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

[Ronaldo8]

This isn't front-loaded revenue because the revenue comes in monthly, not all at the start of development. GamePass revenue is high but it is now funding 23 first party studios.



Having a diverse portfolio of indie, AA and AAA games really has no bearing with how development is funded. Publishers have made solid profits by just charging for titles on an individual basis. At GameLab in 2014 Sony Worldwide Studios President Shuhei Yoshida confirmed that most Sony first party titles aren't profitable but the hits subside the losses.

The economic model Microsoft is building will take time to shake out because it's fundamentally different. I.e in a sell-by-title scenario you know the exact market value of all titles by sales and revenue because this is exactly how much people would pay to play the game. In a subscription smörgåsbord, people will play games that would not have bought so the exact market value of individual titles is unknown. Does it matter? It's a good question, arguably if Microsoft are making good profits from GamePass that's a win? Maybe, maybe not. If Microsoft want to compare GamePass revenue to profits and revenue from sales in the established model - so as to validate this approach to investors - they can't. It's impossible to demonstrate success or failure.

GamePass isn't for me given how little time I get to play videogames but I am fascinated by this new economic model. My only concern is if it proves very successful there'll end up being a handful of game subscription services and to play all the games you want you'll have to be subscribing to a bunch and it'll become expensive real fast. This is kind of where we are with TV subscriptions.

This last few posts really need to be in the other thread.

I don't understand this argument. Gaming is already really expensive. Buying a $500 dollar console and $60 dollar per game is an outlay that many people can't afford, even in OECD countries.
When Phil Spencer talks about lowering the cost of entry to AAA gaming, he is actually being for once brutally honest: it is him acknowledging the pauperisation of the middle class since the last depression.
It is MS acting on this reality by proposing financing help to buy a console. Gamepass aims to lower the cost of gaming by reducing the amount paid upfront and by reaching gamers on devices they already own (TVs, phones, pcs, etc).
Now, don't get me wrong: MS is no good samaritan and they have played a major role in said impoverishment themselves. However, gamepass is a good example of them adjusting their business model to a shifting landscape.

 

[Deleted member 11852]

I don't understand this argument. Gaming is already really expensive. Buying a $500 dollar console and $60 dollar per game is an outlay that many people can't afford, even in OECD countries.

That's nonsense and you know it. In every console generation the vast majority of consoles are sold not at the high launch price and the vast majority of games are not sold at their high launch price point. This is why games go on sale over and over and over. Nobody has to pay the highest price possible for videogames. It's why PS4 and Xbox One S were still selling well in 2019 and 2020.

 

[Entropy]

GamePass isn't for me given how little time I get to play videogames but I am fascinated by this new economic model. My only concern is if it proves very successful there'll end up being a handful of game subscription services and to play all the games you want you'll have to be subscribing to a bunch and it'll become expensive real fast. This is kind of where we are with TV subscriptions.

This is obviously what it will gravitate towards.
We've seen it to some extent with music (strong consumer resistance), with TV (weaker consumer resistance), and there is every reason to assume we'll see it with gaming.

It's not for me, there is no way I will devote that much of my remaining time to gaming.

 

[Ronaldo8]

That's nonsense and you know it. In every console generation the vast majority of consoles are sold not at the high launch price and the vast majority of games are not sold at their high launch price point. This is why games go on sale over and over and over. Nobody has to pay the highest price possible for videogames. It's why PS4 and Xbox One S were still selling well in 2019 and 2020.

Significant hardware price cuts usually occur 3 years from the launch at the earliest, usually with the introduction of slim versions at a lower node. And this time around consoles are launching at $500 at a loss for Sony/MS (price cuts not coming anytime soon). Which means that a vast majority (your wording) of gamers will be locked out of AAA gaming for nearly half of a console's generation. Again, this has been spelled out by Phil Spencer times and time again. Is it really controversial to acknowledge that AAA gaming (even in its lower priced console form) is still the preserve of higher income earners?

 

[zed]

Gamepass aims to lower the cost of gaming by reducing the amount paid upfront and by reaching gamers on devices they already own (TVs, phones, pcs, etc).

lower the cost upfront by making them pay more in the long term
No offense but you're incredibly naive that a subscription model is done for anything other than gaining more money from the user. Its certainly not done for ethical reasons ( I hope some of the companies are saying these , I could do with a laugh )
be it
MS office -> office 365
adobe -> adobe subscription ( I still use CS6 so it backfired on me, but overall it works for enough ppl )
buying albums CDs occasionally -> spotify
renting dvd's / buying videos -> netflix

You can argue (and I think with good merit) that you are getting far more for your buck now, but overall the average person is spending more.

Personally: I think Gamepass is a great deal if I played games I would most likely get it. Even though I would end up spending more per year that I would otherwise, the benifits of having more to play would override the extra expense

 

[Jay]

MS office -> office 365
adobe -> adobe subscription ( I still use CS6 so it backfired on me, but overall it works for enough ppl )

Not really equivalent examples.
Those you could pretty much buy as a one of purchase.

Your not paying a subscription for the one game.
If you want the one game, then you can buy the one game.

 

[Ronaldo8]

lower the cost upfront by making them pay more in the long term
No offense but you're incredibly naive that a subscription model is done for anything other than gaining more money from the user. Its certainly not done for ethical reasons ( I hope some of the companies are saying these , I could do with a laugh )
be it
MS office -> office 365
adobe -> adobe subscription ( I still use CS6 so it backfired on me, but overall it works for enough ppl )
buying albums CDs occasionally -> spotify
renting dvd's / buying videos -> netflix

You can argue (and I think with good merit) that you are getting far more for your buck now, but overall the average person is spending more.

Personally: I think Gamepass is a great deal if I played games I would most likely get it. Even though I would end up spending more per year that I would otherwise, the benifits of having more to play would override the extra expense

47% of the adult US population lives from paycheck to paycheck (https://www.theatlantic.com/magazine/archive/2016/05/my-secret-shame/476415/). More to the point: 47% of respondents can't afford an outlay of $400. It's quite simple: for a significant % of the US middle-class, a monthly subscription of $15 for a plethora of games available on a device they already own can fit within their budget (their paycheck minus living expenses) but they will be absolutely stomped to pay up $500-$400 for a dedicated gaming device. Will they pay up more in the long run ? Absolutely but just like for mortgages, an inability to pay upfront renders such an argument hopelessly moot. Now, granted, I personally believe that usury/predatory pricing is immoral but we live in a western world that emphatically doesn't think so. So again, moot.

 

[BRiT]

They can opt for the AllAccess $25 or $35 a month options instead of paying the $500 upfront.

 

[eastmen]

They can opt for the AllAccess $25 or $35 a month options instead of paying the $500 upfront.

Also that price will only drop quicker this generation because of the Xbox Series S . This is the first time that you can buy a next gen system at launch for only $300 which is a price point that aside from one off sales on black friday neither of the previous consoles went under

 

[zed]

Not really equivalent examples.
Those you could pretty much buy as a one of purchase.

Yeah but my point was that, things that were once outright sold are now subscription models, just for the sole reason that the companies will earn more money.
Hell I heard the other day about HP have now moved to a subscription based model to supply ppl with ink for their printers Im not making this up.
https://instantink.hpconnected.com/uk/en/l/ Oh I like the look of that 10 pounds a month plan, I can print a whole 300 pages (and not a single one more)
obviously they had to look for better revenue streams after the lawsuit where they had to pay out after they got caught gaming their printers to just display an error message and not work, even though there was nothing wrong with their printers

 

[iroboto]

I just hope they continue the trend of releasing day 1 launch on gamepass. This is undeniably better for all gamers, in the ecosystem and out of ecosystem, then paying for timed exclusivity or content.
Let price and value be the decision the consumer makes (as opposed to being forced to make) for whatever ecosystem they want to go to.

 

[Ronaldo8]

They can opt for the AllAccess $25 or $35 a month options instead of paying the $500 upfront.

Yea...that was like the whole point about MS bringing to market financing deals for gaming consoles and Phil Spencer recognising the high cost of entry represented by hardware. Felt like we have been talking past each other when there was no disagreement to begin with...Annoying.

Anyway, now I think we can all agree that GP +Xcloud will not actually make gaming more costly as it is a spurious argument if you cannot gain access to begin with.

 

[eastmen]

I just hope they continue the trend of releasing day 1 launch on gamepass. This is undeniably better for all gamers, in the ecosystem and out of ecosystem, then paying for timed exclusivity or content.
Let price and value be the decision the consumer makes (as opposed to being forced to make) for whatever ecosystem they want to go to.

There isn't any reason for MS to stop it. If they stop it then they will take away a big reason to have game pass.

There are rumors out there that MS is going to 3rd party devs that aren't interested in being bought and instead opening up the check book to get exclusive games made for Xbox/ Game pass. its a smart move by MS because it will associate that game with game pass from the get go and if they fund the first and a sequel it will be hard for that developer to move off game pass with a third in the series because the audience will be more resistant to buying it at full price esp if its on something like the switch or PlayStation

 

[Vega86]

This is obviously what it will gravitate towards.
We've seen it to some extent with music (strong consumer resistance), with TV (weaker consumer resistance), and there is every reason to assume we'll see it with gaming.

It's not for me, there is no way I will devote that much of my remaining time to gaming.

Plus those "+" versions where you might eventually pay subscription on top of your subscription to get better graphics or the latest content. Doesn't Netflix lock HDR/Dolby/4K to their more expensive sub? Welcome to the future of gaming.

 

[liams]

There isn't any reason for MS to stop it. If they stop it then they will take away a big reason to have game pass.

There are rumors out there that MS is going to 3rd party devs that aren't interested in being bought and instead opening up the check book to get exclusive games made for Xbox/ Game pass. its a smart move by MS because it will associate that game with game pass from the get go and if they fund the first and a sequel it will be hard for that developer to move off game pass with a third in the series because the audience will be more resistant to buying it at full price esp if its on something like the switch or PlayStation

The other benefit of funding games from prominent 3rd party developers that dont want to be acquired is that it would allow microsoft to add a clause to their contract that would let them match any accepted acquisition offer made by another party, effectively ensuring that the possibility of acquiring the developer wont be gone in the future (because someone else has acquired them). Thats why EA ended up acquiring respawn, because they had an offer from iirc Nexon to be acquired, but EA matched the offer and acquired them instead.

And if you were a 3rd party studio, a couple of exclusive games for xbox in, hopefully having a good experience working with microsoft, why wouldn't you want to be acquired? You get enough money to buy an island and get more job security for your team. Plus at this rate the annual developer conferences that microsofts internal teams will be having will be larger than GDC in all likelihood, so you get to learn from some of the best studios in the industry. Thinking about adding guns to your game? You can get help from id, adding RPG mechanics? heres the phone number for the half dozen first party RPG studios

 

[liams]

Plus those "+" versions where you might eventually pay subscription on top of your subscription to get better graphics or the latest content. Doesn't Netflix lock HDR/Dolby/4K to their more expensive sub? Welcome to the future of gaming.

its already starting to become a thing with game pass, they are starting to add all the DLC content to the game pass ultimate tier, but not include it in the standard version of game pass. They did it with the hivebusters DLC and said some things that would suggest that adding DLC to game pass ultimate would be a thing in the future.

 

[AzBat]

Nice Forbes article on Game Pass & subscriptions & how they relate to the industry.

For Microsoft’s Sarah Bond, one of the major differentiators between Game Pass and the subscription services that have come to dominate the video and music industries is that it remains joined at the hip to the Xbox Live retail store, and so the relationship between playing on subscription and buying games is fluid in a way that isn’t replicated for those other services.

“When you subscribe to a channel that enables you to watch a video, like Netflix,” she says, “that’s kind of the end of the monetization cycle that you have with that piece of content. In gaming it’s the opposite: there are items that you can buy in the game, there are extensions you can buy, there’s a next franchise you can purchase, there are other genres that you can leap to.”

On average, according to Bond, Game Pass subscribers spend 20% more time playing games, play 30% more games, play 40% more genres and, crucially, spend about 20% more on gaming overall. That could always change if Game Pass and other subscriptions become a bigger part of the industry overall, but Bond stresses that there’s still a lot of room for overall growth, especially since Xbox is tying its streaming services to Game Pass.

“There are 200 million people who buy a console, and there are 3 billion people who play games,” she says. “Today, a lot of those people don’t have the option to play many of these amazing experiences and iconic games that you see. When you really look at what we’re doing with Game Pass is we’re making that possible by linking that to subscription, and putting our streaming into subscription. We’re able to make the economics of all that work”.

https://www.forbes.com/sites/davidt...ng-developers-some-surprises/?sh=148f53d62b49

Tommy McClain

 

[Metal_Spirit]

Nice Forbes article on Game Pass & subscriptions & how they relate to the industry.



https://www.forbes.com/sites/davidt...ng-developers-some-surprises/?sh=148f53d62b49

Tommy McClain

So. Unless Gamepass makes the days 20% bigger, there is groing addiction, less work, an less time with the family.
With a 30% increase in games played, wich means either a couple of minutes spent in each extra game, or less time in the bigger games. Meaning good money for indie devs, but less for AAA producers.
All adding up to 20% more spending than without the serviçe...
Doesn't seem like a great deal, specially for the future of AAA games, and in particular single player games with 20 to 30 hours lenght.

 

[zed]

All adding up to 20% more spending than without the serviçe

You're misunderstanding it,
"On average, according to Bond, Game Pass subscribers spend 20% more time playing games, play 30% more games, play 40% more genres and, crucially, spend about 20% more on gaming overall."
thus subscribers spend about 20% more on gaming overall than non subscribers.
its not spending went up 20% after they became GP subscribers. Im guessing the ppl that attracted to GP are more likely hardcore gamers than average, thus will spend more than the average gamer. Now if they are only spending 20% extra then that sounds too little, Im sure the figure the figure they were spending was anywhere between 50-100% before gamepass, but now since they dont have to buy as many games they amount they actually spend has gone down.
This is gonna hurt AAA games most of all if they decide to end up on GP, at the moment GP earns 18,000,000 ppl x $10 a month = $180 million divided up into how many 100s of games. OK AAA will get a larger slice of the pie but still ....
FWIW COD modern warfare 2019 earnt $600 million in its first 3 days, cyberpunk earnt $780 million in its first 10 days.
Wheres the incentive for publishers to put big AAA games on it, sure maybe after a couple of years, but the initial earning phase? No chance in hell

 

[Jay]

Not looked at everyone's breakdowns, but is all these taking into account game sales outside of GP?
Especially as currently studios are saying their not seeing loss of sales and in some situations higher sales due to the viral nature of GP?