-
Ever wanted an RSS feed of all your favorite gaming news sites? Go check out our new Gaming Headlines feed! Read more about it here.
McKinsey: The Netflix of gaming? Why subscription video-game services face an uphill battle
- Thread starter Akash
- Start date
That's a different model though, similar to PSNow which could work.
But the question here is whether a subscription with AAA day 1 3rd party games could work and the answer is no based on economics.
MS day 1 gamepass you mentioned could work financially as they would be sacrificing margins on 1st party games to enhance platform USP. But they won't release analytical reports on current Gamepass so we don't know anything really.
This.
It's the job of some very highly paid execs to figure this out. Not some arm chair analysts on enthusiast forums who seemingly want to do so for no reason.
It's like moviepass; was it sustainable? No. But what do you care? Fill your boots.
I agree on many of the writers points. I think subscription services are great for indies and visibility but realistically in 3-5 years games on these will suffer from the same issues that plague video content today: being divided onto too many platforms and costing way too much to subscribe to them all. Not only that but at some point there will be saturation if everyone has a service and the viability of games will get harder as more and more games join these services.
thats the benefit of new console gens. There is a clear reset and people want new games for their new devices, so it can revitalize the market And provide new visibility.
I think this is potentially a dangerous attitude. Obviously yes, the service is great and helping most smaller to medium devs, tho your $100M+ productions aren't going on it day one. But I think game services pose the risk of devaluing games like with movies and music.
people don't want to own movies anymore, and people don't want to own music anymore. While music and movies going full streaming is good overall, there are certainly negatives to this and I think it's worth not just hand waving it as "let Xbox be concerned about it"
Once Sony (PS Now), Xbox, Google, and who knows if Samsung, Amazon, or Nintendo or anyone else have game pass like services, once we have 4-5 total I think we would start to see many of the same issues that movie/music services do today imo.
Not to mention that many families share Netflix and Hulu logins so 4-6-10 people potentially get use out of a $10-$16 sub, but with gaming services I doubt they will be that lenient with amount of users per sub.
thats the benefit of new console gens. There is a clear reset and people want new games for their new devices, so it can revitalize the market And provide new visibility.
I think this is potentially a dangerous attitude. Obviously yes, the service is great and helping most smaller to medium devs, tho your $100M+ productions aren't going on it day one. But I think game services pose the risk of devaluing games like with movies and music.
people don't want to own movies anymore, and people don't want to own music anymore. While music and movies going full streaming is good overall, there are certainly negatives to this and I think it's worth not just hand waving it as "let Xbox be concerned about it"
Once Sony (PS Now), Xbox, Google, and who knows if Samsung, Amazon, or Nintendo or anyone else have game pass like services, once we have 4-5 total I think we would start to see many of the same issues that movie/music services do today imo.
Not to mention that many families share Netflix and Hulu logins so 4-6-10 people potentially get use out of a $10-$16 sub, but with gaming services I doubt they will be that lenient with amount of users per sub.
OP
OP
What if Moviepass was run by one of the worlds biggest companies with the ability to lose billions. They then completely change the landscape of the medium until hardly any major players survive and then jack up prices? I know its a little doomsday but still.
The idea is that Microsoft prefers to have 5 people spend $10 each month than 1 person spending $60 on a game each month. Especially now, since they're still in ''growth mode''
Those 10 million subscribers isn't enough. And I'm sure it isn't what Satya Nadella wants. Spencer and co will have to work really hard to keep convincing the Microsoft board that gaming is a business worth being in. They'll roll out xCloud, they'll improve their PC gaming efforts, they'll add a lot more content. Because I'm sure their end goal is to have a viable, steady, stream of income in a consumer area. Something Microsoft has been struggling for in years.
Those 10 million subscribers isn't enough. And I'm sure it isn't what Satya Nadella wants. Spencer and co will have to work really hard to keep convincing the Microsoft board that gaming is a business worth being in. They'll roll out xCloud, they'll improve their PC gaming efforts, they'll add a lot more content. Because I'm sure their end goal is to have a viable, steady, stream of income in a consumer area. Something Microsoft has been struggling for in years.
The problem is this is a forum full of people who
(1) generally are an older kind of customer who is used to buying things outright and would be normally biased against a service like this...
(2) ... but have very little understanding about the business or evidence to support their stances in a world where the game industry has much higher supply than demand.
The result is that almost any discussion about game pass here turns into mud very quickly.
I think Game Pass will be fine and continue to grow. I really don't see any other gaming subscription services competing with Game Pass.
You think subsidizing Gamepass as a tremendous loss leader long enough to dry out Sony and Nintendo is realistic, let alone possible? Come on, this is nuts. Eventually MS will want to start evening out the books, and if XGS content has gotten to a strong enough place then the first thing they will do is start phasing out the big 3rd party games because the licensing is just too damn much, and it will be much easier for PR than increasing the price.
But why is the question limited to AAA 3rd party games if we're comparing it to the Netflix model? That's what doesn't make sense to me about this section of the article. The Netflix model worked because it was bankrolled by investors while it swelled its subscription numbers and invested in first party content to obviate the need to dole out so much of its subscription revenues to licensors - is that not what Microsoft is trying to emulate with Game Pass? They're pumping out subscription promotions, clearly trying to pump the total # of devices via Xcloud, dumping a bunch of money into first party studios - all of which launch day and date on Game Pass.
It just seems pretty obvious going through their points on that section (there's 3 bullets, but 2 and 3 are extensions of the same thing):
- "Most users interested in blockbuster premium games buy them right away: on average, 50 to 60 percent of the lifetime units are sold in the first month after launch ...To be attractive, a subscription service would have to feature blockbusters at or near their launch dates." -
- See Xbox Game Studios acquisitions. AAA franchises like Halo and Gears are on the service from their launch. Results from those acquisitions are obviously TBD and we can quibble as to whether or not there will be enough "blockbusters" to sustain, but the very purpose of Xbox Game Studios would seem to be to address this point.
- "Currently, a game publisher nets at least $42 per unit on a $60 game sold digitally or physically... Licensing just two blockbusters a year could cost a platform $8 per user every month."
- Note the numbers in point one. They net $42/60 per unit on a $60 game sold digitally or physically, and they sell 50-60 percent of their lifetime units in their first month - but games don't consistently sell for $60 outside of their first month. That means for 40-50% of lifetime units sold, publishers aren't necessarily getting that full $42 return. It doesn't really make sense then to assume that third party publishers will be able to demand a rate per game based on their highest overall return, especially where a platform like Game Pass isn't licensing those from launch date.
It's just odd to me that it wants to position subscription services as binary - you either license the third party content or you develop it - when you're a) comparing to Netflix, and b) are staring at a model that's a straddle of both.
Last edited:
This. This might destroy the quality and scope of games as you know them today if the economics need to adjust to make such a game subscription tenable going forward in terms of costs consumers are willing to pay long term.
OP
OP
I think it's tenable that given Microsoft's assets, openness to working with other platform owners, and foothold in both the PC and console space that they could become to gaming as Amazon publishing/Kindle is to books. And very few people are happy with Amazon's dominance in that arena.
But I agree, Sony and Nintendo are around for the long haul.
I just converted a $65 24 month Xbox live to Ultimate. I'm not sure how they're really making any money, but I gotta say I'm really enjoying the service right now.
Fucking this!
I see all the drive by posts, the shitty one takes and the dumb gifs and it's just sad the level of discourse we are seeing lately.
The way games are made and what kind of games are made will change drastically if the "Netflix" model takes off in the gaming business.
A crude exemple:
If they remunerate content creators with a one time fee every time someone download their game, most devs will make shorter games to maximize returns. GAAS will suffer since their whole business is keeping users engaged for a long time. And while many of then have issues with monetization, there are some pretty good GAAS out there.
On the other hand if the compensation is done by engagement, then everything will be GAAS and shorter games and even single player games will suffer.
I think Gamepass pays a one time fee AND remunerates engagement as well, but I'm not sure. I doubt that game pass is a profitable service for MS, they are making an investment to attract users.
Personally I would love if someone cracked this, I mean who doesn't want to pay 15 bucks a month to play anything? I just don't know how it will work out and what are going to be the repercussions if the industry leans heavily that way.
That whole Phil Spencer "let MS worry about the money" is bullshit, we all know what happens when people delegate to big corporations decisions that affect their buying habits. Everyone should be more transparent on this.
Yes the article is making up a scenario that doesn't exist in relation to Gamepass and posters here are happily running with it.
This is the very definition of a total fluff piece with zero hard evidence, like you know...the financials and commentary of everyone (publishers and game devs on these platforms) involved with these services. GamePass is wildly successful and no other service launched by a publisher has done anything but grow. Sony and EA's services are multiple years old.
And with game sales over the past year, it isn't affecting day one/month one sales in any real way. We've heard one piece of concern from one publisher before they got on any streaming service. Then Devolver Digital released a few games on GamePass and not a peep since.
The concern trolling over gaming subscription services never will end. Publishers and developers repeatedly tell us via words and financials that it is successful but people will always doubt it because it is a new way of generating revenue that doesn't have an NPD chart associated with it. Just like the people that continued to use outdated numbers and percentages for digital sales from like 2016 when discussing 2019 or 2020.
Getting free games via NSO or PSN or Xbox Live is literally the same thing. Let's not act like these publishers are being forced to put games on these platforms. These companies have bean counters that know what is best for the long term financials of a game.
And with game sales over the past year, it isn't affecting day one/month one sales in any real way. We've heard one piece of concern from one publisher before they got on any streaming service. Then Devolver Digital released a few games on GamePass and not a peep since.
The concern trolling over gaming subscription services never will end. Publishers and developers repeatedly tell us via words and financials that it is successful but people will always doubt it because it is a new way of generating revenue that doesn't have an NPD chart associated with it. Just like the people that continued to use outdated numbers and percentages for digital sales from like 2016 when discussing 2019 or 2020.
Getting free games via NSO or PSN or Xbox Live is literally the same thing. Let's not act like these publishers are being forced to put games on these platforms. These companies have bean counters that know what is best for the long term financials of a game.
+1
The games industry isnt unique. That statement applies to many cases including this one. Look at what's happening with streaming movie and cable platforms. This isnt an argument against options but the idea that the current firesale is going to continue on forever.
PS Now
Stadia
GeForce Now
Playkey
Shadow
Parsec
Vortex
Jump
HP Omen Game Stream
GameFly Streaming (DEAD)
OnLive (DEAD)
Playcast (DEAD)
InstantAction (DEAD)
Do you really look at most of these streaming services and think their pricing wont change drastically? Most wont even survive the price war. And almost half of what you listed are from the same company, you are proving the consolidation point raised by OP.
i signed up to gamepass for full price the day i got my (used) xbox one s, and have never not paid full price... every single month
i represent the majority
All it takes is a single competitor to MS in that space to stall their rise. MS doesnt have the storefront ubiquity, IP, hardware proliferation, or infrastructure exclusivity to prevent Sony, Valve, Epic, or Nintendo from stepping into that space with minimal effort. Netflix had years of nearly unencumbered growth and likely easy licensing deals to establish the market, and Amazon is without question the #1 online store and can push their product to any device. MS doesnt have these advantages, besides having the #1 PC gaming OS, and they can't even get their own PC gaming store to function properly... meanwhile Steam and EGS are light-years ahead and can easily pivot to counter whatever MS offers on PC, likewise Sony and Nintendo on consoles. Even in cloud services, MS isnt the only game in town and Xbox certainly won't get exclusive access to Azure resources.
This is pretty much spot-on. Another thing people need to consider is how heavily Microsoft is invested in cloud computing and data centers. So... when someone is paying $15/month for GamePass Ultimate to get Xbox Live Gold, XCloud, and GamePass, most of that money can go towards covering the costs of licensing games for the service. Microsoft has other areas of (successful) business that use and cover the cost of their data centers. They are in a unique position to make a service like this work (as is Google), but it will never completely replace people purchasing games (especially the big AAA titles from 3rd parties).
I should also add Wall Street loves tech stocks that have subscription services. Netflix is considered a tech stock. All Wall Street cares about is user base of these subscription services, because it's easy to turn to a profit model once you've already gotten 10's of millions of subscribers. Microsoft has always been a great tech stock and so good that every trader really should have it in their portfolio. I wouldn't worry about Game Pass going away anytime soon if ever.
And what's that do for you as the consumer? 'Win' for you, as you spend more money for much less content?
We have had devs/pubs say this is how it worked. That they get paid X amount to be on GP for Period of time.
I usually just watch and have no position in this type of thread because I am quite ignorant about the economics of games and these stuff(is the way that I have for avoid talking bullshit about things I don't know).
But for some reason people refuse to have discussions in a...discussion forum? If it is the case that the person thinks it is ''concern trolling'' just ignore the thread and move along, better than making useless drive-by posts. Sorry for the off-topic.
I'm not saying that this is what happens with GP, but it's fairly common to a product to exist in a loss, but with other services in the company's pipeline covering the costs (Like amazon as a whole). In the end this can generate engagement and fidelity with the brand. It's playing the long game really to be the next big thing...
Exactly, it's a weak analysis. Making such sweeping generalizations as "games are turning into services", and also failing to explain why this isn't a good thing for Game Pass or subscription models (it's better if players have an infi item amount of gaming on the service than not, it keeps them around).
Also, it tries to suggest that Game Pass is competing with free-to-play titles and blockbusters (it isn't), and that it needs to pay insane amounts of money to secure these titles for it's service (it doesn't).
Game Pass has already proved the concept out. It's already becoming successful, they have an increasingly large slate of first-party titles that are quite obviously hugely compelling for gamers, and all of this sits right alongside the blockbusters and free-to-play behemoths, offering a compelling alternative.
This also fails to mention how the subscription model lowers the barrier of entry to Game Pass games. That Game Pass being across PC, Xbox, and Xcloud, and being highly streaming compatible is a great way to generate word-of-mouth. If I was a betting man, I'd bet on MS' Game Pass strategy not only causing increased budgets for marquee games, but also pushing some MS exclusives back into that blockbuster top 10 (not that minecraft ever left) due to all that word of mouth. With so many great studios producing so much quality content, it's only a matter of time before some of their games really start to take off in popularity, like we are already seeing with Sea of Thieves.
I don't understand how F2P doesn't work with a subscription-style service like GamePass. Put Fortnite on there, for example, and people who have GamePass get 500 vbucks a month through the 'Perk' system they've been experimenting with using PSO.
It doesn't matter if the game is free, there are ways to add value to the subscription using it. Hell, there's probably more ways with F2P since they tend to offer a wide array of possible monetizations. Give away exclusive character or weapon skins, stuff like that.
It doesn't matter if the game is free, there are ways to add value to the subscription using it. Hell, there's probably more ways with F2P since they tend to offer a wide array of possible monetizations. Give away exclusive character or weapon skins, stuff like that.
Game Pass, in particular, seems geared around enticing users to buy the game after it leaves the service and buying DLC through the Xbox closed garden marketplace. On PC it's a little more interesting since 99% of the time you wouldn't buy that through MS' marketplace. I'm sure Devs/pubs don't mind people playing a game on PC game pass then buying it on Steam but maybe MS does. Or maybe that's how they get to lock in games for a year or so at good rates.
I think subscriptions are likely to be the future for gaming to be honest, but I do think it will be dramatically less rosy for consumers than a lot of GamePass fans expect.
Prices will rise, quality content will start to get divided up into more and more exclusivity deals, content that can only be got via subscription may arrive too.
Prices will rise, quality content will start to get divided up into more and more exclusivity deals, content that can only be got via subscription may arrive too.
Ok, from my stand point there are a lot of drivebys because these concerns have been brought up before. At first it was MS will never put their 1st party AAA games on GP. Then it was they won't put them in day 1, then it was they will be timed.
We have had devs/pubs say they were paid X amount upfront for their game to be on Gamepass for X amount of time. It wasn't restricted to playtime, downloads, or activations. Additionally they aren't putting 3rd party AAA games in the service day 1. I agree it isn't sustainable to have all of ubisoft's games on the service day one. The first party AAA games are sold on Steam and Xbox so there are other revenue streams than just gamepass.
Fundamentally, this is where I think the economics will take the business model within the gaming sphere; i.e. a landscape of publisher islands with their respective Netflix-like services driven predominantly by their own first party produced content, all charging their own subscription. Gamers will pick and choose which service they subscribe to based on the original produced content libraries they prefer and then just buy all the other individual games they want a la carte.
I don't think the idea of a single dominant Netflix-like gaming service is even remotely realistic.
I think we're already halfway there with the big publishers -- Microsoft, EA, Ubisoft. Ubi's service is comically overpriced for a publisher that aggressively discounts their games within a month or two of release but clearly they don't feel like it's cannibalizing traditional revenue stream.
I think what makes Game Pass more novel is the fact (perception?) that MS seems willing to take that extra step of undercutting sales to boost Game Pass revenue. Though they're still not putting DLC on the service, I think.
One thing that people forget when they talk about the "Netflix of gaming" is that new movies don't tend to go directly to Netflix. They might take months or a year, if they ever land there.
They even land earlier, to buy or rent, on virtual stores like Google Play Movies before Netflix.
Since Xbox has a store that sells games, I didn't expect they to put their exclusives there day one. So they got me by surprise. On the other hand, I expect Stadia to give their exclusive games on Stadia pro or in a subscription like xCloud.
They even land earlier, to buy or rent, on virtual stores like Google Play Movies before Netflix.
Since Xbox has a store that sells games, I didn't expect they to put their exclusives there day one. So they got me by surprise. On the other hand, I expect Stadia to give their exclusive games on Stadia pro or in a subscription like xCloud.
yup only recently some devs were commenting on their success on gamepass
I keep seeing people bringing up this "devaluing game" thing. Can someone explain to me how Gamepass devalues games and why it's bad?
And lol at the GaaS concern, how many games on gamepass are GaaS?
To those who complain about posts dismissing the discussion, do you know how many gamepass threads have there been? I haven't seen any new points raised from all those threads, it's always the same "concerns" over and over again. Until we get some new information, such as dev's inputs, I don't see any points repeating the same thing non-stop. And this article certainly doesn't bring anything new.
And lol at the GaaS concern, how many games on gamepass are GaaS?
To those who complain about posts dismissing the discussion, do you know how many gamepass threads have there been? I haven't seen any new points raised from all those threads, it's always the same "concerns" over and over again. Until we get some new information, such as dev's inputs, I don't see any points repeating the same thing non-stop. And this article certainly doesn't bring anything new.
I think that no doubt Gamepass can provide a lower barrier of entry to titles that could potentially go unnoticed. The question people are bringing up is the viability for MS at the current price point. As Spencer has stated before, don't worry about MS. It doesn't matter.
1/ The comparison with Netflix works as a broad presentation of such services, but only work at surface level. Games are expensive and take dozens of hours to complete, movies are not. There are like more movies available on Netflix right now than there are video games released on consoles since the dawn of time. Etc.
2/ I get that concerns can be raised with regard to market evolution and how the "traditional model" could be negatively affected by those who prefer it (such as me), but discussing the economic viability of it all is ... like ... it's their problem, not mine. I mean why not discuss it of course, it's a valid subject of discussion, but without hard numbers it all looks like wild speculation if you ask me.
3/ All we have is a bunch of people in the industry saying it's viable. Of course I don't particularly trust such statements, but without evidence of the contrary, it sounds less like an attempt at honest discourse and more like concern trolling.
2/ I get that concerns can be raised with regard to market evolution and how the "traditional model" could be negatively affected by those who prefer it (such as me), but discussing the economic viability of it all is ... like ... it's their problem, not mine. I mean why not discuss it of course, it's a valid subject of discussion, but without hard numbers it all looks like wild speculation if you ask me.
3/ All we have is a bunch of people in the industry saying it's viable. Of course I don't particularly trust such statements, but without evidence of the contrary, it sounds less like an attempt at honest discourse and more like concern trolling.
I don't think a universe exists where Gamepass becomes the primary way to play games. Major publishers are always going to earn too much in the initial retail window with MSRPs of $60-$70 for Gamepass to carry those games and still have a viable subscription fee. Gamepass' appeal to both MSFT and publishers is as a means of distribution once market willingness to pay crumbles 6+ months after release (MSFT gets a piece of subscription fees in lieu of their platform royalty, publishers have a market to distribute their products to once initial demand is essentially nil).
One other point is about the expense of the games being offered vs. something like music. The length it takes to complete a game requires significantly more time and engagement per retail dollar lost vs. listening to an album, and Spotify is doing fine. Spotify's addressable market is definitely larger, but so is the ability of a Spotify subscriber to be a "superuser" (as people can listen to music basically all day long, including while they work). People underestimate the economics of scaling and the consumption habits of a typical (nonenthusiast) user.
TL;DR: It's complicated, and only Microsoft knows how feasible the GamePass platform really is long-term under its current operating model and licensing rates.
One other point is about the expense of the games being offered vs. something like music. The length it takes to complete a game requires significantly more time and engagement per retail dollar lost vs. listening to an album, and Spotify is doing fine. Spotify's addressable market is definitely larger, but so is the ability of a Spotify subscriber to be a "superuser" (as people can listen to music basically all day long, including while they work). People underestimate the economics of scaling and the consumption habits of a typical (nonenthusiast) user.
TL;DR: It's complicated, and only Microsoft knows how feasible the GamePass platform really is long-term under its current operating model and licensing rates.
Netflix was a good deal initially. The price has doubled for me since I started subbing.
No one is saying you have to care. Some people do because they want to see where it's going once someone has a large amount of market share.
To be fair, the context of the thread is discussing the commercial viability of the platform.
That's the part I don't get, all the 'this CAN'T be profitable for Microsoft' handwringing and concern trolling is ridiculous. Who cares if they make money off it, or if they are just committed to using it as a loss leader to get people on their system and into their ecosystem?
If they raise the price some day, evaluate the value of it again - if it's not worth it for you, cancel. What are you out?
It is but I think we shouldn't be approaching things from a corporate viability except in relation to how it affects consumers. Otherwise we start to defend business practices on behalf of corporations which I think is bootlicking.
I mean this hasnt happened, you have no evidence that it will ever happen, and there is no sign of it happening. Shows and movies released straight to netflix are not shorter than they were in other forms of media. Developers arent going to stop making games like the Witcher 3 or TLOU2 simply to maximize the amount of downloads then can get on gamepass or similar service.
But if Xbox is saying their model is viable, devs are saying its viable and it's still being supported by new releases and third party AAA games then who should we believe? Concerned speculations? It disingenuous
And when it does... then we can show concern? Like concern speculation now just seeems a little service platform warry to me tbh