Gaming Needs More Ads, Expert Says, And A $6 Game Pass Tier

Microsoft Gaming CEO Asha Sharma recently said in a memo to staff that Xbox Game Pass has become too expensive for players and that she wanted to create a “better value equation” and offer greater flexibility to players. It remains to be seen what changes might come to Game Pass, but researcher and educator Joost van Dreunen has now offered his thoughts, saying Microsoft–and the industry at large–should embrace advertising. Meanwhile, a former PlayStation executive said Game Pass is in dire straights currently.

Van Dreunen said on his blog an “ultra-low” Game Pass tier, possibly priced at $6/month, could be one way forward for Microsoft to create more flexibility with the subscription service. Pricing will not address the underlying problem with Game Pass, van Dreunen said.

“Research on subscription models in the console industry has found that while subscriptions change purchasing behavior–subscribers buy fewer individual titles–they do not meaningfully expand the overall market. Adding more games to a library does not attract players who weren’t already gaming. Subscriptions excel at retention. They perform much worse as a driver of growth,” he said.

The expert went on to say that other major forms of media over the years, including TV, radio, and the internet, do not charge viewers or readers for content, instead relying on ads to cover costs. “Gaming has resisted this logic longer than any other mass medium, partly out of cultural pride and party because, for a long time, the premium audience was large enough to sustain the business,” van Dreunen said, speaking generally about the gaming market and not just Xbox.

The audience for Game Pass Ultimate, which costs $30/month, is “not enough” to be sustainable, van Dreunen said. Instead, Microsoft should look at the wider market of 3 billion+ people who “won’t pay anything” to help grow the Xbox business, and give them some “free” content in exchange for ads.

Van Dreunen believes Xbox will “start relying much more heavily on advertising” in the future to help grow the business, and he said Sharma’s experience scaling Instacart’s business could be a signal for what she may do at Xbox. Microsoft doing more with an ad-based model would be a natural shift for the media landscape, he said. “Streaming platforms resisted advertising until they didn’t. Ride-sharing apps added it. Smart TVs built entire business models around it. The pattern is consistent enough to be called a law: Ads eventually reach all addressable surfaces,” he said.

In 2006, Microsoft bought the in-game ad company Massive Inc. and attempted to scale this business for Xbox, but it failed, with Microsoft closing it down for good in 2010. At the time, van Dreunen said the dominant gamer demographic was “actively hostile to commercial messaging,” but he said gaming has grown to such a scale in 2026 that gaming is no longer a “subculture” but instead is a “media market.”

In terms of a lower-priced tier for Game Pass, it has been reported that Microsoft could offer an ad-based tier for Game Pass in the future. In fact, it was reported that people may be able to watch ads in exchange for playing Game Pass titles for free.

Lots of other entertainment services offer ad-based tiers that are free or discounted compared to the ad-free versions, with one prime example being Netflix. Its plan with ads starts at $9/month, which is a hefty discount compared to the Standard plan ($20/month).

Sharma was the COO of Instacart from 2010-2024, and she helped scale the company’s margin-rich advertising business. Instacart’s ad revenue is growing faster than its business from food deliveries. Today, Instacart is increasingly an “audience platform that also delivers groceries,” van Dreunen said, and Sharma could apply some of these learnings to Xbox.

“Having helped build that model, Sharma will look to translate elements of it to Xbox. The memo signals as much: Direct monetization alone won’t be enough. Lowering the cost of subscription tiers, pricing premium titles at regular market rates, and building an advertising ecosystem could allow Xbox to expand its addressable audience while improving unit economics,” he said.

Under Sharma’s leadership, van Dreunen said he expects Xbox to become a “full-stack model where distribution, monetization, and audience aggregation take precedence over content ownership.”

“Grim”

Former PlayStation executive Shawn Layden responded to van Dreunen’s article, posting on LinkedIn that Microsoft is “trying so hard” to make Xbox Game Pass a healthy subscription service. However, Layden said Microsoft is pushing ahead “despite unfavorable diagnostics and a grim prognosis. A clarifying post mortem would do the entire industry some good,” he said.

A Netflix bundle?

In addition to making Game Pass more affordable, Sharma might look to partner with Netflix on some kind of bundle offering for Game Pass. Netflix co-CEO Greg Peters said he and Sharma have “kicked around ideas” for how Netflix and Xbox could work together on subscription bundles. Nothing has been confirmed, but Peters said he “wouldn’t eliminate any possibilities.”

“You would have to do it in a way that works for the consumer and works for both companies, and frankly, I think Microsoft’s still trying to figure out how to make the Game Pass bundle work for Microsoft,” Peters said. “But what I like about Asha’s thinking is, it’s all about, ‘How do we do more?’ And it’s already been exciting to watch.”

Sharma took on the role of Microsoft Gaming CEO in February, replacing Phil Spencer. In addition to these rumored changes to Game Pass, Sharma has already made a big shift for Xbox, as she killed the “This is an Xbox” campaign because it didn’t “feel like Xbox.”

Source link