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

[Deleted member 11852]

You mean revenue models. They are not guaranteed to bring profits for projects of all sizes.

This still remains the big question of GamePass. We've seen the service evolve from "its drives software sales" to "it lowers sales", which surely must have been predictable given the more subscribers you have, the less people you have buying it.

Ultimately it's a very simple equation, is what Microsoft spend collectively on GamePass more or less than what the revenue brings in over any given period, and what is the differential (margin) and which direction is it travelling?

 

[Johnny Awesome]

There's no guarantee in any business. I believe GP will work, but only if MS execute properly, which they aren't at the moment. A lot is riding on Starfield, Forza, Hellblade 2, Avowed, Fable, etc...

 

[Nesh]

There's no guarantee in any business. I believe GP will work, but only if MS execute properly, which they aren't at the moment. A lot is riding on Starfield, Forza, Hellblade 2, Avowed, Fable, etc...

I am not referring to the word guarantee in a general sense. I am referring specifically to the way Gamepass's economics seem to work.
The revenue of Gamepass that will go to a game is subject to the contract MS puts on the table. That alone puts up a ceiling of how much money a game can make both in absolutes and when you contrast it to the market dynamics.
This is why big companies are unwilling to put their big games on Gamepass but indies are rushing for it.
Thats why large developers like Activision expressed their concern about Gamepass lowering their sales potential. These companies have faith on how well their games will do in the market.
And thats exactly why Activision without the merger is unwilling to put Call of Duty on Gamepass. And this is why Sony refused Microsoft's offer to put Call of Duty on Plus if the merger happens. Both companies view these subscriptions as a life cycle management but for MS Gamepass is a project of its own that needs full support.

With the merger MS's interests and plans for Gamepass become Activision's. MS's profits become the support for ABK's future. ABK wont rely on their own self-funding and growth anymore. But as of now, with Activision being a separate company, MS's interests and Activision's include some conflict regarding Gamepass, and businesswise it makes more sense to fully support Playstation and XBOX using the current model.

 

[stu11]

Another dev saying that Gamepass hurts game sales.


Quote “We did a pretty good deal,” Patti says. “I also think it hurts sales. Because a lot of people just go in and try it and they don't invest. If they don't like the first 10 minutes? That’s it. Also, if you don't make the first 10 minutes amazing, maybe it's also a problem. I think [Game Pass] is okay. It's not my favorite. My favorite is the old premium model where I sell you on some video, on big images, and earn your $30. And then after that, I have to deliver. I don’t need to get money out of you later.”

 

[Deleted member 11852]

Another dev saying that Gamepass hurts game sales.

Echoing the reporting from earlier this year following Phil Spencer's disclosure to the UK CMA of a reversal of the GamePass sales trend. Microsoft had a fairly good run and this was inevitable. I think it was back in 2018 that Phil Spencer first confirmed that Game Pass was driving software sales.

This makes sense as buzz from people playing games in GamePass passed on to those without the service, who bought games. As the numbers of subscribers has increased the buzz has probably gotten greater, but the number of receptive ears who would need to buy games has gotten smaller.

His statement about preferring the classic/premium model because GamePass changes the way games invest themselves in subscription titles is interesting.

 

[Silent_Buddha]

Quote “We did a pretty good deal,” Patti says. “I also think it hurts sales. Because a lot of people just go in and try it and they don't invest. If they don't like the first 10 minutes? That’s it. Also, if you don't make the first 10 minutes amazing, maybe it's also a problem. I think [Game Pass] is okay. It's not my favorite. My favorite is the old premium model where I sell you on some video, on big images, and earn your $30. And then after that, I have to deliver. I don’t need to get money out of you later.”

The problem there is with the old model, not all developers delivered on their amazing video and big images. And then the user was stuck with a bad game that they forked out 30 USD for. At which point they become more and more wary of buying games from newer developers which makes for a self feedback loop that leads to our current situation where AAA games are mostly all using a very narrow band of genres and sticking to "safe" formulas (remakes or already successful IPs).

Sure it's great when it works out. Not so much when it doesn't.

So leading up to their entry on GP, you have a situation where the first 2 games sold amazingly well, the first because of Microsoft, I found that bit interesting...

When Limbo initially launched, it was among the first wave of Xbox Live Arcade games – a curated list of excellent indie titles – which helped boost its visibility. But it could have gone a different way. When Playdead was initially looking for a publisher, Sony showed interest. The only issue was, the contract would have signed over ownership of the IP, giving PlayStation full control over the future of Limbo. Patti refused.

“Then we were invited to a meeting with the CEO, Michael Denny. So we’re suddenly going from one producer to the top CEO of Sony Europe,” Patti remembers. “We were like, ‘Okay, we’ll get a good deal now.’ We had a lawyer there and we went into the room. [There was] five minutes of small talk and then he said, ‘We need the IP.’ And we said, ‘We can not give you the IP.’ And they stopped the meeting. We flew to the UK for that meeting. We just went quietly out of the room, and we went to the local cafe with our lawyer. We looked at each other like, ‘Yeah, okay.’ We spent 15 minutes in that room and then flew home again.”

I guess, when you hold as much power as Sony does, for smaller developers it might be a case of give us the IP or get out of the room.

Anyway, Limbo did well due to Microsoft's promotion. That gave their next game Inside a lot of visibility and it succeeded and both of those gave an immense amount of visibility to Somerville, which then went on to disappoint people that came to expect a certain type and quality of game from Dino Patti. He was famous enough at this time that even though this was a different studio, expectations were set due to his involvement. Famous enough with a good enough reputation that MS took a chance that Somerville would also be as good as his first 2 games.

Sommerville was not a critical success or sales success like Limbo and Inside. Now, was that due to Game Pass or due to it being a bad or mediocre game? It's critical reception (Metacritic 68) and user scores (Steam: mixed ... Metacritic 5.2) suggests a game that isn't as good as either Limbo or Inside. Should it be expected to sell better than his other games (Limbo and Inside)? This reads like him looking for a scapegoat for why Somerville didn't sell as well as his previous games.

I could certainly get behind his argument that GP cost him sales if the game had actually been received well by critics and consumers, but it wasn't. IE - going back to that initial quote. Videos were delivered, big images were sent out ... developer failed to deliver on their sale.

Regards,
SB

 

[Deleted member 11852]

The problem there is with the old model, not all developers delivered on their amazing video and big images. And then the user was stuck with a bad game that they forked out 30 USD for.

That is a problem solved by people taking responsibility for checking the quality of what they are about to buy. All of the people buying games unseen, or worse, pre-ordering, have contributed to the poor quality crap coming out. Publishers have learned that they can realise crap because idiots will continue to pre-order and buy games unseen. Nobody has a responsibility to bankroll publishers selling bad games. It's a competitive market.

There are clear selling points for GamePass, but that ain't one of them.

I guess, when you hold as much power as Sony does, for smaller developers it might be a case of give us the IP or get out of the room.

Absolutely. Games out of the mainstream where the appeal is a risk is going to have many publishers wanting more than just bankrolling the project. Some publishers are going to be more flexible in this regard. In which case, walking out of the room and finding a better publisher is better for the developer as is the case here with Limbo.

Creating things, funding the creation of things, and trying to sell things comes with risk. If you want a business with guaranteed work, become a plumber, an electrician or a builder. People will always needs those skills.

 

[cheapchips]

Another dev saying that Gamepass hurts game sales.


Quote “We did a pretty good deal,” Patti says. “I also think it hurts sales. Because a lot of people just go in and try it and they don't invest. If they don't like the first 10 minutes? That’s it. Also, if you don't make the first 10 minutes amazing, maybe it's also a problem. I think [Game Pass] is okay. It's not my favorite. My favorite is the old premium model where I sell you on some video, on big images, and earn your $30. And then after that, I have to deliver. I don’t need to get money out of you later.”

I was really looking forward to Somerville. Limbo and Inside are brilliant. I don't really want to be overly rude here, but Somerville delivered a curve of increasing disappointment before I gave up on it. Frankly Gamepass saved me that $30.

That's the negative buzz they received from people I know and reviews as well.

If Gamepass really works as a sentiment amplifier, you better be sure your game delivers.

 

[Silent_Buddha]

That is a problem solved by people taking responsibility for checking the quality of what they are about to buy. All of the people buying games unseen, or worse, pre-ordering, have contributed to the poor quality crap coming out. Publishers have learned that they can realise crap because idiots will continue to pre-order and buy games unseen. Nobody has a responsibility to bankroll publishers selling bad games. It's a competitive market.

There are clear selling points for GamePass, but that ain't one of them.

Yes, and that's the point. Somerville isn't a good data point for GP reducing sales. The game would have sold worse than his previous titles regardless of whether it was on GP or not. GP, as Cheapchips mentioned, likely actually saved people money.

So I guess in that sense, for developers putting out a subpar product, then GP will help to reduce sales of a game that people would have regretted buying. In that sense GP rewards good game releases and punishes bad game releases.

I still can't see the negative here unless you are a developer that released a mediocre or subpar product and then are sad that you didn't get more sales from suckers who bought into your pre-release video and images.

It's entirely possible and maybe probable that the developer ended up making more money from the game being on GP (the money they got from MS + sales) than they would have if it hadn't been on GP. Perhaps they would have gotten more sucker sales before word of mouth went around, but would that have brought in more money than MS paying them to have it on GP?

If anything, I think MS were the loser here, but that's the gamble that you take with paying a developer based on reputation (of the dev or dev team members) before the game is released.

Regards,
SB

 

[stu11]

So leading up to their entry on GP, you have a situation where the first 2 games sold amazingly well, the first because of Microsoft, I found that bit interesting...



I guess, when you hold as much power as Sony does, for smaller developers it might be a case of give us the IP or get out of the room.

It's not just about Sony's power though. It's well known that Sony will sometimes require ownership of an IP if they are going to publish the game under the SCE/SIE banner. It seems to date back to the PS1 days with them promoting games like Crash Bandicoot and Spyro as mascot titles for the PS1 and then having a fallout with the IP owner of both those games (Universal Interactive) and losing them both. Sony is the one putting up the money to publish and promote the game, they are taking the risks. I doubt they want the same thing to happen again that happened with Crash and Spyro.

Anyway, it seems since at least 2013 that Sony allows indies to self publish their games on Playstation. Although I found this part interesting.

Quote " Microsoft currently does not allow indie studios to self-publish. This is an issue for many small studios who don’t want to give up creative control, property rights, and profits to meddling publishers. Small studios are responding well to this treatment and may end up supporting PS4 over Xbox One if Microsoft does not change its policies."

So in short it doesn't sound like MS was any less strict than Sony back then either.

 

[SmooTh]

I think that's why they created ID@Xbox in 2014 but not sure if there was no self-publishing before on 360/OG Xbox.

 

[Johnny Awesome]

We tend to go in circles on this topic. There are some people on here who are dead convinced that GP can't be a model for games going forward no matter what, and others like myself that believe it can be a good model if executed properly (it currently isn't). If MS can deliver a AAA game every quarter on the service (especially if one of those annual releases is CoD) then I believe they can sell 100+ million subs. With $12 billion in annual revenue they can make GP work. That's the vision if MS can execute. They need games.

 

[Deleted member 11852]

Yes, and that's the point. Somerville isn't a good data point for GP reducing sales. The game would have sold worse than his previous titles regardless of whether it was on GP or not. GP, as Cheapchips mentioned, likely actually saved people money.

I disagree and took a very different message from Dino Patti is saying. He says - explaining why he prefers the 'premium' model of GamePass - is because to do well on GamePass your game introduction needs to grab the player within ten minutes. If it doesn't the gamer will move on which is the same effect as he describes happened to musicians with Spotify.

There’s a danger that subscription services could do to games what they did to music. Famously, Spotify changed how musicians implement their hooks, putting them closer to the start of the song to grab the listener – all to cater to a new, more impatient kind of customer. It wouldn’t be a huge leap to imagine something similar happening in games, which are often backed by data-driven business minds.

His point is Somerville was a game they didn't make to account for this and it didn't do as well as they would hve liked. He is saying that to do well on GamePass, you have to make games differently. He prefers the 'premium' models (selling games outright) because he gets to make games how we wants to too, and introduce them how he wants too, not how you need to make then to get the player through that first ten minutes.

So I guess in that sense, for developers putting out a subpar product, then GP will help to reduce sales of a game that people would have regretted buying. In that sense GP rewards good game releases and punishes bad game releases.

I'm sure there will be some genuine cases of this. For me, I wouldn't have bought the games in the first place. The value in Game Pass for me is games like Atomic Heart. I played it for an hour, enjoyed that hour, that initial world-building and exploration, and had my fill. I would never have bought it in the first place.

But the 'problem' you are describing is people lazily throwing their money at things without looking at what it is they are buying. Reviews, videos, demos etc.

I still can't see the negative here unless you are a developer that released a mediocre or subpar product and then are sad that you didn't get more sales from suckers who bought into your pre-release video and images.

The article is setting out the meta-negative. If you want to partner with GamePass you need to make games that will be successful on GamePass, but they may not necessarily be the game that the creators want to make. For some developers and publishers, this may not be problem, but for him, he prefers making the game he wants and selling it.

 

[see colon]

Another dev saying that Gamepass hurts game sales.


Quote “We did a pretty good deal,” Patti says. “I also think it hurts sales. Because a lot of people just go in and try it and they don't invest. If they don't like the first 10 minutes? That’s it. Also, if you don't make the first 10 minutes amazing, maybe it's also a problem. I think [Game Pass] is okay. It's not my favorite. My favorite is the old premium model where I sell you on some video, on big images, and earn your $30. And then after that, I have to deliver. I don’t need to get money out of you later.”

Regarding this sentiment.... I'm not sure why sales matter. You have to think, what are the point of sales, from a publisher/developer standpoint? It's revenue and engagement, right? Obviously having your game available to people on a subscription service has engagement opportunities, but wouldn't a deal to get on Gamepass also have some sort of revenue sharing? Why would it matter if you sell less copies if you can match the revenue on a subscription service?

The idea that your game has to be fun at the beginning has been an issue that games have had forever, and the theory that subscription services exacerbate the issue affects not only affects GP but also EA Play, PSN+, Ubisoft Connect, etc. But I'm also sure everyone here has a digital library (or maybe even physical) that contains games that they've never played, or played a few minutes of and decided not to bother. So I get that from a developer's standpoint, if they can get $30 out of a customer and it's irrelevant if the consumer is engaged afterword, that can be a good deal I guess. The "I don't need to get money out of you later" comment seams out of place. You signed a deal with GP and got some sort of compensation, plus residuals.

 

[iroboto]

Phil and Matt cover the business of Game Pass in the latest Giant bomb interview.

As a quick summary, Gamepass business model follows the TCV model of a lifetime expectancy of getting a user onboard.
Effectively, they work out the TCV of someone entering or using the platform on gamepass for the lifetime and potential other purchases and DLC.
Discounts are effective Cost of Acquisition markdowns which they feel the user will be able to cover after a certain period of time.

My understanding, is that they're just doing total expected TCV of users vs total cost of Gamepass and that's how they determine profitability.

Full video with commentary here:

Giant Bomb at Nite: Night 3

We brought a couch to LA so we HAVE to get folks to sit on the couch and talk about video games. #sgf #summergamefest2023 #summergamefest #giantbomb

www.youtube.com

 

[Silent_Buddha]

Phil and Matt cover the business of Game Pass in the latest Giant bomb interview.

As a quick summary, Gamepass business model follows the TCV model of a lifetime expectancy of getting a user onboard.
Effectively, they work out the TCV of someone entering or using the platform on gamepass for the lifetime and potential other purchases and DLC.
Discounts are effective Cost of Acquisition markdowns which they feel the user will be able to cover after a certain period of time.

My understanding, is that they're just doing total expected TCV of users vs total cost of Gamepass and that's how they determine profitability.

Full video with commentary here:

Giant Bomb at Nite: Night 3

We brought a couch to LA so we HAVE to get folks to sit on the couch and talk about video games. #sgf #summergamefest2023 #summergamefest #giantbomb

www.youtube.com

Don't have time to check it out, but hopefully they're also factoring in percentage of people that won't do an effective lifetime subscription. I can't imagine they aren't. Those numbers should be relatively solid by now (X% of new subscribers will be long term subscribers while Y% will be limited time subscribers). Those numbers are then likely simplified to a single number for the lifetime expectancy model.

Regards,
SB

 

[iroboto]

Don't have time to check it out, but hopefully they're also factoring in percentage of people that won't do an effective lifetime subscription. I can't imagine they aren't. Those numbers should be relatively solid by now (X% of new subscribers will be long term subscribers while Y% will be limited time subscribers). Those numbers are then likely simplified to a single number for the lifetime expectancy model.

Regards,
SB

Yea they said they account for that. They mention that it would be great if people did that, but they have metrics of people signing for 1 month and leaving the next. All of it must be accounted for.

 

[Shifty Geezer]

PSN is potentially getting PS5 streaming.

"There's no release date as yet, just word that Sony is "testing" the technology for select PS5 titles, including those in the subscription's game catalogue, and others you may own. And to be clear, this will be a Premium tier benefit - so you won't get it if you're on regular old PlayStation Plus Essential or Extra."

Looks to be gearing up for stream-anywhere gaming, like everyone else.

 

[Shifty Geezer]

Sony interview on the matter: https://www.gamesindustry.biz/plays...lus-strategy-as-it-readies-ps5-game-streaming

This effectively saw the company merge its two subscription offerings: PS Plus, which featured some games but was mostly about online play, and PlayStation Now, which featured a catalogue of games that users could download or stream.

Maguire tells us the service has been a hit, highlighting stats such as 'a billion hours of gameplay since that catalogue launched'. He also says that users of the service are, on average, spending seven times as much time on PS Plus than they did with PlayStation Now in the year prior to launch.


"Putting games in a bit later in the life cycle has meant that we can reach more customers 12, 18, 24 months after they have released. We're seeing customers still get excited about those games and jumping in. For us, that's working. Occasionally, there will be an opportunity to invest in a day-and-date like Stray and we will jump on those when they come in. But for us, letting those [first-party] games go out to the platform outside the service first… that's working and that will continue to be our strategy moving forward."


"I was personally surprised that Premium has ended up being a bigger share of the base than Extra."

 

[Silent_Buddha]

So, here's something I wasn't expecting but makes sense.

Xbox Game Pass also benefits PlayStation users, says Everspace 2 dev

"You just make a better game, and everybody's happy."

www.gamesradar.com

Basically, because of the Xbox Game Pass deal, they were able to spend more time in development on both the game itself and the console versions (PS5 and XBS consoles). The money they got upfront for the deal basically funded another 9-12 months of development time.

It's always nice to see a developer reinvest any money they make on the game into making the game even better.

Also, being on PC Game Pass didn't reduce their Steam sales at all.

Schade is also asked whether putting Everspace 2 on PC Game Pass hurt Steam sales of the game. "To be frank, I couldn't see any dip," he says, confirming that Steam figures weren't affected by PC Game Pass. He calls the deal with Game Pass "one of the best, if not the best" in the industry, as it allowed Rockfish to remain independent whilst getting the studio more visibility and extra funding.

Basically, good games don't have their sales impacted by being on GP.

Just out of curiosity looked at Steam reviews for this and Somerville. And yeah. There's a reason Somerville was selling far under what the developer was hoping it would sell and GP was definitely not it.

Regards,
SB