Subscription Model is the Trend for Gaming

Subscription model is a new emerging trend for the gaming industry. As a revolution, it quickly outpaced the traditional model of selling single copies of games. Immediately following Netflix as the successful video subscription service, gaming subscription can only be more promising. Gamers welcome subscription service, according to a global survey, 35% of gamers have subscription services, 71% of them are considering multiple subscriptions, and 9% already have[1].

 

Industry leaders switch to subscription model

 

To lean on its subscription service, Game Pass, Microsoft made the most expensive deal ever in history to purchase Bethesda for $7.5 billion[2]. With many compelling titles, Microsoft Xbox Game Pass prices for $9.99 per month and Game Pass Ultimate $14.99. Google platform Stadia offer AAA games for a monthly fee of only $9.99. Apple Arcade costs $4.99[3], Sony’s PlayStation Now $9.99, Discord’s Nitro services $9.99 and Nitro Classic $4.99, EA Sports Play $4.99, per month, respectively. Netflix like subscription model actually works for gaming, and big companies race to adapt it.

 

Subscription model dramatically increases retained gamers with more activities

 

Subscription model makes it easy for gamers to try new games. With a relatively low cost per month comparing to the cost for a single released game, gamers are much less likely to get disappointed. For consumers, the risk mentality switched from losing money to losing time, which does not feel as bad. It actually helps subscribers play more. Take Microsoft’s Game Pass as an example, the game time increased by 20% and the number of games played increased 40% for Game Pass subscribers[4]. A subscription model also potentially reduces the financial cost of trying out a new game, more importantly, gamers now have a game library at a low cost[5]. The value proposition has changed from the performance of a single game to the options available on the platform[6]. Instead of pursuing ownership, consumers now value subscription-based services with the opportunity to try, like music (e.g. Spotify, Pandora) and video (e.g. Netflix) services. Eventually more active gamers will emerge because no or low financial barrier to entry a new type of titles. It’ll benefit the gamers with more content available and a brand new play experience.

 

Subscription model makes revenue predictable and consistent

 

Game releases are unpredictable in nature, with top games bringing the most revenue, but casual gamers may enjoy new games even at their beta version, so the appealing nature of subscription model has the huge advantage to provide the gaming companies a fixed revenue, which is more financially reliable[7]. Google and Apple both readying the subscription service as Google Play Pass and Apple Arcade, respectively. Subscription services guarantee a consistent source of revenue and an engaged audience, dramatically reduced the risk of delivering top performing titles on a regular basis[8]. Besides, cash income before developing will greatly foster excellent game titles with less financial stress.

 

Investment logic regarding the emerging subscription model

 

Investors usually look at unit sales for new releases as a key performance indictor and soon they will shift to a model that more accurately values repeat usership[9]. There are more and more companies shift to the subscription market, such as Sony’s PlayStation Now, Discord’s Nitro service, Humble, also cloud-based game streaming, such as Blade’s Shadow PC services, Google’s Project Stream, Nvidia’s GeForce Now, Microsoft’s xCloud, and EA’s new streaming service[10]. Companies who enters the subscription market need to have sustainable external partners of developers and publishers to keep the value of their libraries. The successful subscription model Netflix successfully raised three rounds of investment with the most recent one happened in 2019 of $2 billion to create more content[11]. A subscription ecosystem is large and challenging to out compete other company’s program. It is exciting to see the ultimate leaders of gaming subscription services revealed in the near future.

 

Developing future of subscription model

 

The gaming community has already widely accepted the concept of subscription service that a significant percentage of gamers are on a running subscription[12], however, current services do not overlap, so how users choose and pick the right service for them is an interesting question. It is expected the levels of subscription will vary among sporadic gamers and avid gamers, and the prices will increase in the future because the current $100-140 low annual cost[13] does not seem sustainable over the long run, especially due to the fact that consumers will buy fewer new releases. The biggest rival is free-to-play gaming models, so the success of the subscription model will largely depend on the pricing based on competitive library content with popular games and big developers on board.

 

Besides pricing, the library content is crucial to take the audience into consideration. The majority of mobile gamers are less experienced and are females, whereas PC and console gamers are mostly males and experienced traditional gamers[14]. For the mobile gaming platform, it is particular challenging due to the abundant releases of new free games on a daily basis[15]. Therefore, well arranged content is key to effectively implement a subscription model.

 

For some gaming companies, it is still debatable whether or not to join the trend. Take Two, for example, is not convinced that subscription model is better[16]. Some others are debating over the decision to be part of Xbox subscription service because they fear that subscription model benefits the platform rather than developers[17]. It is uncertain whether the subscription model can bring the company better revenue than premium mode or FTP where revenue comes from IAP, ads, and micro-transactions. It is likely that there will be a period that all monetization models will co-exist.

 

However, treats like free play selected compelling titles in a limited period with Xbox subscription are not only appealing, but also pooled loyal fans to the newly released titles, who will purchase the title after the free period. Overall, it is quite certain that in a few years, game subscription will dominate mobile phones, tablets, and even consoles and PCs with more accumulated user base. The future of subscription model is worth looking forward to.

 

References

[1] Brendan Sinclair. Survey: 35% of gamers have a subscription service. https://www.gamesindustry.biz/articles/2020-10-14-survey-35-percent-of-gamers-have-a-subscription-service

 

[2] Dina Bass and Jason Schreier. Microsoft to Buy Bethesda for $7.5 Billion to Boost Xbox. https://www.bloomberg.com/news/articles/2020-09-21/microsoft-to-buy-bethesda-studios-for-7-5-billion-to-boost-xbox

 

[3] Video Game Subscriptions — A Fad, Or the Future? https://medium.com/@tweddlr/video-game-subscriptions-a-fad-or-the-future-2c579eff24f7

 

[4] Helen Ashcroft. How Video Game Subscription Models Will Change the Industry (If At All). https://www.thegamer.com/how-video-game-subscription-models-will-change-industry-if-at-all/

 

[5] Rohan. The Pros and Cons of a Subscription model in Gaming. https://esports-betting-tips.com/the-pros-and-cons-of-a-subscription-model-in-gaming/#:~:text=The%20Subscription%20model%20provides%20a,a%20direction%20to%20the%20developers.

 

[6] Michael Futter. The Future of Gaming Is Subscription. https://variety.com/2019/gaming/columns/the-future-of-gaming-is-subscription-1203146012/

 

[7] Rohan. The Pros and Cons of a Subscription model in Gaming. https://esports-betting-tips.com/the-pros-and-cons-of-a-subscription-model-in-gaming/#:~:text=The%20Subscription%20model%20provides%20a,a%20direction%20to%20the%20developers.

 

[8] Abhijit Ahaskar. Subscription-based gaming: Pay once, play all you want. https://www.livemint.com/technology/tech-news/subscription-based-gaming-pay-once-play-all-you-want-1565883649067.html

 

[9] Michael Futter. The Future of Gaming Is Subscription. https://variety.com/2019/gaming/columns/the-future-of-gaming-is-subscription-1203146012/

 

[10] Michael Futter. The Future of Gaming Is Subscription. https://variety.com/2019/gaming/columns/the-future-of-gaming-is-subscription-1203146012/

 

[11] Sarah Perez. Netflix to raise $2 billion in debt to fund more content spending. https://techcrunch.com/2019/10/21/netflix-offers-2-billion-in-debt-to-fund-more-content-spending/

 

[12] Rohan. The Pros and Cons of a Subscription model in Gaming. https://esports-betting-tips.com/the-pros-and-cons-of-a-subscription-model-in-gaming/#:~:text=The%20Subscription%20model%20provides%20a,a%20direction%20to%20the%20developers.

 

[13] Editor Roundtable: What’s up with game subscription services? https://www.gamasutra.com/view/news/345729/Editor_Roundtable_Whats_up_with_game_subscription_services.php

 

[14] Jennifer Mendez. How to Effectively Implement a Monthly Subscription Model for Your Game. https://www.gamasutra.com/blogs/JenniferMendez/20170721/302123/How_to_Effectively_Implement_a_Monthly_Subscription_Model_for_Your_Game.php

 

[15] Sunny Cha. Are Content Subscriptions The Next Big Trend In Mobile Game Monetization? https://blog.tenjin.com/are-content-subscriptions-the-next-big-trend-in-mobile-game-monetization/

 

[16] Alissa McAloon. Take-Two CEO: Subscriptions not a ‘foregone conclusion’ for game industry. https://www.gamasutra.com/view/news/342641/TakeTwo_CEO_Subscriptions_not_a_foregone_conclusion_for_game_industry.php

 

[17] Edwin Evans-Thirlwell. What developers think of Xbox Game Pass. https://www.eurogamer.net/articles/2019-07-05-xbox-game-pass-developers