Are subscription and streaming models sustainable for the industry?
Let me start by saying I think Game Pass and services like it are a fantastic idea. They are excellently priced and give you access to all the games you could ever need and that library grows larger everyday. Consumers get the best bang for their buck and for some devs their game reaches an audience that it may not have been able to before. It's also great for getting players to try games they would never normally consider as it won't cost them anything more than their subscription fee. Everything I just mentioned is great for the consumer and somewhat good for game devs but, how is it for the gaming industry as a whole?
The aim of this article is to examine this in detail where the subscription model might lead us for both good and bad. As this model is relatively new to the industry outside of individual subscriptions such as World of Warcraft, I will be looking at other entertainment industries like music and film to see how adopting the model has affected them. I know it might seem like I am comparing apples to oranges but there are some similarities to draw on. Like I said above, it's very new to gaming so we need to start somewhere. I would also like to preface that it's not my intention to bash Game Pass, it just happens to be the biggest and most well known service of its kind.
Xbox boss Phil Spencer recently spoke to The Verge about the types of deals Microsoft are making with devs. Although no exact figures were mentioned he does mention many of the models I am going to talk about. Spencer tells The Verge: "Our deals are, I'll say, all over the place. That sounds unmanaged, but it's really based on the developer's need,". He then went on to say "We're open to experimenting with many different partners, because we don't think we have it figured out," Spencer said. "When we started, we had a model that was all based on usage. Most of the partners said, 'Yeah, yeah, we understand that, but we don't believe it, so just give us the money upfront.'”
With all that said, game streaming services are still in its early days and it seems the industry is acknowledging that by trying many different solutions. Let's dive into those solutions and see whether subscriptions spell the end or a new dawn for gaming.
How does it all work?
At the moment of writing this there is very little information about how game developers make money from having their game on Game Pass. However, if we take a look at other subscription models from different industries we can formulate a picture of how it might work. In other industries the main way in which a creator makes money for having their work on a streaming service comes in three forms which I will give you a brief outline of and go into more detail later.
The first being a flat fee. You have a game and you want to put it on a streaming service like Game Pass. You negotiate a one time lump sum to be paid by the streaming company. Your game then appears on the service for the negotiated period of time. This is how services like Netflix mostly operate.
The second would be similar to that of the music steaming model such as Spotify. Using this model you would be paid a percentage based on the number of times your game was played or number of hours played for. The amount you receive would vary but it is usually pennies on the dollar amount users are charged for the service.
The third model which is also quite popular with the likes of Netflix and Amazon is the funding model. Let's say you're a game dev with an amazing idea for a game but you need money to get it made. In steps your local neighbourhood streaming service and tells you they will fund your game and it will exclusively appear on their service. The best example of this is when you see Netflix or Amazon original at the start of a movie or TV show.
With game streaming being so new they may develop other ways of paying creators but for now these seem like the most likely options.
Positives and negatives
So, now that we have an idea about how it might work it's time to examine how it will affect game devs going forward. Before I go further into detail I would like to say that each of these methods share a common positive and negative which are kind of two sides of the coin. If you have your game on a streaming platform chances are more people will play your game because they are already invested due to their subscription fee. Which is great because you reach a huge audience. The inverse of this is it may lead to dwindling sales because if people play your game on a streaming service they are a hell of a lot less likely to buy your game afterwards for full price. Why buy the cow when you can get the milk for free as it were.
The flat fee is great for a dev because it's a guaranteed sum of money regardless of sales figures or the popularity of your game. It is also icing on the cake because it still allows you to sell your game through normal channels such as physical and digital store fronts. This money allows a dev to recoup some money on development even if their game is a flop. However the one time fee is a double edged sword. Normally with media ,and games are no different, you would have a sales team that would broker deals for different territories around the world. They would be securing you the best deal to have your game sold in Japan or Europe etc. The flat fee model is just that. One flat fee for world wide distribution on the platform no negotiations, no making back money in one territory that you lose out on from another.
The pay per play model allows a dev to have a continuous income stream from whatever streaming service they choose. Each week or month they will receive a payment based on many times their game was played. It can provide relief to know that you could potentially make money indefinitely from your game. Where this all falls apart is the amount of money. As mentioned earlier with the Spotify model this fee per play is usually a pittance and the devs would have no chance covering their development costs.
The funding model is probably the best option out of the bunch. Devs get paid to make their game. The subscription service gets to say they will have a great game as an exclusive to drive subscriptions and everybody wins right? Where this method falls down is that it turns into a shotgun approach. What do I mean by that? Well let's look at how much original content someone like Netflix has. It's a lot, some of it amazing most of it trash. This is because content is being made just for sake of having original content. You may think, great more games for me to play but do really want to play bad games just for the sake of having games to play? It's a quantity versus quality approach that is bad for consumers in the long run.
Everyone wants a piece of the pie
Much like the early days of TV and movie streaming there are only a small number of players in the market. This is great right now because you only have to have one maybe two subscriptions at most and you get access to almost every game you could ever want. The popularity of game streaming is on the rise and fast. 70% of Xbox owners are subscribed to Game Pass. So, how long before everyone wants in? I think we can all agree that soon we are going to see a saturation of the market. Once again you may think great more games for me but at what cost. We will reach a point where to access a lot of your favourite titles you are going to need a Ubisoft subscription, a Sony one, Game Pass, Activison and so on and before you know it the monthly fees will be too much. This will leave the market more fractured than ever. You will ask your friend if they played the new Final Fantasy and instead of hearing no but it’s on my list and will play it soon. You will get the response, no I don't have a Square Enix subscription because I already pay for EA and Activision and I can't afford a third.
Okay so maybe that is some kind of dystopian gaming future that is a long way off or maybe not. Let's say not everyone gets involved and there are only a few streaming services. We still run into exclusivity issues. There is also the problem of games disappearing from a service. What if you start a huge game like Red Dead Redemption. You’re a busy person with a life and maybe only get to play a couple of hours a week. One day you have some time to play and you open up your streaming platform of choice only to find that whatever deal Rockstar made with service has reached an end and the game has been removed. Now you either have to buy the game for full market price or subscribe to a different service. Begging the question why did you bother subscribing at all if you just have pay again.
I pray I am wrong
At this moment in time there is no denying the value in the subscription model for the average gamer with only a few key players the cost is low and you get to play a ton of games. With there still being an emphasis on traditional game sales alongside subscriptions it's still good for devs as they get paid and reach more people than ever before.
As we go further into uncharted territories with game streaming I can see the dystopian future I talked about early starting to emerge where we need 9 different subscriptions just to play the games we love. I know competition leads to a cheaper market for all which is good for the consumer. In the long run though I think it will lead to sharp decline in quality.
I really hope I am wrong but with the rise of phrases like “I will just wait till it comes out on Game Pass." I am not optimistic.
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