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

[Deleted member 11852]

Yes selling on sony would bring them short term gain but long term it doesn't net them any benefit.

Why would selling games on Sony and Nintendo platforms be a short term gain? The gain will be revenue for as long as any game sells and games like Elder Scrolls are IPs with long legs. If 25 million Sony and Nintendo console owners buy Elder Scrolls IV that's north of a billion dollars, and closer to two billion the more buy it at full price. The goal is bottom line profits and the value of Microsoft stock.

The risk in deciding not to release a particular IP on Nintendo and Sony platforms, or significantly delay it, is you end up with the situation like Rise of the Tomb Raider which sold poorly on PlayStation after a year delay despite solid PS4 Pro and PSVR support. Square Enix vowed never to do it again. If folks who only have non-Microsoft platforms can't access certain IPs then Microsoft change their mind about platform exclusivity, the impact may take a long time to reverse - if it can be fully reversed at all.

 

[Silent_Buddha]

It would be kind of stupid if they didn't. What makes the whole thing extra complicated is the economics of AAA game development and GamePass - which itself is finding its feet.

Take for example Elder Scrolls VI. If this is exclusive to Xbox and Windows and included day one for GamePass subscribers, this will obviously not be the revenue storm that a traditional multi-platform release would be. All the existing GamePass subscribers, with the vast majority being Xbox users, will not be contributing any more to Microsoft's revenues. Any revenue bump will come from non-GamePass subscribers who just buy the game outright on Windows or Xbox, or any increase in GamePass subs. But whether they last is, I guess, the gamble. Lure people in, get to the sub long-term is the foal.

Elder Scrolls (and Fallout) games typically have insanely good replay value I started a new Skyrim play through just last month! The economics of ephemeral GamePass subscriptions vs. outright purchases vs. long-term new GamePass subscriptions balances with loss of PlayStation/Nintendo revenue is going to be an absolute f***er to predict/calculate.

It'll be fascinating to watch unfold over the coming years.

While I find it doubtful that MS keeps most of what the Zenimax acquired studios produces as multiplatform titles, I could see one avenue of reasoning where it might make sense.

Consider a scenario where all the titles are multiplatform across consoles (Xbox, PS4, and maybe Switch or whatever Nintendo's next console is). Now consider someone that's never owned anything other than a Playstation or Nintendo console in their lives.

If they really like the games those studios make, they "could" pay for and play it on their Playstation or Nintendo console, or there's this Game Pass thingy that people keep going on about. Perhaps they just try it on their phone through X-cloud. Then they discover these other games they like playing, but they want to play them on something better than a phone through the cloud. Perhaps they decide to get a Xbox or a PC, doesn't matter which. What matters is if MS can lure them into becoming a Game Pass subscriber.

So far it's working like a charm in South Korea which is typically PC centric. Game Pass has taken off there where console's haven't. And it's not even in the PC space as one might expect considering how popular PC is in S. Korea, it's on mobile devices. It's also finding success in Japan, but to a lesser extent than S. Korea.

Now I totally don't think something like this would happen, unless their data scientists and accountants determine that the potential revenue and operating profits are greater than the cost of porting the titles to a competing hardware platform. But, it's certainly something within the realm of possibility.

Regards,
SB

 

[PSman1700]

Why would selling games on Sony and Nintendo platforms be a short term gain?

So why does/did sony have some exclusives to ps/psnow?

 

[Nesh]

Why would selling games on Sony and Nintendo platforms be a short term gain? The gain will be revenue for as long as any game sells and games like Elder Scrolls are IPs with long legs. If 25 million Sony and Nintendo console owners buy Elder Scrolls IV that's north of a billion dollars, and closer to two billion the more buy it at full price. The goal is bottom line profits and the value of Microsoft stock.

The risk in deciding not to release a particular IP on Nintendo and Sony platforms, or significantly delay it, is you end up with the situation like Rise of the Tomb Raider which sold poorly on PlayStation after a year delay despite solid PS4 Pro and PSVR support. Square Enix vowed never to do it again. If folks who only have non-Microsoft platforms can't access certain IPs then Microsoft change their mind about platform exclusivity, the impact may take a long time to reverse - if it can be fully reversed at all.

I wouldnt call it short term gain, but making people migrate to their ecosystem is going to create larger longer term gains.
MS isnt interested in just getting some extra revenue. They want to own the gaming scene. They have the budget and financial security to think much further into the future. The acquisition of Zenimax reflects what they wanted to do when they entererd the market with the XBOX. It is no myth they tried to purchase many big companies back then.
Making people choose XBOX instead of Playstation suits them much more than selling games on Playstation. Each customer that "jumps in" the XBOX gives them money for any game they buy for the platform, whereas a Playstation customer gives them revenue for only the MS owned games that may be released through Zenimax. Square Enix isn't a platform holder. They are just software developers and their financial security depends on their own games alone.
It may not be very clear now but Sony's position is getting very tight and pressured as we move further into the future.

 

[PSman1700]

It may not be very clear now but Sony's position is getting very tight and pressured as we move further into the future.

As evident they are slowly releasing on pc/psnow aside from playstation. The old model of having everything/exclusives on a single fixed platform with a new sku every seven years is on its way out.

 

[dobwal]

While I find it doubtful that MS keeps most of what the Zenimax acquired studios produces as multiplatform titles, I could see one avenue of reasoning where it might make sense.

Consider a scenario where all the titles are multiplatform across consoles (Xbox, PS4, and maybe Switch or whatever Nintendo's next console is). Now consider someone that's never owned anything other than a Playstation or Nintendo console in their lives.

If they really like the games those studios make, they "could" pay for and play it on their Playstation or Nintendo console, or there's this Game Pass thingy that people keep going on about. Perhaps they just try it on their phone through X-cloud. Then they discover these other games they like playing, but they want to play them on something better than a phone through the cloud. Perhaps they decide to get a Xbox or a PC, doesn't matter which. What matters is if MS can lure them into becoming a Game Pass subscriber.

So far it's working like a charm in South Korea which is typically PC centric. Game Pass has taken off there where console's haven't. And it's not even in the PC space as one might expect considering how popular PC is in S. Korea, it's on mobile devices. It's also finding success in Japan, but to a lesser extent than S. Korea.

Now I totally don't think something like this would happen, unless their data scientists and accountants determine that the potential revenue and operating profits are greater than the cost of porting the titles to a competing hardware platform. But, it's certainly something within the realm of possibility.

Regards,
SB

Technically, MS can treat its whole library similarly to how some films are treated today. It can sell its titles in a piecemeal fashion across all platforms while tying its content to a subscription on the xbox and PC. If MS is pumping out titles at quality and rate that make Game Pass compelling to xbox and PC users then it can readily sell $70 titles to users who want the games but don't want or don't have access to the service.

 

[BoardBonobo]

As evident they are slowly releasing on pc/psnow aside from playstation. The old model of having everything/exclusives on a single fixed platform with a new sku every seven years is on its way out.

Releasing old catalogue into different eco systems creates more revenue from old assets and creates interest in newer properties which will be Playstation exclusive. Sells more playstations and creates money from old rope. Just good business logic, don't think anything that has happened so far indicates that the current business model hasn't still got lots of legs. It's whether stack 'em high sell 'em cheap models like Gamespass can support the creation of Triple A's without bleeding Microsoft dry or forcing the quality of the product down, that's yet to be proven.

 

[cheapchips]

It's whether stack 'em high sell 'em cheap models like Gamespass can support the creation of Triple A's without bleeding Microsoft dry or forcing the quality of the product down, that's yet to be proven.

That's a rubbish description Gamepass's business model.

And it's worth point out that the AAA market barely supports AAA development. Fallout 76 was a direct result of Bethesda looking for new business models.

 

[PSman1700]

Doom series are fully AAA to me in all ways.

 

[Deleted member 11852]

I wouldnt call it short term gain, but making people migrate to their ecosystem is going to create larger longer term gains.

Microsoft cannot make people migrate. They can hope they the allure of certain games being Microsoft-platform exclusives results in that, but for some people the investment will be too great to migrate. xCloud muddies the waters somewhat. For people with decent enough internet connections, an xCloud/GamePass sub for a month may let people play and complete a AAA game for far less than paying full price for the game were its released on PlayStation of Nintendo. Is that a win?

The hook of subscription systems, hence why free trials are commonplace, is to get people in and hook them well enough that they stay, which is where long-term profits comes in.

 

[BRiT]

Microsoft cannot make people migrate.

Sure they can, once people get any Covid19 vaccine, then Bill Gates activates the nanobots...

 

[eastmen]

Sure they can, once people get any Covid19 vaccine, then Bill Gates activates the nanobots...

Don't see what the big deal is. I just found someone with covid , extracted their blood put it into a cow with cow pox and then take the puss and inject it into me. I am now Immortal and have no nanobots tracking me

 

[Deleted member 86764]

The current size of Bethesda must be predicated on the number of sales they're making across all platforms they make games for. If their sales drop by a particular percentage, then the team and project sizes would have to drop proportionally.

It makes me wonder how Microsoft are planning on financing something that had grown due to their game sales and attempt to make a similar profit by reducing the platforms the games are available on.

I can't make the economics of it fit. Does GamePass give them a higher profit when compared to disc/digital sales?

 

[Johnny Awesome]

MS has so much cash, they can get creative.

 

[BRiT]

Does GamePass give them a higher profit when compared to disc/digital sales?

That is their play. Where monthly subscriptions outnumber individual game sales.

 

[iroboto]

The current size of Bethesda must be predicated on the never of sales they're making across all platforms they make games for. If their sales drop by a particular percentage, then the team and project sizes would have to drop proportionally.

It makes me wonder how Microsoft are planning on financing something that had grown due to their game sales and attempt to make a similar profit by reducing the platforms the games are available on.

I can't make the economics of it fit. Does GamePass give them a higher profit when compared to disc/digital sales?

subscription revenue is highly predictable removing a majority of the boom/bust issues with the games business. Their titles are still sold on PC and Xbox. And as long as the number of subscribers increase, it is likely over time to surpass the revenue gained by releasing their products here and there.

Games are expensive but they are funded over time, so the budget to make a game is released annually and not all at once. The revenues for game pass are also retrieved annually, in which provided your subscription fees already surpass your expenses for each year, it's a relative non issue. That's the catch with understanding the economics of it all. Budgets might be in the 500M for say Destiny, but so much of that is marketing. Game Pass doesn't need marketing, so those fees drop off dramatically. You only need to market 1 Game Pass, and showcase what games are coming to it, reducing the budgets dramatically away from advertising and pushing it towards supporting a larger cast of developers/games.

And of course the games sales/dlc/MT themselves are still profitable ontop of all of this. The tail for games is much longer on a subscription service because MS is looking to have a huge number of games that people want to play. So if you release a dud, it's still within MS interests for you to improve it to the point that it's now very playable. This is what keeps subscribers to keep coming back.

it's within MS interests to invest in heavy backwards compatibility support because by upgrading these older 'high demand titles', people will keep sticking around. There are a lot of titles out there I haven't touched. Peoples interests are always changing, having good games of high quality updated for new niche groups is how MS keeps people subscribed.

 

[Johnny Awesome]

Not to mention that this gets around Sony's hardware dominance over time, especially when Xcloud matures.

20 years from now when tons of people have super fast Internet, they won't even have to make new hardware anymore. Just upgrade the blades.

People laugh at this, but even just from a gaming division standpoint right now, I'd rather be MS than Sony or Nintendo. GP is the future IMO. I'm not even sure Sony and Nintendo are going to be able to stop it from being on their hardware even.

 

[iroboto]

Not to mention that this gets around Sony's hardware dominance over time, especially when Xcloud matures.

20 years from now when tons of people have super fast Internet, they won't even have to make new hardware anymore. Just upgrade the blades.

there are a lot of xbox owners out there that did not upgrade to 1X. So to upgrade to series X|S and get to go back to play games they missed now in 4K or 60fps is ideal.

 

[Deleted member 86764]

Hopefully they're still able to knock out blockbuster sized games. Looks like they are in the short term with Halo Infinite.

Future blockbusters would presumably rely on increased GamePass membership. Looks like it's increasing nicely at the moment and I can only see Microsoft being able to take these types of risks and be able to finance slow or lower than expected GamePass subsciptions.

It's an amazingly bold proposition. I hope it works out, even if gaming subscriptions don't work for me personally, they probably would my children.

 

[Deleted member 86764]

there are a lot of xbox owners out there that did not upgrade to 1X. So to upgrade to series X|S and get to go back to play games they missed now in 4K or 60fps is ideal.

I kinda think they need to sell significant amounts to non-Xbox One players. They need to appeal to a wider audience than their usual buyers/players.

I'm a prospective owner that would like to see games that are more internationally themed. From my perspective the games are targeted to a more North American audience.