video games subscription model – Trekking with Dennis

Game Pass means fewer sales? Well, duh.

Microsoft recently talked about the success of its Xbox Game Pass and PC Game Pass subscription services – which between them have somewhere in the region of 30 million subscribers. However, this was accompanied by news from Microsoft that sales on its Xbox platform are down, with some big games not selling as many copies as they might’ve been expected to in years past.

Some outlets and commentators have seized upon this news in a pretty bizarre way, trying to present Game Pass as some kind of “problem” for Xbox and Microsoft, even going so far as to say that Game Pass is “harming” the company. But… Game Pass was designed to lead to fewer sales. It’s something that’s baked into the subscription model. To use a bit of game dev lingo: it’s a feature, not a bug.

An example of the kind of reactions we’re talking about.
*Image: DreamcastGuy via YouTube*

Saying that Game Pass is “harming” sales of games on PC and Xbox is like saying Netflix is harmful to sales of films on VHS, or that Spotify has led to fewer cassettes being sold. The entire point of creating a subscription is to sign people up for the long-term. There are legitimate questions about the viability of the subscription model in the video gaming space, because it’s new and relatively untested. But to say that it’s “harmful” to game sales is, in my view anyway, entirely missing the point.

Consider what Microsoft’s objective is with Game Pass. They hope to create a “Netflix of video games,” where players sign up and remain subscribed for the long haul, playing the games they want as they become available. It’s intended to work in a similar way to the way subscription services work with other forms of media. By definition, that means fewer physical and digital sales. Microsoft will have known this going in, and fully expected it.

Microsoft sees an opportunity to make the Game Pass model the future of gaming. Rather than buying individual titles, players will pay one monthly fee and have access to a range of titles on either PC, Xbox, or both. With a linked Xbox account also tracking achievements, adding friends, and playing online, the corporation hopes that this will keep players “loyal” to their brand for console generation upon console generation.

There’s a subset of self-professed “hardcore gamers” who vocally lament the decline of physical media in gaming, and it seems to me that it’s predominantly these folks who are upset by Game Pass as a concept – and they always have been. If I may be so bold: they’re dinosaurs, and the way they like to purchase and own games is on the way out. We’ve talked about this before, but there will come a time – perhaps within just a few years – when there will no longer be anywhere to buy physical copies of games. Certainly in the area where I live, most dedicated gaming shops have already closed their doors.

There are fewer and fewer retailers like this these days.

The industry is moving on because players are moving on. The convenience of digital downloads is, for a clear majority of players, something to be celebrated. It began on PC with the likes of Steam, but now it also includes Game Pass as well as other digital shops. The way most players choose to engage with games companies is changing – and that trend shows no signs of slowing down, let alone reversing.

Maybe Game Pass won’t end up being the subscription service that takes the gaming world by storm. Perhaps some other platform will come along to dethrone it, a service that offers more games at a lower price, or one that can – somehow – be available on multiple platforms. But Game Pass is, at the very least, the canary in the coal mine: a harbinger of what’s to come.

An example of some of the titles available on Game Pass for PC.

When I see folks criticising Game Pass or trying to manufacture stories about how difficult and problematic it is for Microsoft, I feel they’re rather like the old guard of the music industry railing against people taping their favourite songs off the radio, or a DVD retailer trying to fend off the likes of Netflix and Disney+. The way people consume media – all forms of media, gaming included – is changing, and subscriptions are the current direction of travel. That’s not to say it won’t change in the future, but right now, subscriptions are where the entertainment industry is headed.

With the convenience of digital distribution, it’s hard to see a way back. Having tried Game Pass for myself, it already feels like a big ask to go back to paying £50-60 – or more, in some cases – for a single title when there are dozens available on subscription. Even just playing a couple of new games a year is still cheaper on Game Pass than buying them outright. And the more people who sign up, the more that feeling will grow. Rather than whining about Game Pass, other companies need to be taking note.

Game Pass feels like good value right now.

In the television and film space, we’re firmly in the grip of the “streaming wars,” and that has been a double-edged sword for sure. On the one hand, there’s been a glut of amazing, big-budget content as streaming platforms and the corporations backing them up continue to slog it out, competing for every subscriber. But on the other, the industry feels quite anti-consumer, with too many services charging too much money. Not all of the current streaming services will survive the decade, I am as certain of that as I can be!

But gaming has the potential to be different. Unless Microsoft gives its explicit consent, no other streaming service could set up shop on Xbox consoles, nor could anyone but Sony run a subscription for PlayStation titles. The titans of the gaming industry will continue to compete with one another, but the issue of oversaturation of the kind we’re seeing in the film and television space should be avoidable.

Sony is (belatedly) getting started with the subscription model too.

Games companies will have to adapt. Raw sales numbers are already less relevant now that Game Pass is up and running, and they’re going to be of decreasing relevance as time goes on. The way in which developers and publishers measure the success of their titles will have to change as the industry continues this shift – and the companies that get this right will reap the rewards. Those who don’t – or who try to bury their heads in the sand and pretend it’s not happening – will fall by the wayside.

The way I see it, Game Pass is just getting started. 30 million subscribers may seem like a huge number – but it’s a minuscule percentage of the total number of gamers worldwide, so there’s huge potential for growth. There will be competitors that will rise to meet it – but all that will mean is that more players, not fewer, will get roped into long-term subscriptions. We’ve already seen the beginnings of this with Nintendo Switch Online, PlayStation Plus, and even the likes of Apple Arcade on mobile.

Subscriptions like Game Pass could reach huge numbers of people.

It’s mobile phones, more than anything, that I’d argue kicked off this trend. The biggest, fastest-growing gaming platform of the last decade is entirely digital and has been since day one. Players have always accepted digital distribution on their smartphones – because it’s always been the only option. Subscription services are the natural next step – and the only surprising thing, really, is that it’s taken as long as it has for a gaming subscription to become as successful as Game Pass.

The success of Game Pass is not without pitfalls, and as I said the last time we talked about the decline of dedicated gaming shops, it will impact some people more than others. Younger people, people on low incomes (as I am myself), and others will all find that their relationships with gaming as a hobby will change as a result. Not all of these changes will be for the better for everyone, and people who aren’t able to commit to a monthly expense, or who don’t have the means to do so, risk being left behind. But many of those folks are already priced out of the gaming market, especially as companies jack up their prices to unjustifiable levels.

Some of the “hot takes” on Game Pass over the past week or so have taken me by surprise – but in some cases at least, we can look to the “usual suspects” of Sony supporters and die-hard believers in the supremacy of physical media. Stirring up trouble for Game Pass and Microsoft is a hobby for some outlets!

I’m not a defender of Microsoft by any means, and the corporation has made a lot of mistakes. But Game Pass, at least at time of writing in early 2023, feels like a good deal. It has a mix of new games, older titles, and some big releases – like Halo Infinite and Starfield – come to the platform on release day. I’ve discovered games I’d never have thought to try and been able to play games I’d never have purchased entirely because of Game Pass. That undoubtedly means I’m buying fewer brand-new games… but from Microsoft’s perspective, that’s entirely the point.

Microsoft operates the Game Pass subscription service.

We should all be vigilant and not simply accept what these big corporations want to do. They’re trying to corner the market and rope players into long-term subscriptions, and they’re doing so not because they think it’s particularly beneficial to players – that’s merely a coincidence. They’re doing it to maximise profits. Not having to split the proceeds with shops or storefronts is a big part of it, and Microsoft would rather take £7.99 a month, every month, than take a cut of the profits on a single sale that it has to share with other companies.

But if this corporate skullduggery is beneficial to players, why shouldn’t we participate? An Xbox Series S or a pre-owned Xbox One combined with a Game Pass subscription is an easy and relatively affordable way into the gaming hobby – offering players a huge library of titles that would be impossibly expensive for practically all of us if we had to buy each game individually. The disadvantages are the ongoing nature of the subscription and the inevitability of titles disappearing from the service either temporarily or permanently. But them’s the breaks – that’s the nature of subscriptions across the board. And with Microsoft doing all it can to buy up companies, more and more titles will be locked into Game Pass for the long-term.

There are reasons for scepticism, sure. But trying to spin this particular issue as a negative one for Xbox and Microsoft is disingenuous. Game Pass was always going to lead to fewer game sales in the long-run. Far from worrying about this, Microsoft’s executives will be rubbing their hands together gleefully… because right now, their plan is working.

Game Pass is available now for PC, Xbox One, and Xbox Series S/X. Xbox, Game Pass, and other titles discussed above are the copyright of Microsoft; other games and titles may be the copyright of their respective studio, developer, and/or publisher. This article contains the thoughts and opinions of one person only and is not intended to cause any offence.

Microsoft buys Activision Blizzard

Fri 21.01.22Fri 21.01.22Dennis

Well that certainly came out of nowhere! Microsoft has opened its wallet once again, this time buying up massive video games publisher Activision Blizzard for a whopping $69 billion. Nice.

After receiving criticism during the previous console generation for the lack of exclusive games on its Xbox One system, Microsoft has stepped up in a big way in the last few years. Early moves brought on board companies like Obsidian and Rare, and then last year came another shock announcement: the acquisition of ZeniMax – the parent company of Bethesda. All of those laid the groundwork for something big, and Microsoft has now added Activision Blizzard to its lineup, bringing on board hugely popular games and franchises like Call of Duty, Overwatch, World of Warcraft, and even popular mobile game Candy Crush.

At almost ten times the price of its Bethesda purchase, Microsoft clearly has big plans for Activision Blizzard and its games. Even by the standards of other corporate takeovers, $69 billion is a lot of money – an almost unfathomable amount. As Microsoft looks to expand its Xbox and PC gaming platforms, though, it makes a lot of sense to bring on board a company like Activision Blizzard.

Keep in mind that Microsoft is currently pushing hard to take gaming as a whole in a new direction, pioneering a subscription model based on the likes of Netflix – indeed, Game Pass was originally pitched as the video game equivalent of Netflix. Though on the surface the company seems to be taking a two-pronged approach, with its Xbox home console family and PC gaming being separate, in many ways that isn’t really the case any more. Microsoft’s goal is to bring these two platforms as close together as possible, offering most games to players regardless of their chosen platform. One need only look to two of the biggest releases of the past year as an example: both Halo Infinite and Forza Horizon 5 came to both Xbox and PC, despite originally being franchises that were exclusive to consoles.

*Forza Horizon 5* was a massive title for both Xbox and PC – and came to Game Pass on release day.

Let’s step back for a moment. My initial reaction to this news was disbelief! But after double-checking my sources and confirming that this was, in fact, not some kind of elaborate prank, my next thoughts were of the Activision Blizzard scandal, and how from Microsoft’s point of view this may not have been the best time to announce this acquisition.

There’s no denying that Activision Blizzard is a tainted brand in the eyes of many players, with the severity of the sexual abuse scandal cutting through to make the news in mainstream outlets when it broke last year. Perhaps somewhat counter-intuitively, the scandal is part of the reason why Microsoft may have felt that the timing was right – Activision Blizzard shares had lost basically a third of their value over the last few months (down from almost $100 per share to below $65 prior to the acquisition announcement). Microsoft arguably made a savvy deal in some respects.

Activision Blizzard is a company embroiled in scandal right now.

There also seems to be a sense from at least some quarters of the gaming press and gaming community that Microsoft is “swooping in” to save Activision Blizzard from the scandal, perhaps even preserving the jobs of some employees or protecting games and franchises from cancellation. I didn’t really expect this reaction, and while it’s safe to say there’s been plenty of criticism to balance out some of the positivity, overall the mood of players seems to be more in favour of this acquisition than opposed to it.

We should talk about exclusivity before we go any further. Despite the hopeful – almost desperate – claims being made in some quarters, Microsoft isn’t going to publish Activision Blizzard titles on PlayStation forever. Once the deal has gone through and existing contracts have been fulfilled, expect to see all of Activision Blizzard’s new titles and big franchises become Xbox, PC, and Game Pass exclusives.

*Starfield* is a highly-anticipated Bethesda title – and it will be an Xbox and PC exclusive following Microsoft’s acquisition of Bethesda.

This is exactly what happened with Bethesda. Some players clung to the argument that Microsoft somehow wouldn’t want to limit the sales of some of these games to Xbox and PC players only, with some even going so far as to claim that we were witnessing the “death of console exclusives.” That hasn’t happened (to put it mildly) and we’re now expecting massive games like Starfield to become Xbox, PC, and Game Pass exclusives.

When Microsoft first jumped into the home console market in 2001 with the original Xbox, a lot of games industry critics and commentators argued that the company would open its wallet and spend, spend, spend in order to compete with the likes of Sega, Nintendo, and Sony. Microsoft certainly made some sound investments in games early on, but it’s really taken almost twenty years for some of those concerns to be borne out – and by now, the gaming landscape has so thoroughly shifted that it doesn’t feel like a bad thing any more.

It’s been more than two decades since Microsoft jumped into the home console market.

When Microsoft announced the acquisitions of the likes of Oblivion, Rare, and even Bethesda, there was still a sense that the games industry was pursuing its longstanding business model: develop games, release them, sell them, turn a profit, repeat. But now I believe we’re actually in the midst of a major realignment in the way the entire games industry operates – a realignment that’s shaping up to be as disruptive as Netflix’s emergence as a streaming powerhouse in the early 2010s.

Microsoft isn’t making all of these big purchases just to make games and sell them individually. That approach will remain for the foreseeable future, of course, but it isn’t the company’s primary objective. In my view, this is all about Game Pass – Microsoft’s subscription service. Microsoft has seen how successful the subscription model has been for the likes of Netflix – but more importantly for the likes of Disney with Disney+.

Disney+ is both an inspiration and a warning for Microsoft and Game Pass.

As streaming has become bigger and bigger in the film and television sphere, more companies have tried to set up their own competing platforms. In doing so, they pulled their titles from Netflix – something we saw very recently with Star Trek: Discovery, for example, which will now be exclusively available on Paramount+. Microsoft is not content to simply license titles from other companies – like Activision Blizzard – because they fear that a day is coming soon when other companies try to become direct competitors with their own platforms – muscling in on what Microsoft sees as its turf. If Sony gets its act together and finally manages to launch a Game Pass competitor on its PlayStation consoles, Microsoft will be in an out-and-out scrap, and pre-empting that fight is what acquisitions like this one are all about.

If Netflix had had the foresight to use a portion of the money it had been making in the early 2010s to buy up film studios or television production companies, it would have lost far fewer titles over the last few years, and wouldn’t have needed to pivot so heavily into creating its own content from scratch. I think that the Activision Blizzard deal is one way for Microsoft to shore up its own subscription service ahead of a potential repeat of the “streaming wars” in the video game realm.

So it isn’t just about “more games for Game Pass” – this deal is about Microsoft’s vision for the future of gaming as a medium, and also their concerns about other companies trying to elbow their way in and become serious competitors. Spending $69 billion may be a huge financial hit up front, but if it pays off it will mean that Game Pass will remain competitive and profitable for years – or even decades – to come. That’s the attitude that I see through this move.

And I don’t believe for a moment that Microsoft is done. Activision Blizzard may be the company’s biggest acquisition to date, but it won’t be the last. When the deal is done and has officially gone through – something that most likely won’t happen for at least twelve months – expect to see Microsoft lining up its next big purchase, and it could be yet another games industry heavyweight. There have been rumours in the past that Microsoft had considered making a move for Electronic Arts, for example… so watch this space!

Could another big purchase be on the cards in the next couple of years?

As a player, these are exciting times – but also turbulent times. I increasingly feel that it’s hardly worth purchasing brand-new games, because several massive titles that I’ve spent money on have ended up coming to Game Pass. In the last few days the Hitman trilogy has arrived on the platform, Doom Eternal landed on Game Pass last year, and even Mass Effect: Legendary Edition is now on the platform less than a year after its release. What’s the point in buying any new games any more? Let’s just wait and it seems Microsoft will eventually bring them to Game Pass!

This is, of course, an attitude Microsoft wants to foster. If Game Pass is an appealing prospect, players will stop buying games. Once they’re “locked in” to the Game Pass ecosystem, Microsoft thinks it’s got them for the long haul. This is how Netflix, Disney+, and other streaming platforms view their audiences, too: once someone has been hooked in, they tend to stay hooked in. That’s why they put the majority of their time and energy into recruiting new subscribers rather than ensuring current subscribers stay signed up.

So it’s an interesting moment in gaming, and one that has the potential to herald an entirely new chapter in the medium’s history. People who decry the death of buying individual titles increasingly feel like they’re on the losing side; relics of an era that’s rapidly drawing to a close. Subscriptions have basically become the norm in film and television, with sales of DVDs, Blu-rays, and the like in what seems to be terminal decline. Television viewership, along with cable and satellite subscriptions, are likewise declining.

And who really feels that the death of broadcast television is something to mourn? Subscription platforms offered viewers a better deal – so they snapped it up. If Game Pass can do the same for gaming, more and more players will jump on board.

The Call of Duty series will soon join Game Pass.

Speaking for myself, I’ve been a subscriber to the PC version of Game Pass for almost a year-and-a-half. In that time, my subscription has cost me £8 per month ($10 in the US, I think). Call it eighteen months, and that’s £144 – or roughly the same amount of money as three brand-new full-price video games. In that time I’ve played more than three games, meaning Game Pass feels like a pretty good deal. If Microsoft continues to splash its cash on the likes of Activision Blizzard, bringing even more titles to the platform without asking me to pay substantially more for my subscription, then as a consumer I gotta say it’s worth it.

One corporate acquisition on its own does not irreversibly shift the gaming landscape. But we’re on a trajectory now that I believe will see gaming move away from the old way of doing business into a new era where subscriptions will be a dominant force. There will be advantages and disadvantages to this, but I don’t see it slowing down. As the likes of Sony and even Nintendo try to compete with Game Pass, if anything we’re likely to see this trend speed up.

Watch this space – because this certainly won’t be Microsoft’s last big move.

All titles mentioned above are the copyright of their respective studio, developer, and/or publisher. Some promotional screenshots courtesy of IGDB. This article contains the thoughts and opinions of one person only and is not intended to cause any offence.