Business aspects of Subscription Game Libraries [Xbox GamePass, PSNow]

[mrcorbo]

@mrcorbo Movies and TV shows exist in a different economic model to games both in terms of production and distribution costs and attachment/engagement (sales) costs, not to mention the market for TV and movies being vastly wider than that of video games. I think the Netflix graph demonstrates how different they are so it make be a relatable basis upon which to anticipate GamePass growth.

Don't forget that Netflix have re-invented their service a couple of times, it used to be a DVD rental by post service before streaming kicked in and Netflix's more recent growth came following Netflix Originals - starting with House of Cards. Netflix put out new TV shows constantly and have such a large audience that it's easy for them to entice content into the service.

I'm not sure how Microsoft could entice more non-Microsoft AA/AAA games into GamePass, they'd need to subsidise the outright sales losses.

The graph was simply to illustrate that it took time for Netflix to gain traction. GamePass should be expected to also be a slow build until a tipping point is reached where content/accessibility/market acceptance trigger more explosive growth. They may never get there, but right now it is very early days and judging the service's potential by it's market penetration right now seems premature.

 

[London Geezer]

The evidence is out there for everyone to see: cinemas have been closed for months.

Studios could have sold their newest movies online - and some did - but yet they have chosen to delay and delay until they can open at the box office, not only that but when they know that lots of people will actually go. Until then, they simply will not release the movies as it makes no financial sense for them to do so.

The Netflix model works for their own content, of which there is quite a lot, and by delaying the release of outside content by more than a year, sometimes more.

 

[manux]

Another thing about movies is that at least i go there for the experience I don't have at home. Bigger screen, better audio and sometimes it's just a convenient social event. Games I feel are different and are best enjoyed at home. No double dipping.

But could it be microsoft investment to specific games is limited due to maximum gamepass profits not being that much(buffet for 10$/month). Limited investment would not allow maximizing hardware as most of the magic is in development team quality, size and time they need.

 

[iroboto]

The evidence is out there for everyone to see: cinemas have been closed for months.

Studios could have sold their newest movies online - and some did - but yet they have chosen to delay and delay until they can open at the box office, not only that but when they know that lots of people will actually go. Until then, they simply will not release the movies as it makes no financial sense for them to do so.

The Netflix model works for their own content, of which there is quite a lot, and by delaying the release of outside content by more than a year, sometimes more.

yea, the theatre experience is different from the home viewing experience.
its worth it to go to the movies. The big screen, big sound, the crowds, etc. It's a good event that can't be replicated at home.

 

[London Geezer]

yea, the theatre experience is different from the home viewing experience.
its worth it to go to the movies. The big screen, big sound, the crowds, etc. It's a good event that can't be replicated at home.

Also, a blockbuster movie will make hundreds of millions if not billions (Marvel!) in the first weeks of release, in the cinemas. This will simply not be possible in any other way - unless a revolution happens, but I don't see it. Same for 'blockbuster' games.

 

[Johnny Awesome]

GamePass is awesome. My son has it and I play the games he downloads on my account as well. That's one of the reasons why it's 10m and not 50m. There are probably 20m GamePass users on 10m subscriptions.

Arguing against the GamePass model is like arguing against Netflix IMO. Once MS has twice the content drops (which they will given their studio acquisitions) it will be a no brainer for a ton of Xboxers.

GamePass is a lot like Netflix in that you subscribe for $120/year to get 3 or 4 big games ("series") and about 8 or so decent fillers ("mini-series") if you play 10 hours a week like I do, but then pickup a few things that you can't get on the service along the way like Cyberpunk 2077 ("go to a movie theatre for blockbusters").

If you own an Xbox it's hard to be unhappy with getting Halo, Forza, Psychonauts, Grounded, Everwild etc.... over the course of the next year on GamePass, while picking up Cyberpunk 2077, CoD and maybe Valhalla or whatever big 3rd party title you prefer.

 

[mrcorbo]

Well why would anyone complain if it included all the first party games? I mean, I assume this year in the Cinematic pass I would have had (at least) LoU2 and GoT right? Prior to that we have big hitters like GoW and Spider-Man.

Each depends on the games you like...quality is better than quantity in my book but I can totally get people who think the other way.

So, you'd be a fan of Gamepass, then, if it was a Sony product and had Sony first-party games?

 

[London Geezer]

So, you'd be a fan of Gamepass, then, if it was a Sony product and had Sony first-party games?

100% - it's a great deal. I just do not know who it would ever work financially with Sony's many big first party games.

 

[Xbat]

Given the talent that's in Sony's teams, why not have them deliver something like PT? Short, very different experiences, with high production values. Surely it'd be good for those teams to have a pallet cleanser, try out new ideas, with failure being less of an issue. "Sony Studios Shorts". It'd be great! They just have to work out how to sell them if they don't do their own version of Gamepass.

How would shorter games be better for Gamepass ? In fact it would be worse.
There's a reason Microsoft is making Halo a platform type game and seems like Forza will be going the same way.

Sony make big single player cinematic games because there's a gap there that 3rd parties don't cover and there studios want to and are good at it. The market seems to want those games too with most of them selling over or close to ten million copies.

It's a segment of the market that's not over saturated and what Sony's studios are good at and the better the games do the bigger the budget for the sequels or next projects which makes them even stand out more from the competition.

Just so I'm clear I'm coming from a business position. As a consumer I would love to get Sony first party games in a cheap game pass type subscription I just think it won't be viable for the types of games they make.

 

[iroboto]

How would shorter games be better for Gamepass ? In fact it would be worse.
There's a reason Microsoft is making Halo a platform type game and seems like Forza will be going the same way.

Sony make big single player cinematic games because there's a gap there that 3rd parties don't cover and there studios want to and are good at it. The market seems to want those games too with most of them selling over or close to ten million copies.

It's a segment of the market that's not over saturated and what Sony's studios are good at and the better the games do the bigger the budget for the sequels or next projects which makes them even stand out more from the competition.

Just so I'm clear I'm coming from a business position. As a consumer I would love to get Sony first party games in a cheap game pass type subscription I just think it won't be viable for the types of games they make.

Subscription type systems are very viable.

Ultimately as long as revenue exceeds expenses the service is working as expected.
On the subscriber side of things, the revenue can scale very high, as the number of subscribers can go up as the market increases. If you take a sample market penetration metric, say 1%, as long as the market continually increases, you own a portion of that increase.

the goal is to do this while keeping expenses somewhat fixed as much as possible. if expenses are increasing faster than revenue is increasing you have a business model that won't work. But if your subscriber revenue is increasing fast enough to outpace your expense count over time, then you just need to hold on long enough for that to happen.

So it doens't matter if XGP is $1 or $15 dollars. If it's $1 and there are 100M subscribers. That's 100M per month. Or 1.2B per year.
If it's $15 dollars a month and you have 10M subscribers that 150M a month, or 1.8B a year.
So as long as your subscribers rate is moving fast enough to break through the cost of your expenses, you're in a net positive.

The question that needs to be asked is whether there is another model that would generate the company more profit.
And I think in the short term, that answer is yes, the Sony model.

I think in the long term (very long term) the answer will likely be subscription.

 

[Xbat]

Content is king, if you can release enough big games a year I'm thinking 3 or more where most subscribers keep there subscription going and don't just get a month every time you release your big single player game yes it can work but otherwise it's going to force you into making a certain type of game and that's my problem with it.

 

[iroboto]

Content is king, if you can release enough big games a year I'm thinking 3 or more where most subscribers keep there subscription going and don't just get a month every time you release your big single player game yes it can work but otherwise it's going to force you into making a certain type of game and that's my problem with it.

I think it depends.
The cost of making a game actually just comes down to labour. And the best looking games today do most of the computational processing offline, ie: baking lighting and GI into textures, baking lights etc. That takes a ton of time offline. And every change you do to a scene that recalculation and recompile takes a lot of time.

When you move to dynamic lighting and away from baking, that should reduce the cost of labour (at the expense of pushing the labour onto the hardware to perform). So such games that are traditionally really expensive to make, can be dramatically cheaper to make now. And cheaper means faster iterations, or different types of content etc.

Current generation was about the introduction of PBR pipelines. To support the best of it, we baked it all.

The next generation is about dynamic lights, GI, shadows... (enabled largely by ray tracing) and what comes with that is to support dynamic environment changes and gameplay. If they could replicate the best of current generation baked lights, without baking, that would be a huge burden removed for a great deal of many games, not to mention how quickly AA type titles could quickly ramp up to compete with some of the best looking games today. There is the additional aspect of SSD as well. Moving away from from baked lighting, also alleviates memory pressure heavily.

Something like UE5 makes it really simple for indie and AA sized developers to produce some really beautiful things with very little understanding or effort to build it.

 

[mrcorbo]

100% - it's a great deal. I just do not know who it would ever work financially with Sony's many big first party games.

It has to scale past console numbers. The reason MS are trying to hook in mobile and PC is to create a larger addressable market. Not an easy task, but that's how you make the numbers become a net positive.

 

[Deleted member 11852]

I think it depends. The cost of making a game actually just comes down to labour.

Don't forget some costs will come from licensing an engine, middleware and other tools, sometimes music, sometimes outsourcing CGI creation and using specialist facilities for things like facial and body animation capture.

It has to scale past console numbers. The reason MS are trying to hook in mobile and PC is to create a larger addressable market. Not an easy task, but that's how you make the numbers become a net positive.

I agree, but growing new (or enlarger existing) markets is very difficult and it's not always about monetary investment, will or effort.

Microsoft put a lot of money, time and effort into Plays For Sure and Zune and they didn't succeed. Microsoft put a lot of money, time and effort in Windows 10 ARM/Nokia and it didn't succeed. Microsoft put a lot of money, time and effort into Mixer and it didn't succeed. Microsoft put a lot of money, time and effort into Azure and nobody quite knows how well it's doing other than in terms of market share it's a very distance third place behind Amazon and Google.

Sometimes you can do nothing wrong and still not grow your market.

 

[cheapchips]

Content is king, if you can release enough big games a year I'm thinking 3 or more where most subscribers keep there subscription going and don't just get a month every time you release your big single player game yes it can work but otherwise it's going to force you into making a certain type of game and that's my problem with it.

It doesn't force a certain type of game. Picking examples that are suited to it from MS's first party is, well, selective. Subscription services want big tickets to draw people in, new stuff so they can say "try new thing" and a wide variety of content so they're always feeding their audience and providing perceived value (100+ games!). Gamepass is doing that now with 3rd party content as much as any first part stuff.

It's not like PSNow isn't essentially the same as Gamepass. They rotate first party hits in and out of the service, which is a fair enough play. On top of this, some short experience from their studios would be a great "this month on PSNow" headline. It also lets them do nextgen showcases without having to wait years for titles to land.

 

[MrFox]

How would shorter games be better for Gamepass ? In fact it would be worse.
There's a reason Microsoft is making Halo a platform type game and seems like Forza will be going the same way.

Sony make big single player cinematic games because there's a gap there that 3rd parties don't cover and there studios want to and are good at it. The market seems to want those games too with most of them selling over or close to ten million copies.

It's a segment of the market that's not over saturated and what Sony's studios are good at and the better the games do the bigger the budget for the sequels or next projects which makes them even stand out more from the competition.

There's certainly an argument to be made about games having to succeed based on their merit. I want them to continue to make the games that 10 million people want to pay $70 for it even if it's a 12h single player experience, no filler, not millions of side quest, no grinding, no uTX. Those games don't make financial sense on a sub service unless it's a delayed release. Putting everything on a service day one is risking becoming quantity over quality, or worse, they would make games in a different way, designed to keep you on the sub service because it would become the main revenue.

PSNow or gamepass, or EA-what's-the-name, if it ever becomes the norm, we'll end up like the streaming services where everything is spread across 4 or 5 subscriptions at $10 or $12 per month, and we'd still need to buy the biggest third parties full price.

We still need tiers and we lost one in the last decade. Rental. There has to be gamers with a lot of money paying $70 per game at launch, and lower income gamers having access to the games with something like rental or these nice sub services. That's a basic market requirement to reach the largest audience without shooting yourself in the foot by giving everything for free to the high income gamers because you want money from the lower income bracket.

uTX have already altered game design decisions of some studios, I don't want sub services do the same in bulk. These sub services must remain an additional way to play games. So the financial success of the game relies on it's own merit and the gamers vote with their wallet. They need to bring back rental, and ubiquitous trials on PSNow.

I would definitely pay for PSNow just for trials of any launch games. Third party studios were against it and Sony had to kill it after they announced it. I'm pretty sure which studio killed it. It needs to be mandated platform-wide to be useful.

 

[Xbat]

It doesn't force a certain type of game.

Of course it does. If you releasing one or maybe two single player games a year that will probably sell closer to five million copies in a month and there's an option to play those games for one sixth of the price that will have a massive impact on the revenue those games bring in which will effect those games future viability.

 

[mrcorbo]

Don't forget some costs will come from licensing an engine, middleware and other tools, sometimes music, sometimes outsourcing CGI creation and using specialist facilities for things like facial and body animation capture.


I agree, but growing new (or enlarger existing) markets is very difficult and it's not always about monetary investment, will or effort.

Microsoft put a lot of money, time and effort into Plays For Sure and Zune and they didn't succeed. Microsoft put a lot of money, time and effort in Windows 10 ARM/Nokia and it didn't succeed. Microsoft put a lot of money, time and effort into Mixer and it didn't succeed. Microsoft put a lot of money, time and effort into Azure and nobody quite knows how well it's doing other than in terms of market share it's a very distance third place behind Amazon and Google.

Sometimes you can do nothing wrong and still not grow your market.

I don't see why tallying up a list of failed efforts is relevant. Shall we come up with a list of Sony's failures over the years? And Google are notorious for taking shots at things and dumping them shortly after. None of them have any bearing on whether the next, "next thing" for any of these companies will be successful or not.

Edit: WRT Azure's position in the market, where are you sourcing your numbers?

I found this estimate from Canalys.

AWS - 33.4%
Azure - 14.9%
Google Cloud - 4.9%

 

[Xbat]

or worse, they would make games in a different way, designed to keep you on the sub service because it would become the main revenue.

This is my biggest concern. Large single player games is what I have always enjoyed, I really like that they getting longer but that's just me.

 

[BRiT]

We still need tiers and we lost one in the last decade. Rental.

I dont know about that. I still see commercials for GameFly.