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

[Deleted member 11852]

Sounds like just a Title ID & not a unique ID per disc.

This would make for fascinating reading if it could be done. I'd love to know how many discs are used on different consoles, whether those consoles are connected (family, friends lists etc) in some way, how many people are mostly disc-based vs mostly digital vs a combination of both.

 

[goonergaz]

Thought I'd add that you can currently get Ultimate for essentially £2.38pm, you can rinse and repeat this kind of thing - essentially make a new account and make your console the primary and away you go...never pay full price

https://www.hotukdeals.com/deals/11...ate-2614-eneba-new-customers-see-post-3515220

 

[iroboto]

Thought I'd add that you can currently get Ultimate for essentially £2.38pm, you can rinse and repeat this kind of thing - essentially make a new account and make your console the primary and away you go...never pay full price

https://www.hotukdeals.com/deals/11...ate-2614-eneba-new-customers-see-post-3515220

I placed the promotional items and marketing under the line item of cost of acquisition which is a per month per subscriber.
This is a typical for us to separate it in this way, since we have to do this at telcos when we sell you mobile data/subscriber plans. This is how we separate the revenue from promotional losses. The goal is to reduce expenses and COA over time. ie. we subsidize new handsets like iphones when you sign a contract with us. So we eat say $500 over 3 years (initial phone subsidy), but you are paying $2500 over 3 years in contract fees. Sometimes we have promotional offers on data, or internet or TV, in which you pay a reduced rate, and it would be calculated in these terms, or we would line item it into a single upfront cost.

Which I've shown, the COA will go down 5% per year, which is a typical corporate goal. As there becomes more need to reap more profits, the number of promotional units goes down. So there might be a 12 weeks a year it's $1 a month. And then the next year it's only for 10 weeks. Then 8 weeks. etc. Slowly reducing the rate at which these promotional activities hit because ideally they are invested in the service to care about their account. Not everyone is willing to game the system, its a lot of work to do repeatedly and the companies account for that.

So if game pass is $10 /mo
You give it to them for $2 per month
that's a Cost of Acquisition of $8 per month

I put in a COA of $6/mo, with a set price of $10. So the total profit already has been chopped down significantly.

The price will increase at a rate of 5% per year as well. To adjust for inflation and spend, the need for profitability.

Spreadsheet

• I made changes to move it back down to 1.25B spend for licensing. With an increase of 12% per year.
• I've reduced the yoy subscriber growth to 23%
• I cleaned it up to be a bit more clear.
• I guess I should add definitions on it.

https://1drv.ms/x/s!Arh_9w0iEIQBhIcTSA3K8Pyfw3BGiQ?e=xHbORF

 

[goonergaz]

I placed the promotional items and marketing under the line item of cost of acquisition which is a per month per subscriber.
This is a typical for us to separate it in this way, since we have to do this at telcos when we sell you mobile data/subscriber plans. This is how we separate the revenue from promotional losses. The goal is to reduce expenses and COA over time. ie. we subsidize new handsets like iphones when you sign a contract with us. So we eat say $500 over 3 years (initial phone subsidy), but you are paying $2500 over 3 years in contract fees. Sometimes we have promotional offers on data, or internet or TV, in which you pay a reduced rate, and it would be calculated in these terms, or we would line item it into a single upfront cost.

Which I've shown, the COA will go down 5% per year, which is a typical corporate goal. As there becomes more need to reap more profits, the number of promotional units goes down. So there might be a 12 weeks a year it's $1 a month. And then the next year it's only for 10 weeks. Then 8 weeks. etc. Slowly reducing the rate at which these promotional activities hit because ideally they are invested in the service to care about their account. Not everyone is willing to game the system, its a lot of work to do repeatedly and the companies account for that.

So if game pass is $10 /mo
You give it to them for $2 per month
that's a Cost of Acquisition of $8 per month

I put in a COA of $6/mo, with a set price of $10. So the total profit already has been chopped down significantly.

The price will increase at a rate of 5% per year as well. To adjust for inflation and spend, the need for profitability.

Spreadsheet

• I made changes to move it back down to 1.25B spend for licensing. With an increase of 12% per year.
• I've reduced the yoy subscriber growth to 23%
• I cleaned it up to be a bit more clear.
• I guess I should add definitions on it.

https://1drv.ms/x/s!Arh_9w0iEIQBhIcTSA3K8Pyfw3BGiQ?e=xHbORF

If I'm reading that right you need to adjust the years row, 10bn loss and no break even until 2030...

 

[iroboto]

If I'm reading that right you need to adjust the years row, 10bn loss and no break even until 2030...

oh right. yea that final year is supposed to be 2031, the years duplicated for some reason in the years row.

And yup, break even at 2030 (sub 1B profit in 2030). Actual worthwhile net profit in 2031
Thanks fixed.

Coincidentally this spreadsheet works out that they finally get green when this generation ends.

 

[dobwal]

The average gamer does not subscribe does he? If he did the number of subscribers would be higher. Comparing DVDs to games is apples to oranges, streaming offers more than just films it offers TV shows and box sets that will cover the whole family. With GP you could be serving just one family member.

Do you think things are suppose to happen overnight? In 2005 Netflix's VOD 2.5 million subscribers were mostly DVD subs who were given free access to the service. In 2007, Netflix had 7 million subs and $62 million in profit. Now Netflix has 167 million subs and annual profits close to 2 billion.

These are a new type of service. Just because gamers aren't instantly running toward these services head over heels doesn't mean they won't eventually. Digital downloads of full package console games was relatively non-existent prior to this gen. Now they rival physical sales. Xbox Live and PS Plus weren't instant successes either. It took Xbox Live 2 years to get to 1 million subs.

Game Pass will support as many profiles thats allowed on a "Home" console.

 

[zed]

https://1drv.ms/x/s!Arh_9w0iEIQBhIcTSA3K8Pyfw3BGiQ?e=xHbORF

Mate the whole spreadsheet is missing a very important piece of data, I said this a couple of times, its gonna earn less profits than the traditional model
Perhaps I havent explained clearly enough, I try again

Take one game, halo infinite

comes out, sells 8million = 8x$50 = $400 million additional revenue, traditional model
comes out, sells a handful of copies since everyone downloads it on gamepass, = bugger allextra revenue (yes it may make some more ppl buy gamepass)

i.e. where are the numbers of the missed revenue?

 

[goonergaz]

Do you think things are suppose to happen overnight? In 2005 Netflix's VOD 2.5 million subscribers were mostly DVD subs who were given free access to the service. In 2007, Netflix had 7 million subs and $62 million in profit. Now Netflix has 167 million subs and annual profits close to 2 billion.

These are a new type of service. Just because gamers aren't instantly running toward these services head over heels doesn't mean they won't eventually. Digital downloads of full package console games was relatively non-existent prior to this gen. Now they rival physical sales. Xbox Live and PS Plus weren't instant successes either. It took Xbox Live 2 years to get to 1 million subs.

Game Pass will support as many profiles thats allowed on a "Home" console.

Of course I don't expect it to happen over night. And you're totally missing my point (probably my bad in poor explanation) - you cannot compare Netflix to GP, they are 2 totally different audiences. The Netflix audience is the whole family, so the VFM is much better because maybe in my household it's just my son interested in gaming. Also, with Netflix I can get the premium version and share on 3 other devices, so technically again it's a better value proposition.

Mate the whole spreadsheet is missing a very important piece of data, I said this a couple of times, its gonna earn less profits than the traditional model
Perhaps I havent explained clearly enough, I try again

Take one game, halo infinite

comes out, sells 8million = 8x$50 = $400 million additional revenue, traditional model
comes out, sells a handful of copies since everyone downloads it on gamepass, = bugger allextra revenue (yes it may make some more ppl buy gamepass)

i.e. where are the numbers of the missed revenue?

Yes, this is a major miss - @iroboto surely the more popular GP is the less 'old school' revenue comes in. However, it's worth pointing out that a different spreadsheet altogether and one that should include all game revenue (and expenditure) as it currently is and how the whole peice will transition. So at the start of the sheet 'old school' is subsidising GP, but by the end we should see a reverse (in the spreadsheet- maybe not in reality!).

 

[iroboto]

Mate the whole spreadsheet is missing a very important piece of data, I said this a couple of times, its gonna earn less profits than the traditional model
Perhaps I havent explained clearly enough, I try again

Take one game, halo infinite

comes out, sells 8million = 8x$50 = $400 million additional revenue, traditional model
comes out, sells a handful of copies since everyone downloads it on gamepass, = bugger allextra revenue (yes it may make some more ppl buy gamepass)

i.e. where are the numbers of the missed revenue?

Yes, this is a major miss - @iroboto surely the more popular GP is the less 'old school' revenue comes in. However, it's worth pointing out that a different spreadsheet altogether and one that should include all game revenue (and expenditure) as it currently is and how the whole peice will transition. So at the start of the sheet 'old school' is subsidising GP, but by the end we should see a reverse (in the spreadsheet- maybe not in reality!).

Yea, I totally get where that discussion point comes in. It's a bit of a separate discussion from GP sustainability. Since we're talking about revenue maximization now, short term vs long term goals.

I'm not sure how to do opportunity costs. This one is much harder to account for. There's no easy way to determine this. Some people may wait for prices to drop. Some people may buy used.
I think the hardest thing is to determine that opportunity cost is going to be different for each title. If you guys have ideas on how that would work I would layer that in. I mean, from a starting point we would have to make an assumption on how much revenue is brought in through regular sales. Then we'd have to extract how many people would not buy the game because of gamepass. And then you'd have to subtract that portion out. There might be other factors to layer in, but I guess we can start with that.

 

[goonergaz]

Yea, I totally get where that discussion point comes in. It's a bit of a separate discussion from GP sustainability. Since we're talking about revenue maximization now, short term vs long term goals.

I'm not sure how to do opportunity costs. This one is much harder to account for. There's no easy way to determine this. Some people may wait for prices to drop. Some people may buy used.
I think the hardest thing is to determine that opportunity cost is going to be different for each title. If you guys have ideas on how that would work I would layer that in. I mean, from a starting point we would have to make an assumption on how much revenue is brought in through regular sales. Then we'd have to extract how many people would not buy the game because of gamepass. And then you'd have to subtract that portion out. There might be other factors to layer in, but I guess we can start with that.

Do we have nothing that shows the current expenditure and income related to games?

TBH it seems almost impossible to get anything meaningful together as from the PR we are expected to believe that GP improves sales son the reality (in MS PR land) is that both lines move in a positive direction!? Lol - sorry, the more I think about it, the more I disagree with the PR

 

[iroboto]

Do we have nothing that shows the current expenditure and income related to games?

TBH it seems almost impossible to get anything meaningful together as from the PR we are expected to believe that GP improves sales son the reality (in MS PR land) is that both lines move in a positive direction!? Lol - sorry, the more I think about it, the more I disagree with the PR

No, those are pretty closely kept secrets for every company. If your breakdown of costs is known, it's easy for anyone else to figure out how to entire the market - people would know exactly what your margins were and how much to flag you down by. I used to do product management, and even then it was still very challenging to break down the cost of selling a product, every hand it touches etc.

We're unlikely to get any idea on the expenditure and income related to games, we can do some ball park averaging at best.

 

[mrcorbo]

The deep discounts are to get people to try it. There will be those who see value in it and those that don't.
As long as they capture the ones who do see value it in, they will stay subscribed at $15/mo.

That's sort of the catch there. Even at $15 a month it's $180 a year. That's the price of 3x AAA titles per year. Someone is going to do the math here and notice that you're going to get more than 3x AAA launch titles per year, and then some.
So even at the regular price point there will be those who see the value. The value will continue to rise as when xCloud leaves beta.

Even then, the discussion around the cheap $1 doesn't seem far off the mark than what Humble Bundle has done for ages now. A great many people donate near nothing for 30+ titles.

$15 is for ultimate (Console+PC+Xcloud). It's only $10/month for GP for console.

 

[dobwal]

I placed the promotional items and marketing under the line item of cost of acquisition which is a per month per subscriber.
This is a typical for us to separate it in this way, since we have to do this at telcos when we sell you mobile data/subscriber plans. This is how we separate the revenue from promotional losses. The goal is to reduce expenses and COA over time. ie. we subsidize new handsets like iphones when you sign a contract with us. So we eat say $500 over 3 years (initial phone subsidy), but you are paying $2500 over 3 years in contract fees. Sometimes we have promotional offers on data, or internet or TV, in which you pay a reduced rate, and it would be calculated in these terms, or we would line item it into a single upfront cost.

Which I've shown, the COA will go down 5% per year, which is a typical corporate goal. As there becomes more need to reap more profits, the number of promotional units goes down. So there might be a 12 weeks a year it's $1 a month. And then the next year it's only for 10 weeks. Then 8 weeks. etc. Slowly reducing the rate at which these promotional activities hit because ideally they are invested in the service to care about their account. Not everyone is willing to game the system, its a lot of work to do repeatedly and the companies account for that.

So if game pass is $10 /mo
You give it to them for $2 per month
that's a Cost of Acquisition of $8 per month

I put in a COA of $6/mo, with a set price of $10. So the total profit already has been chopped down significantly.

The price will increase at a rate of 5% per year as well. To adjust for inflation and spend, the need for profitability.

Spreadsheet

• I made changes to move it back down to 1.25B spend for licensing. With an increase of 12% per year.
• I've reduced the yoy subscriber growth to 23%
• I cleaned it up to be a bit more clear.
• I guess I should add definitions on it.

https://1drv.ms/x/s!Arh_9w0iEIQBhIcTSA3K8Pyfw3BGiQ?e=xHbORF

Are you attributing the total cost of MGS to Game Pass?

And $1.25 billion in third party licensing equals out to those 200 titles selling 62 million units annually at an average price of $20 a unit. For a 10 million sub base that’s seems a little far fetched. That’s 6 games per user per year.

 

[BRiT]

What is MGS? That does not exist.

It is Xbox Game Studios, so XGS if you must abbreviate.

 

[iroboto]

Are you attributing the total cost of MGS to Game Pass?

And $1.25 billion in third party licensing equals out to those 200 titles selling 62 million units annually at an average price of $20 a unit. For a 10 million sub base that’s seems a little far fetched. That’s 6 games per user per year.

Yea. I’m attributing the cost of all of XGS to game pass. Not sure why. This is probably wrong now that you questioned it lol.

 

[dobwal]

Yea. I’m attributing the cost of all of XGS to game pass. Not sure why. This is probably wrong now that you questioned it lol.

If you were a company you probably lump all revenue generated by your software. Whatever, % of that total was contributed by your sub revenue would be used as the % of the cost needed to produce and market that software and attributed to your steaming service.

80% of revenue generated by single unit sales then only 20% of the cost is attributed to the streaming service unit.

 

[dobwal]

What is MGS? That does not exist.

It is Xbox Game Studios, so XGS if you must abbreviate.

My bad. It did spend the first 20 years of its life using “Microsoft” in its title.

 

[mpg1]

Looks like they are dropping the 'Xbox' from Xbox Game Pass....and just calling it Game Pass now.

https://www.thurrott.com/games/xbox/238570/microsofts-updating-xbox-game-pass-branding

 

[AzBat]

I unrolled 3 tweets & exported it to 1 image. Original link at the bottom.



Source Tweet

Tommy McClain

 

[Deleted member 11852]

And this put's Microsoft strategy into perspective: hardware is unimportant in terms of revenue. But it has no context with the same pie showing profit/loss.