Subscription services aren’t anything new, but with more content than ever available on-demand, they have certainly become the norm. Consumers have access to entertainment media through platforms like Netflix, which generated annual revenue of $20 billion in 2020, and Spotify, which generated annual revenue of $9.44 billion in 2020. With such appealing success through the subscription model, it’s no surprise some video-game giants are leaning that way, too.
Early April 2021, Xbox and Apple pushed new games — previously exclusive to Sony’s catalog — to their subscription gaming services, Xbox Game Pass and Apple Arcade. Subscription video game services make gaming available through streaming on the cloud and, theoretically, would allow games to be played on any screen with an internet connection. However, while video-game business models test the waters of subscription-based services, the future for these platforms remains uncertain.
Technical Problems with Cloud Gaming
Cloud gaming intends to provide players with access to games through streaming, meaning they wouldn’t have to download large game files to their device. The biggest setback to cloud gaming is that technology hasn’t yet caught up to expectations. Cloud gaming performs at a lower quality than playing on a console and still struggles with responsiveness. As a substitute to streaming, publishers market monthly subscription services for access to premium games available for download. Once downloaded, these games work just as well as if they had been bought from a store.
Benefits of the Subscription Model
There are many benefits of the subscription model for both developers and consumers. The first is decreased risk for consumers. With a subscription of $5–15/month, players can access a limited library of games and try new games at their leisure. For consumers, the small price tag per month switches the risk mentality from spending money to spending time. Subscription services cater to the preference for access to multiple games over the ownership of individual titles.
For developers, the subscription model makes revenue predictable and consistent. One of the biggest challenges of video game development is financing since studios spend millions of dollars in development with the expectation that they’ll make a profit after the game is released. While large studios have more resources than indie developers, game releases remain unpredictable. Subscription services provide a fixed revenue, engaged audiences, and cash income before development. These benefits allow studios to create games with less financial stress.
Challenges of the Subscription Model
Even with benefits to both the players and the developer, the subscription model for video games still faces many challenges. Many characteristics of video games such as gameplay loops make them poor candidates for subscription services.
The open-ended experience of games means that, for many titles, there truly is no end. Even when players complete the story of a game, they still have access to the game’s world and spend hours competing with other players or completing individual challenges. For the same reason that the linearity of movies, tv-shows, and music make them suitable for subscription services, the looping experience of games may be unsuitable.
Games have also transitioned towards “live” products where developers release patches and downloadable content after the initial release as a way to fix bugs, add content, and keep players engaged. In this way, games have become more of a service than a product in an effort to keep players active. The service model uses games that are free-to-play in order to minimize the barrier to new players, and then offer in-game purchases as a revenue stream for the developer.
In order for subscription services to be available, they would need to offer exclusive titles that only exist behind a paywall. Free-to-play games wouldn’t sit well in a library that players paid for and consumers would want access to high-value games. To justify a subscription fee, the service would need to provide access to “premium” games that consumers would otherwise pay for individually. However, the premium game market is concentrated among the top ten franchises and is only an $18.5 billion market compared to the $90 billion free-to-play market.
In addition to the smaller market value, developing exclusive games for subscription services would be astronomically more expensive than game development is already. For subscription services, a AAA game would cost an additional $50–100 million to develop. With growing competition in the video game market and consumers unlikely to sample multiple games without low prices, the cost for exclusive subscription service games is too unrealistic.
The Future of Subscription Gaming
While leaders in the industry like Apple, Microsoft, and Sony are investing hundreds of millions of dollars into their new subscription services, it’s uncertain if the model will be a success. Until technology catches up to cloud gaming, it’s unlikely the video-game market will see any significant changes to the distribution of its products.