Subscription, The Future of The Gaming Industry

September 30, 2021
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Emmanuel Umukoro


Many industries have been impacted by the subscription model. Subscriptions, which have their roots in media and telecoms/utilities, have recently infiltrated established industries like automobiles and healthcare. The gaming sector, which is exploring novel ways to expand, has joined this growing list of industries adopting the subscription business model.


Owning a game in the early days of video gaming meant scrawling your name on the back of a game cartridge. It might mean owning a physical copy of a disc in a box or a digital copy on your computer or console's hard drive nowadays.


However, when you include programs like PlayStation Plus and Xbox Live, which provide monthly rotating licenses for a small number of games, things start to get complicated. The act of purchasing a game from an online store for the month and keeping it for the long haul now matches with the ownership paradigm we've known for years.


Consumer behavior towards entertainment ownership has changed during the last few years. Due to various services like Pandora, Netflix, Spotify, and others like it, many people have given up their massive collections of CDs and DVDs.


Although there is still a market for Blu-Ray disks, it is certainly fading. In 2017, disc sales and rentals dropped, but subscriptions skyrocketed. Thanks to services like Pandora and Spotify, music ownership has been on the decline for years.


Revenue from video game subscription services like PlayStation Plus, Xbox Game Pass, and Apple Arcade is estimated to reach 7.5 billion U.S. dollars in 2021


Now the video game industry is moving full-steam ahead and incorporating subscription-based access into its approach.  Gaming subscriptions are one of the fastest-growing gaming segments, outpacing video game purchases and in-game purchases in terms of annual growth rate. In 2021, revenue from video game subscription services like PlayStation Plus, Xbox Game Pass, and Apple Arcade is estimated to reach 7.5 billion U.S. dollars. And video game subscriptions are projected to maintain a double-digit annual growth rate at a 14.3% market revenue increase per year till 2025.


Despite the industry's growing adoption of digital ownership, players still retain a sense of ownership over their work. Whether people still buy a physical copy from a store or download directly from a storefront, there is a one-to-one transaction: money now for a game that they can play continuously, even if that notion of permanence has been challenged of late.


The value proposition as a whole has shifted. Consumers under a subscription model don't often consider what they'll receive out of a particular game. Instead, they use all of the available possibilities as a determining factor.


“The need to own is being supplanted with a need to experience things and a desire to try. And as a result, we’re seeing this shift in consumption patterns where access is being valued greater than ownership.”

- EA senior vice president of player network Michael Blank


Beginning with EA Access on Xbox One, EA was one of the first major subscription services available in the gaming industry. Discounts on EA games, a limited number of hours of pre-release play (regardless of pre-purchase status), and a vault of back catalog offerings were all part of the selling pitch. Later, a PC version was released with a similar offering. According to EA senior vice president of player network Michael Blank, “The need to own is being supplanted with a need to experience things and a desire to try. And as a result, we’re seeing this shift in consumption patterns where access is being valued greater than ownership.”


Microsoft took that concept and released a Netflix-style offering for its first-party games and several titles from third-party developers and publishers in June 2017.


Microsoft didn't provide precise figures, but it does thank Game Pass for the success of its titles.  “State of Decay 2” has over 3 million players,  “Sea of Thieves” has surpassed 5 million players, “Forza Horizon 4” had 2 million people online in the first week, and over 7 million total. Game Pass subscribers bolstered all of these demographics. For consumers who aren't sure if they want to spend $60 on a new game, Microsoft's concept is appealing, and EA followed suit with Origin Access Premier, which was revealed at E3 2019.


On the PC, Access Premier adds another layer, allowing customers to play EA's new games as soon as they become available for purchase. Sports games like "FIFA 19" and action games like BioWare's "Anthem" fall under this category.


It wasn't easy for EA to sell a service like Access Premier internally. Investors still look at unit sales for new releases as a key performance indicator. Giving away games with a subscription program is more difficult for investors to grasp. Our primary metric of success is still sales, but we're moving toward a model that values repeat users more accurately.


Since the Xbox team is a part of a larger Microsoft financial engine, adding new releases to a subscription service is a little easier for them. Gaming is EA's only and most important business.


Michael Blank added that “I believe that what is good for the players will ultimately be good for the industry, which will ultimately be good for our company, but when we first embarked on this program, we didn’t know exactly what the impact would be. We didn’t know if people would use the service. Would they come in and play one game and then choose to leave? We did a lot of modeling to try to understand what that impact would be"


“That also created some trepidation because you’re getting a tremendous amount of value for one game and then you’re getting a whole array of games at one reasonable price. We went on an expedition of learning how would people play. Would they play multiple games as a result? Would they stay on the subscription service for longer? All of the data is suggesting that it is positive for players and it’s positive for us as well because the more they play, that’s more time they engage in our network and the more they motivate others to play. All this translates into positive, good things for the company.”


Research reveals that that subscription models will have a significant impact on the future of video gaming, as gaming subscriptions appeal to a wide range of gamers


As an organization, we wanted to know what gamers' future needs would be. We wanted to know some effective approaches that game publishers and developers can adapt to meet their needs. Based on our findings, we believe that subscription models will have a significant impact on the future of video gaming, as gaming subscriptions appeal to a wide range of gamers.


Industry players must recognize that subscription services have a strong chance of becoming the primary means for consumers to access games and will also increase gaming’s share of a valuable asset – consumers’ time.


Types of Gaming Subscription

A game subscription service, to put it simply, is a video game monetization model in which gamers pay a regular subscription fee to access a library of video game titles. This is in contrast to the traditional video game business, in which games are purchased and sold separately, either on disk or as a digital download, with consumers maintaining ownership of each title. For the most part, consumers can subscribe to gaming services in one of three ways:

  1. A subscription to a game console’s online services. PlayStation Plus is an example in this category
  2. A subscription to one game such as MMORPGs like World of Warcraft
  3. A subscription to a platform that offers games from different publishers such as Apple Arcade, or Microsoft Game Pass


Video game subscriptions that offer access to a library of playable and even downloadable and shareable are a recent service from video game publishers. Research reveals that over one-third of gamers worldwide had purchased at least one gaming subscription and that the quality, number, and diversity of games included in the subscription are the most important factors in their decision. The price of the subscription is the fourth most important factor among gamers who play more than five hours each week. These preferences are similar to those for other media subscriptions, such as television, where we see quality and freedom are also important.


Is there room for new game publishers to join the game subscription train?

Serious gamers playing 20+ hours per week would spend $19 to $40 per month for their ideal gaming subscription, and even casual gamers playing fewer than five hours per week are willing to spend $10 to $30 per month. Such a wide willingness-to-pay range gives new game developers and publishers room in subscription allowance to compete for the wallet of the modern gamer.


While an increase in the number of gamers signing up for subscriptions is beneficial for the industry, it also means that competition is increasing. Research reveals that gaming subscriptions, which are comparable to on-demand TV and movies, are unlikely to be a “winner-takes-all” market in which one subscription provider builds such strong customer loyalty that it prevents customers from trying alternative subscriptions.


80% of buyers of one gaming subscription are interested in buying more subscriptions


We discovered that 9% of gamers had purchased numerous gaming subscriptions, with another 71% willing to attempt multiple subscriptions in the near future. In sum, 80% of buyers of one gaming subscription are interested in buying more subscriptions. Gaming subscriptions are tapping into a customer preference for increased choice and flexibility, similar to how Netflix and Amazon Prime disrupted the paradigm of watching movies and TV shows on-demand and having several subscriptions.


Subscriptions may be tapping into a similar mindset that encourages increased consumption (bingeing) of on-demand TV, in addition to normalizing video games as a form of entertainment: 70% of gamers report playing more when buying a gaming subscription. Providers are already rushing to better address the market by leveraging existing customer loyalty to introduce gaming subscriptions, such as Apple One, which bundles Apple Arcade into a larger subscription offering. Additional subscription providers' exploratory offers, such as Amazon Luna, usher a new era of increased focus on consumers interested in gaming subscriptions.


Microsoft’s Xbox and Apple are early trendsetters of two pricing models for hardware and gaming: ongoing commitments (vs. one-time upfront purchase) and bundled subscriptions. As additional providers follow suit and offer competitive offers, consumers can look forward to greater choice and flexibility in their access to games.


Cannibalization Risk and Final Thoughts

Subscription models are financially appealing to game publishers because they generate recurring revenue streams and provide a continuous chance to define the value of extra services and premium content. They should, however, consider the possibility of a larger shift toward subscriptions, which could diminish gamers' willingness to spend more than $50 on flagship games in the future. Early users of music subscription services like Spotify, tended to be those who already spent a lot of money on music. People that use it now are more price-conscious, and they frequently utilize it to save money in general. That is why game publishers, such as Sony, refuse to include their premium products in subscriptions, believing that it is not a viable revenue model for games in that price range.


Although there's a risk of cannibalization, there's also far too much at stake for publishers who choose to wait and see instead of jumping on the subscription train. We expect the market for flagship titles to evolve in the same way that the market for movies has: they will only be included in subscriptions after they have been available for purchase separately for a period of time. This will aid in maximizing revenue throughout a title's lifespan.


If you’re a developer or game publisher, looking to generate recurring revenue, raise your revenue, and prepare for the future of gaming, subscription is the way to go. Thankfully, Chargezen has various subscription plans suitable for all business sizes and gaming categories. If that sounds like what you’re looking for, search no further. Simply reach out to Chargezen support team or write me at success@trychargezen.com if you’ve questions or need help getting started.

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