a great deal of my youth in my local game store Ram Electronics, talking nothing but games, playing all the new releases on every platform they had. Spending Saturday in their after being at school was the highlight of my week ; indie game stores rock. With all that said I don't suppose anyone with a bucket caught the dripping irony of complaints about it hurting the second hand market did they?

Now Indies doing it honestly hasn't been the problem, the problem has been the major retailers like Gamestop and GAME reselling games, making it a cultural norm and having major ramifications on the line up of product we see in the store today. If Indie Shops want to point fingers at this decision, point it at high street chains, not Microsoft.
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Show all comments (10)
Steve Ellis Managing Director / Programmer 3 months ago
I'd love to sympathise but I can't quite get there. Retail has spent around two decades starving publishers and developers of revenue through pre-owned sales. They didn't even slightly care about the damage they were doing to the industry - to the very companies who create the games that they sell. Now the shoe is on the other foot, they're crying foul.

Retailers, please switch off the lights and close the doors on your way out. The industry will thrive without you...
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Fun Fact: Microsoft's President Brad Smith is on Netflix board, and this is "The Netflix model" in gaming. Long Live Netflix!
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Jeff Kleist Writer, Marketing, Licensing 3 months ago
@AbdulBasit Saliu: Not a real surprise, Microsoft developed the original Netflix Streaming app and backend.
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Paul Jace Merchandiser 3 months ago
While I can kind of understand the retailer's(in general) complaints on this issue, there's a few reasons why I have no sympathy for them. First, all the retailers that complained in this story said that the majority of their video game sales comes from PlayStation products. So this isn't likely to affect them much, if at all.

And second, and much more importantly, it's not like Microsoft has stopped selling physical copies of their games. All their first party games that are launching on Game Pass will be launching SIMULTANEOUSLY with physical copies. Plus, it's not like the 30-45 million Xbox One owners are ALL going to subscribe to Game Pass. Microsoft would be lucky to even get half those customers, which means there will be plenty of customers that still want to buy physical copies.
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Richard Westmoreland Senior Game Designer, Codemasters Birmingham3 months ago
Diversify or die. You can't blame Microsoft or Millenials for this, it's the future. The market for physical games was always going to shrink - It happened with music, it happened with film, it will happen with games.

I've not been to a retail game store in years. Why would I? Digital games give me access to my library no matter where I am, for everything else Amazon will send me it, for less money, and with next day delivery. With cross-play I can play my games on my work PC and at home on my Xbox and I'm happy to pay the premium for that!

I get that they'll be resistance from those of us who have grown up with games being a physical thing you own, but it's the age of streaming now. You don't pay for a product, you pay for the experience.
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mr mann game character, Moonfrog Labs3 months ago
This feels like the same thing that happened when the candle store complained about the light bulb store destroying their business. Sorry Gamestop, you are slowly becoming the candle store. Change or be obsolete.
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Jeff Kleist Writer, Marketing, Licensing 3 months ago
@Richard Westmoreland: this issue isnít whether the physical market is going to shrink, itís the game market, and the ability to have a diverse set of offerings people actually can discover. The millennials allergy to socialization, to physical stores and such hampers thst ability because your peer group bubble is rarely penetrated.

And these kids arenít even paying the price of a movie ticket for experience, and that particular experience they have on their laptops instead of a social setting. Probably the single biggest reason outside of translation issues comedies are so dumb these days. Instead of being wit based itís all slapstick and gross out. Because those play better while youíre on your phone and bare,y paying attention.
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