Microsoft CEO's compensation no longer tied to Game Pass growth

Xbox Game Pass has missed its projected growth target for the third year in a row, and Satya Nadella's compensation is no longer linked to its performance.

Microsoft CEO Satya Nadella appears to no longer have his performance incentives tied to Xbox Game Pass. In an SEC filing first spotted by Axios, a specific growth milestone was not listed for Nadella's pay targets for the end of the fiscal year on June 30, 2023. 

Revenue growth for Xbox content and services was included as a component of Nadella's pay in 2021 and 2022, and in both instances, failed to meet their intended targets. The same holds true for 2023: Game Pass was projected to grow by 4.4 percent this year, but in reality saw growth of 0.7 percent. 

Nadella's pay targets aren't indicative of how well Game Pass is (or isn't) performing. But it helps paint a picture of how much he and other executives stand to gain when the service does well, similar to how we know Take-Two executives get paid quite handsomely for how much players spend on microtransactions. 

A majority of his pay is based on performance, and this year saw other sections match or exceed their intended projections. Usage of Microsoft Teams (which accounts for 20 percent of his pay targets) grew during the fiscal year, for example, as did the number of LinkedIn sessions (like Xbox, it comprises 10 percent of his targets).

For the 2023 fiscal year, Nadella's performance pay ultimately came to $48.5 million, down 13 percent from the previous year's $54.9 million.

Microsoft's filing doesn't tell Game Pass' full story this year

2020 is the only year in which Game Pass growth has exceeded projections (subscriptions were up by 86 percent out of a targeted 71 percent). In 2021, Microsoft set a goal of 48 percent and reached 37 percent; 2022 saw 28 percent growth out of a desired 73 percent outcome. 

Earlier this year, Nadella boasted that engagement for Game Pass grew significantly by 22 percent compared to 2022. That was months before the release of Bethesda's Starfield, though, which hit 10 million players two weeks after it released on Xbox Series X|S and PC.

Because the cutoff date for the fiscal year was June 30, we'll have to wait until summer 2024 to see how newer variables such as Game Pass going up in price (and changing its standard tier) has affected its subscriber base.

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