TL;DR
Xbox raised Game Pass Ultimate by 50% in late 2025, signaling the service is shifting from a growth engine to a profit engine. The hike arrives as Game Pass sign-ups appear to be leveling off, hardware sales continue to decline, and Microsoft works to justify the $69 billion Activision Blizzard acquisition. For fans, it lands as the latest moment in a pattern of higher costs and weaker brand certainty — a loyalty tax paid to support a strategy under pressure.
Key Takeaways
- Microsoft raised Xbox Game Pass Ultimate by 50% in late 2025, a move that signals Game Pass is shifting from growth engine to profit engine.
- The timing matters: Xbox is leaning on pricing power just as Game Pass momentum appears to be slowing and hardware sales continue to decline.
- Call of Duty going “day-one” on Game Pass creates a tradeoff: more subscription retention, but potentially fewer full-price sales.
- Reporting suggests Microsoft may have sacrificed hundreds of millions in Call of Duty sales by placing the franchise into Game Pass, pressure that makes a steep price hike easier to understand.
- For longtime fans, the increase lands on top of years of uncertainty around exclusives, mixed launches, and a weakening console narrative, turning Game Pass into what many see as a loyalty tax.
- As Xbox enters 2026, the strategy looks less like confidence and more like constraint. More restructures and even job cuts wouldn’t be surprising if growth continues to slow.
2025 was a tough year for Microsoft, and Xbox was no exception. Hardware sales kept sliding, growth in gaming services cooled, and the company’s gaming strategy began to look less like a content-led push and more like a subscription-led business model. Heading into 2026, one decision made in the final quarter of last year stands out as the clearest signal of that pressure, and one of the riskiest calls Xbox has made in years.
The Game Pass price hike reframes what used to feel like a gamer perk into something closer to a monthly bill.⚭ Images generated with AI.
Microsoft’s “Loyalty Tax”: The Game Pass Hike and the Activision Bill
On October 1, 2025, Microsoft rewrote the economics of its flagship gaming subscription. Xbox Game Pass Ultimate, long marketed as “the best deal in gaming,” jumped 50% overnight, rising from $19.99 to $29.99 per month alongside a wider tier restructuring across console and PC plans. The company framed the change as an upgrade, pointing to more games, expanded partnerships, and a broader bundle of perks designed to justify the higher price.
Subscribers didn’t read it that way. The backlash was immediate and unusually personal, especially among longtime users who felt they were being asked to subsidize a strategy shift they never voted for. In forums and across social media, cancellations weren’t framed as routine inflation fatigue. They were framed as a breaking point. When a subscription crosses a psychological threshold, customers stop behaving like fans and start behaving like consumers, and that relationship becomes much more fragile.
That fragility is what makes the timing so consequential. Microsoft isn’t raising prices from a position of momentum. It’s doing it while trying to extract more value from a business that now has to carry a $69 billion acquisition and defend earnings in a cooling market.
To understand why Microsoft was willing to take the reputational hit of a 50% increase, you have to look past the marketing language and toward the balance sheet. The price hike lands in the long shadow of Microsoft’s biggest gaming decision: its roughly $69 billion purchase of Activision Blizzard, a deal announced in early 2022 and closed in October 2023 after a bruising regulatory fight.
Game Pass is being used as the financial absorber for Activision’s acquisition costs.⚭ Images generated with AI.
Microsoft’s pitch for Activision leaned heavily on subscription logic. Call of Duty would become an anchor franchise for Game Pass, turning a hit-driven games business into something closer to predictable recurring revenue. It was a clean story, and in 2022 it sounded like a strategic inevitability.
But the economics became more complicated once Call of Duty began appearing in Game Pass day-one. Bloomberg reported that the move carried real opportunity cost. According to a former Microsoft employee, the company may have given up more than $300 million in Call of Duty sales as a direct result of the subscription strategy, forcing Xbox to find revenue elsewhere.
A Pattern Fans Have Had to Weather
For longtime Xbox fans, that negotiation has been shaped by more than Game Pass pricing alone. It has been shaped by years of strategic drift and a steady erosion of the emotional reason to stay loyal.
- Shifting exclusivity: Reports and rumors that key franchises like Halo may not remain truly exclusive.
- Mixed flagship launches: Several first-party releases failed to create momentum or system-selling demand.
- Sales gap reality: Xbox has spent much of the generation being outperformed by PlayStation, turning the brand into an easy target.
- Timed exclusives: Even high-profile Xbox releases are increasingly expected to reach PlayStation shortly after debut.
- Subscription fatigue: As prices rise, the “best deal” story starts to feel like a bill.
The Day-One Call of Duty Tradeoff
The first real stress test of Microsoft’s post-acquisition strategy arrived when Call of Duty began landing in Game Pass day-one. On paper, it’s a subscription dream: the biggest annual release in gaming becomes a retention engine, and Game Pass finally has the kind of cultural gravity that can keep people paying month after month.
In practice, it’s also a trade. A subscription doesn’t create new demand; it redirects it. Every player who downloads Call of Duty through Game Pass is potentially a player who would have paid full price for it, especially on Xbox and PC where Microsoft has the most control. That’s the cannibalization risk critics flagged from the start. The more Game Pass becomes the default path to Call of Duty, the more Microsoft is choosing to replace high-margin unit sales with a lower, smoothed monthly fee.
Day-one access pulls demand away from full-price purchases and into a smoothed subscription fee.⚭ Images generated with AI.
That tradeoff is manageable if subscriber growth is accelerating. It becomes far harder to justify when growth stalls, because the subscription has to make up for lost unit sales through higher revenue per user. In that environment, the price hike begins to look less like a product decision and more like a financial one.
- Cannibalized unit sales: a portion of $70 purchases shift into subscription access.
- Higher content costs: premium franchises become recurring subscription liabilities.
- Pressure to raise ARPU: when growth slows, pricing becomes the lever.
Subscriber Growth Is Maturing
If Game Pass were still expanding at anything like its pandemic-era pace, Microsoft could absorb lost unit sales from Call of Duty and frame the subscription model as a long-term investment. But the available signals suggest the service is no longer in that phase. Antenna data cited in reporting indicates that new Game Pass subscriptions have been declining since mid-2024, with spikes driven by specific releases rather than a steady upward trend.
Mature subscriptions behave differently from fast-growing ones, and the math is less forgiving. When growth is compounding, companies can afford to keep prices stable because volume does the work. When growth flattens, the playbook shifts: the business starts chasing higher revenue per user. The optics are always softened with new tiers and “better value,” but the underlying goal is the same. Defend earnings.
Microsoft’s earnings filings help explain why this matters. In FY25 Q4, the company said gaming revenue growth was driven by Xbox content and services, which rose 16%, while Xbox hardware revenue fell 25%. In FY26 Q1, hardware revenue fell again, down 29%, while content and services grew just 1%. With hardware declining and subscription growth maturing, pricing becomes one of the few levers left.
- Price hikes and tiering to increase revenue per subscriber.
- Bundling strategies to reduce cancellations and boost perceived value.
- Greater reliance on content and services as hardware declines.
Xbox Is Acting From Constraint, Not Confidence
Taken together, the price hike, the tier restructuring, and the decision to use Call of Duty as subscription fuel all point in the same direction. Xbox is making decisions from a position of constraint rather than confidence. Hardware is declining, the growth story behind Game Pass appears to be maturing, and the acquisition Microsoft framed as a long-term advantage now has to be defended quarter after quarter in real dollars.
This is what happens when a business moves from expansion to defense. The easiest way to defend earnings is to squeeze more revenue out of the customers who are already there, especially the ones most invested in the ecosystem and least likely to churn. The risk is that once pricing becomes the primary lever, the relationship changes. Xbox used to win on goodwill and identity. Now it is asking customers to accept higher costs while the brand’s exclusivity and strategy feel less defined.
Xbox also isn’t the only part of Microsoft’s business leaning harder on pricing power as growth slows. The company’s broader posture, seen in everything from aggressive investment cycles to tighter margin discipline, suggests it’s increasingly willing to shift more of the cost burden to users when demand softens, a theme we explored in our analysis of Microsoft’s 2026 CapEx posture and the AI-era economics reshaping consumer products.
The broader industry backdrop only adds to the pressure. AAA budgets are rising, growth has cooled from its pandemic highs, and publishers are increasingly leaning on subscriptions, bundles, and price increases to defend margins. In that climate, Xbox is trying to turn loyalty into a financial buffer.
- A 50% hike that tests subscriber price tolerance.
- A maturing service that must carry higher content costs.
- A fan base that increasingly views the shift as a loyalty tax.
“There is an old rule in business: the customer is always right,” said Ben Rogers, CEO of VaaSBlock. “When you raise prices 50% and tell loyal customers it’s because you’re adding value, they’ll decide whether they agree. If they don’t, they won’t argue, they’ll leave.”
When the price crosses a psychological threshold, even loyal subscribers consider leaving.⚭ Images generated with AI.
Conclusion: Trouble Ahead for a Once-Promising Brand
Microsoft can call the Game Pass increase a value upgrade, but the size of the jump makes it hard to ignore what it really signals. Xbox is trying to do more with less: carry a massive acquisition, offset declining hardware, and keep subscription revenue growing in a market that is no longer expanding the way it did a few years ago.
The next year will test whether Xbox can survive this transition without losing the fanbase that made the ecosystem valuable in the first place. Expect more restructures and harder calls. And given how this industry behaves when growth slows, it would not be surprising to see job cuts follow, especially if subscription growth fails to offset the revenue the company has sacrificed elsewhere.
For fans, that likely means one thing: more bad news, and fewer reasons to keep paying.
In 2026, the question isn’t whether Xbox can raise prices. It’s how many loyal customers it can afford to lose after doing it.
About VaaSBlock
VaaSBlock is a global leader in blockchain credibility, setting the standard for trust and accountability. Through the RMA™ certification, VaaSBlock offers businesses a robust framework for proving their integrity and reliability to investors, regulators, and users worldwide.
⚭ This article has been co-created by VaaSBlock Consulting Team and our LLMs.
ℹ Sources: Microsoft Investor Relations | Bloomberg | Antenna | GamesIndustry.biz | Circana | Windows Central | Polygon
