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

[iroboto]

But we don't have the important numbers, hence the speculation and debate.

forecasting and making reasonable guesses on spend are required for any proposal stage of any project. Someone didn't just think we should do subscription and hope the numbers worked out. The projection was sold before the project was green-lighted.

Having any form of meaningful discussion on the topic should involve us going through a similar process, or you may as well end any discussion about its validity if no one is willing to even try to see how it's valid.

Math formulas are other proven by testing edge cases to see where things fail and more importantly where they would succeed. We could easily determine at what ranges would be required for this service to succeed, and outside of those ranges the service would fail.

But people do seem interested in doing that; they just seem more interested in positioning if whether or not the service should exist with respect to their own needs.

 

[AzBat]

Also you (like me ) are not paying full price - how many are? Would you if push came to shove? How long can this go on?

Most definitely I would. I found value in it. I will just let go one of my movie/TV subscriptions. Why does it matter how long? If you're purchasing the titles that you love & want to play forever, then it doesn't matter if they drop the service. You already bought the games.

Tommy McClain

 

[Deleted member 11852]

So PSNow is more niche? Game Pass is more casual?

No, I assert based on the game industry.biz story which states that GamePass subscribers are buying a lot more games than is in GamePass, including buying games on disc (i.e not digitally) this fits the description of a more active gamer - somebody for whom choses to spend a lot of time playing games as opposed that much greater segment of the market who do not game every day, every week or every every month. I don't, I just don't have the time.

 

[Deleted member 11852]

But people do seem interested in doing that; they just seem more interested in positioning if whether or not the service should exist with respect to their own needs.

Sure, just don't expect this to be accurate on any level because there is no standard industry template for this type of business from which to draw costs.

 

[iroboto]

Sure, just don't expect this to be accurate on any level because there is no standard industry template for this type of business from which to draw costs.

sure, I just want the end the countless circling of -- but what about everyone who is paying $1, look at how much profit is loss, look at the sales etc etc. Or what about the cost of the new game etc.

We're just looking at sustainability and profits. We should be able to get a general idea.

Like I get how some people might be confused that
f(x) = x^3 + x^2 + x + c will still ultimately look like a cubic graph despite there being a square and linear term added, but the polynomial with the highest power will control the majority of the direction of the graph. That's what we should be doing here, instead of everyone knick knacking every little thing possible to make this as convoluted as possible. The biggest terms are going to be the most important, and bucketing smaller items into bigger ones makes the model simplistic.

 

[goonergaz]

Most definitely I would. I found value in it. I will just let go one of my movie/TV subscriptions. Why does it matter how long? If you're purchasing the titles that you love & want to play forever, then it doesn't matter if they drop the service. You already bought the games.

Tommy McClain

If I was a subscriber and paid full price for 5 years and they pulled the plug I’d have nothing to show for it. Those games are gone and you have to start again.

 

[iroboto]

If I was a subscriber and paid full price for 5 years and they pulled the plug I’d have nothing to show for it. Those games are gone and you have to start again.

and for most people, that's a non issue. If buying more games would cost more than the subscription than for 5 years you are saving money, a lot of money.

Console generations later, not 5 years, you can still purchase said games at a much cheaper price than when you would have had to pay for them new.

 

[Deleted member 11852]

sure, I just want the end the countless circling of -- but what about everyone who is paying $1, look at how much profit is loss, look at the sales etc etc. Or what about the cost of the new game etc.

You won't end the circle of discussion - you need facts for that and we have none. As somebody with a background in server services, spreadsheet needs a lot of additional data points, literally dozens of them. Fundamentally the biggest problem is that the costs are flat, which they won't be geographically nor geographically by locality of user base and that's ignoring the non-linear monetisation of developers by title popularity.

I'm all for trying to fill in the odd blanks, but realistically it's all blanks Unfortunately you can't just reverse engineer, or even remotely approximate, Microsoft business accountancy for GamePass.

 

[iroboto]

As somebody with a background in server services, spreadsheet needs a lot of additional data points, literally dozens of them. Fundamentally the biggest problem is that the costs are flat, which they won't be geographically nor geographically by locality of user base and that's ignoring the non-linear monetisation of developers by title popularity.

yea for this one, I feel may apply more to xcloud than it does to gamepass.

As for non-linear monetization, I agree, cars race around a track completely in non linear velocity, but the lap time is still indicative of the end result. I'm just trying to get us to thinking what the major factors are. I'm sure there are operational costs that do matter, right down to the reporting level of things. But do we really need to go that far? Having a couple million lost here and there won't equate to the billions of revenue.

 

[AzBat]

If I was a subscriber and paid full price for 5 years and they pulled the plug I’d have nothing to show for it. Those games are gone and you have to start again.

If you are a subscriber & love your games so much, then why aren't you buying them(at a discount no less) to keep forever? If people have played them & are done, then like @iroboto says most people won't care if they lose them as they already got their dollars worth after playing them. Those that do care will have bought them to keep. The service does not exclude you from purchasing them. It's not an either/or proposition.

Tommy McClain

 

[London Geezer]

and for most people, that's a non issue. If buying more games would cost more than the subscription than for 5 years you are saving money, a lot of money.

Console generations later, not 5 years, you can still purchase said games at a much cheaper price than when you would have had to pay for them new.

How is it a "non issue" on the one platform that has made the biggest effort into having backward compatibility all the way back to 1957?

 

[London Geezer]

If you are a subscriber & love your games so much, then why aren't you buying them(at a discount no less) to keep forever? If people have played them & are done, then like @iroboto says most people won't care if they lose them as they already got their dollars worth after playing them. Those that do care will have bought them to keep. The service does not exclude you from purchasing them. It's not an either/or proposition.

Tommy McClain

Because then you're duplicating the cost of the game+subscription, which is what I'd like to avoid.

 

[London Geezer]

Obviously MS wouldn't create a project that is negative in perpetuity. So there has to be some logic behind these numbers

With all due respect, I think that this assumption may be flawed.

 

[iroboto]

With all due respect, I think that this assumption may be flawed.

No company can sustain losses in perpetuity.

 

[iroboto]

How is it a "non issue" on the one platform that has made the biggest effort into having backward compatibility all the way back to 1957?

There's been no effort on PC to make things backwards compatible in perpetuity. you have to be reasonable about the age of computing we are in.
Games are designed with abstracted APIs that can run on a variety of hardware. That's as far back as you can go with backwards compatibility.

 

[London Geezer]

No company can sustain losses in perpetuity.

MS is extremely profitable. And they’ve shown over and over again that they are more than happy to subsidise some very expensive projects, given their financial strength.

 

[iroboto]

MS is extremely profitable. And they’ve shown over and over again that they are more than happy to subsidise some very expensive projects, given their financial strength.

That doesn't mean they aren't extremely frugal with their money. They have the money to chase opportunities and to try and fail. There is a failure point with gamepass in which the service will be stopped. All projects will have this.

They don't have the money to lose in perpetuity otherwise Mixer wouldn't be gone.

 

[Deleted member 11852]

yea for this one, I feel may apply more to xcloud than it does to gamepass.

Your mind would be blown if you knew how costly it is serving sufficient bandwidth for millions of people downloading tens/hundreds of gigabytes of data. Depending on how people are consuming/trying games, xCloud may be the cheaper solution because for shorter games or where people are trying games for an hour and deciding they don't like them, it could well be less overall bandwidth to stream the content than download the whole game.

With all due respect, I think that this assumption may be flawed.

Indeed. Few companies intend to lose money, even in a business which is predicated on loss-leading economics, but the game subscription business isn't really an established or proven business, Microsoft are trying to forge a business model out of it - and I admire that. That's ballsy as anything and it is great to see Microsoft try to build a new business rather than enter/re-enter an established one and not succeed commercially. (e.g. Zune/Plays4Sure, Mixer, WindowsMobile etc).

As I've said above, this is not will, desire, intent, effort or investment, sometimes the economics just aren't sustainable - or they are but the economics of the parties you rely on to fill you service change and your business is no longer viable.

That doesn't mean they aren't extremely frugal with their money. They have the money to chase opportunities and to try and fail. There is a failure point with gamepass in which the service will be stopped. All projects will have this.

What Microsoft paid for Minecraft and Nokia is far from frugal! They are not afraid to invest big on acquisitions and are pretty good at giving projects a fair shake at the stick before canning them. Some of their pet R&D projects are kind of nuts but you never know what technological dividends experiments like Surface (the tablet computer), Kinect and HoloLens will pan out down the line.

 

[iroboto]

What Microsoft paid for Minecraft and Nokia is far from frugal! They are not afraid to invest big on acquisitions and are pretty good at giving projects a fair shake at the stick before canning them. Some of their pet R&D projects are kind of nuts but you never know what technological dividends experiments like Surface (the tablet computer), Kinect and HoloLens will pan out down the line.

You cited Apple in another thread. There are more iphones out there than _any_ number of consoles. And you discuss network costs. But serving Apple Music, Apple TV, TV+, and Arcade will have way more financial impact from an operations POV than the game pass service does. But I don't see a single person pointing out how Apple, a non Cloud provider, is servicing the whole world at once with significantly less money than MS, but suddenly gamepass is unsustainable, but everyone else's subscription services totally are.

There is a heavy undertone of overestimating the costs here to make gamepass appear completely and financially unfeasible. Games on average cost 200M to make. That's over the course of 3-4 years. That's 3 Billion dollars, over 4 years. It's not 3 Billion per year for their 15 studios, it's less than 1B per year. Somehow the model doesn't work, but it works for everyone else. For some reason just because a subscription service exists it will make purchases approach 0. We just don't see that. There are artists that need subscription services to even float. And there are those like Taylor Swift who profit more without them. That's for each game and company to decide. Those are the economics that matter.

But everyone seems to be applying the thinking that somehow there's no way that this service could possibly be sustainable or that games need to somehow be complete shit for it to be a feasible model.

If you want to discuss gamepass, put down some understandable stakes on the floor and go from there. If you don't understand how the subscription model works, and I don' think most of us do, then it's okay to admit: hey I don't understand it. But just because we don't understand it, doesn't mean it can't work. There are whole fields of study on things we don't understand, but we take them to be true. Most people don't understand how gravity works, but everyone understands it does work. The tone of this thread has largely been: I don't understand how gamepass works, therefore it must not work.

I'm sorry, I'm not calling anyone in particularly out on it, but that's why this conversation can't seem to proceed in any direction.

 

[Deleted member 11852]

You cited Apple in another thread. There are more iphones out there than _any_ number of consoles. And you discuss network costs. But serving Apple Music, Apple TV, TV+, and Arcade will have way more financial impact from an operations POV than the game pass service does. But I don't see a single person pointing out how Apple, a non Cloud provider, is servicing the whole world at once with significantly less money than MS, but suddenly gamepass is unsustainable, but everyone else's subscription services totally are.

Videogames run from single-digit (very few) to double-digital (most) to triple-digit (a few) gigabytes. Music, News and iOS games do not. In terms of hosting and bandwidth if you look into the industry (which includes how Microsoft charge) there are two metrics that dictate price, the first is size and the second is connection time - that is the time it takes a customer client to fully download the data and they aren't equitable in terms of hosting cost. I.e. it's cheaper to download 100gb of music (lots of individual files, one at a time) than it is 100gb of game data.

This is about download concurrency. Cloud storage providers want to serve as many people as possible but having somebody connected for 3 seconds to download a piece of music is different to having somebody connected for 20 hours to download a game. In terms of server management and overhead, if you have 1,000 people all with crap connections (like my 15Mb DSL) you need to manage those connections for much longer to ensure the data is transferred properly. If something goes wrong at my end, the jobs could fail and you don't get paid because it's an incomplete transfer - again, standard industry practice.

To understand why Microsoft's business is tricky you need to understand how commercial server costs are tiered. They are nothing like you would expect.