The subscription service model has become one of the most widespread systems used by modern companies. Everything from Adobe programs and Microsoft Office to streaming channels and movie theaters have begun selling their products as services to obtain a form of recurring revenue streams. The model promoting the notion of why pay once when consumers can every month.
Within the entertainment industry, platforms including Netflix, Hulu, and most recently Disney Plus, have become synonymous with the foundational concept of TV consumption. So much so that subscribers likely have received a surprised gasp at the mere mention of not owning Netflix at some point. To little surprise, this practice was quick to find its way into the gaming sphere; The consequences of which may have unforeseen implications.
Subscription Services In Gaming
EA Access, PlayStation Now, Origin Access, UPlay+, and Xbox Game Pass have all launched for varying reasons—staying in line with competition and increasing revenue streams to name a couple. Some, such as Origin and EA Access, only allow streaming for their own published titles. Xbox Game Pass and Playstation Now, on the other hand, allow for streaming of both first- and third-party titles. Each platform has been released to varying degrees of success.
In a recent earnings call with Microsoft, the company reported a 21% decrease in year over year profits in their games division. A difference of $905 million dollars this time last year. The decrease was attributed to several reasons, including the decline of console sales. Despite this, Microsoft also reported that Xbox Game Pass subscriptions have more than doubled since last quarter. The exact number is impossible to find, as Microsoft no longer discloses the number of subscribers. The latest report came during quarter four of 2019, toting 65 million subscriptions. This means that, at minimum, Xbox Game Pass has received over 130 million unique users on the platform.
For consumers, the value is clear: hundreds of unique titles to try with no obligation to keep them or resume their subscription the following month. This means that if subscribers play a game but don’t like it, they can continue to download more at no extra cost. Include features such as Xbox Game Pass Ultimate, which allows for gamers to use the service on both Xbox as well as PC, and the value per dollar spent is seemingly obvious.
What is not made clear is whether or not developers who agree to host their games on the platform are well-compensated. Developers within the industry are split on the issue as well. According to GDC State of the industry survey, over twenty-five percent of developers believe that subscription services such as Xbox Game Pass will actually devalue games. Another twenty five percent believe that it is helpful for developers, while the rest remain unsure or undecided on the issue.
Concerns Over The Subscription Service Model
The issue of compensation is among the forefront of concerns, especially for indie developers. One developer stated, “The payback rates for most content creators in subscription-based models cannot justify the cost to make the products subscribers use. This is true in every medium that has taken this approach in the last decade. Music artists do not make enough from Spotify, et al, to finance the production of future music…even the top tier artists. Why would games be different?”
The idea that developers would be able to make more on their own sales leaves room for questioning whether to accept being listed as part of a subscription service. It is possible that by getting paid through a subscription provider such as Microsoft would hinder the overall profits a studio may receive.
The sustainability of the practice raises another major concern. “Unless the lion’s share of revenue from a subscription service goes to the game creators, it’s untenable in the long term. And, even if the bulk of revenue diverts to the creators, it will still create a situation where large AAA studios able to create blockbuster-style hype will end up succeeding, while indies will receive even less than they already do.”
Services like the Humble Bundle have created an interesting solution to this problem. When purchasing a bundle via Humble Bundle, consumers are allowed to distribute the cost of their purchase between multiple parties. This includes humble themselves, the developers in the bundle, and a charitable organization with which Humble has partnered. Unfortunately, prices and rates are negotiated behind the scenes when agreeing to have a title listed as part of a subscription pass.
The Advantages of a Gaming Subscription Service
Gaming subscription services are not inherently bad, however. There are several developers who have reported great success attributed to Xbox Game Pass. In an episode of IGN Unfiltered, Sean Krankel—developer on Oxenfree—explained how Xbox Game Pass benefitted them.
“What I was worried about was, ‘Is this going to cannibalize other sales early on?’ That was the main concern. If this is going to be out on the same platform — I want people buying it on Xbox still — but what we found out was not only did it not [cannibalize sales], it increased our sales everywhere else on every platform.”
He then goes on to mention how discoverability has allowed for gamers across all platforms to discover and play new titles. A player without Game Pass may see an indie title and won’t be able to justify the cost.
Krankel notes that with Game Pass, gamers will try titles they normally would not consider, and if they enjoy it, will recommend the title to friends, allowing for sales to increase globally. “It really is one of the greatest things to happen for the games industry,” states Krankel, “In 5 years this may be the industry norm.”
There is some factuality to this claim, given the increasing success of services such as Game Pass, but also as a result of the increase in digital game sales. In 2018, digital sales hit a record high, accounting for 83% of total game sales. This number has only increased since then.
Subscription-based gaming services may play a role beyond exposure, especially for indie developers. About a decade ago, there was a stigma surrounding independently developed video games. It was implied that these titles were obscure, cheaply made, and as such unworthy to be played. Over the course of many years, that stigma has decreased.
The Need for a Healthy Indie Industry
Today, indie games are recognized in their own category during the game awards, and many of them earned nominations among massive AAA titles such as Death Stranding. Successful indie titles, such as Minecraft, the increase in communication through social media, and the creation of subscription game services, have allowed gamers to experience the indie sphere for themselves.
There is also the advantage of innovation. As AAA games become more expensive to make, it becomes more of a necessity to stick to tried and true formulas that are certain to please massive audiences. As a result, innovation stagnates. Game formulas become repetitive. Before their most recent entry, Call of Duty held a reputation for being one of the most repetitive formulas year after year. This is a direct result of developers being hesitant to change fundamental aspects of a formula they know works.
Indie developers then have the ability to fill this void and breathe fresh life into an otherwise repetitive industry. Until recently, their reach has been limited. With services such as Xbox Game Pass allowing for independent developers to reach audiences far beyond what was previously possible, the gaming industry can evolve faster and in larger steps than ever before.
The Subscription Service model has changed the way audiences consume media. For game developers, greater exposure, increased sales, and growing fanbases showcase a clear cut decision as to whether to host their games on the platform. Underneath, however, the major issue still remains as to whether the practice is sustainable over the long term.
