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The Future of Gaming Is Subscription

What does it mean to “own” a game?

In video gaming’s infancy, it meant scribbling your name on the back of a gray NES cartridge. Today, it could mean having a physical copy of a disc in a box or having a digital copy on your PC or console hard drive.

But things start to get fuzzy when you think about programs like Xbox Live and PlayStation Plus, which grant licenses for a handful of games on a monthly rotating basis. Do you “own” a “Games with Gold” title if you never let your membership lapse? Of course not, but the act of “purchasing” the game for “free” from the store during the month its available and retaining it over the long term aligns with the paradigm of ownership we’ve understood for years.

Over the past few years, consumers have had their conceptions about entertainment ownership challenged. Many have given up their huge collections of CDs and DVDs, because services like Spotify and Netflix changed everything.

There’s still a place for Blu-Ray ownership, but the market is clearly shrinking. Disc sales and rentals were down precipitously in 2017, but subscription memberships are surging. Music ownership has been on the decline for years thanks to services like Pandora and Spotify.

Now the video game industry is moving full-steam ahead to incorporate subscription-based access into the mix. There’s a long road ahead, though. Despite the growth of digital ownership across the industry, players still feel a sense of ownership over their content. Whether they are still going to a retailer for a physical copy or downloading direct from a storefront, there is a one-to-one transaction that takes place: money now for a game that can be played in perpetuity (even if that notion of permanence has been challenged of late).

The entire value proposition has changed. In a subscription model, consumers don’t often think about what they’ll get out of a single game. Instead, they look at all the options available as the driving factor.

“The need to own is being supplanted with a need to experience things and a desire to try,” says EA senior vice president of player network Michael Blank. “And as a result, we’re seeing this shift in consumption patterns where access is being valued greater than ownership.”

EA offered one of the first major subscription programs available, beginning with EA Access on Xbox One. The selling proposition was three-fold: 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. The program was later expanded to PC with a similar offering.

In June 2017, Microsoft took that concept and released a Netflix-style offering for its first-party games and a number of titles from third-party developers and publishers. The key difference was including new first-party releases at launch, day-and-date with retail and digital purchase options.

Microsoft isn’t disclosing specific metrics, but it is crediting Game Pass with the success of its titles. “Sea of Thieves” just hit 5 million players, “State of Decay 2” has been played by more than 3 million, and “Forza Horizon 4” had 2 million people online in the first week, and over 7 million total. All of these populations were bolstered by Game Pass users. Microsoft’s model is an attractive one for people who aren’t sure if they want to drop $60 on a new game, and EA followed suit with Origin Access Premier, announced at E3 2019.

Access Premier on PC adds another layer, giving subscribers EA’s newest games to play as soon as they are available to purchase. This includes sports titles like “FIFA 19” and action games like BioWare’s “Anthem.”

Selling a service like Access Premier internally at EA wasn’t a slam dunk. Investors still look at unit sales for new releases as a key performance indicator. “Giving” those games away with a premium subscription program is a harder thing for investors to wrap their heads around. We’re still shifting from sales as the primary indicator of success to a model that more accurately values repeat usership.

Adding new releases to a subscription program is a bit of an easier proposition for the Xbox business, because the team is one part of a larger Microsoft financial machine. For EA, gaming is the company’s core and only business.

“I believe that what is good for the players will ultimately be good for the industry, which will ultimately be good for our company,” Blank says. “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 that they engage in our network and the more they motivate others to play. All this translates into positive, good things for the company.”

In 2016, two years after the launch of EA Access on Xbox One and a few months after Origin Access began on PC, EA noted that the program was having a positive impact on its business. Subscribers were playing more games, playing for longer, and most importantly for EA, spending more money in those games.

Microsoft put a finer point on the impact of Game Pass on its users. “We were pleasantly surprised to see members increase their total number of games played by almost 40 percent, including titles outside the Xbox Game Pass catalog,” says Xbox Game Pass head of planning and business development Matt Percy. “What’s also great to see is those same community members often discover new franchises they enjoy through the Xbox Game Pass catalog and then go on to try the next major release from those franchises or developers. On average, we see a 25% increase in franchise pre-orders and 10% increase in franchise sales from Xbox Game Pass members compared to non-members.”

What EA and Microsoft are finding is that players are breaking out of their usual purchase habits when they have access to a deep bench of diverse games. A perennial “Madden” player might not risk $60 on a first-person shooter or action game. But if they already have a subscription and there’s no financial barrier to entry, there’s more reason to try games outside their comfort zone.

Percy says that Microsoft is seeing Game Pass members increase the number of genres they play by 30 percent, inclusive of titles outside of Game Pass. In other words, subscription programs aren’t just encouraging people to branch out within the catalog, they are creating overall changes in how a person views their relationship with game content and pushing people outside their comfort zones.

We’re starting to see more entrants in the subscription market. Sony has its version, PlayStation Now, which uses cloud-based streaming to deliver content. Discord’s Nitro service has a catalog of games for subscribers, and Humble offers a similar “trove” of games for those that participate in its monthly program. With cloud-based game streaming also on the rise, like Blade’s Shadow PC service, Google’s Project Stream, Nvidia’s GeForce Now, Microsoft’s xCloud, and EA’s own upcoming solution, the competition for users is going to be fierce.

If players buy in, they’ll shift dollars dedicated to game purchases toward monthly or annual subscription fees. More competition doesn’t necessarily have to be a threat if it strengthens that monetization model overall.

“I think it creates more opportunity for people to play lots of kinds of games with lower friction,” Blank says. “Yes, it does apply a little bit more pressure to the sub services that are out there to find the right kind of games. But there are thousands of amazing games in the market from AAA publishers and from emerging indie publishers. There’s no shortage of content for players. So while yes, there is more competition in the subscription space with more subscription services in the market today than there were three or four years ago, there are thousands of amazing games being created and I think there’s space for more than one subscription in the market, just like we see in the world of TV and movies. There’s some overlap and that’s okay. I think subscriptions will in and of itself also create new kinds of play experiences that different sub services will innovate on. So this added competition is a good thing. It pushes the industry forward and it creates more ways to play. And I think that’s a good thing for players.”

EA, Microsoft, and Sony will need to stay on their toes and continue increasing the value of the programs as more options enter the mix. As more competitors enter the field, it will certainly help make the case overall for subscription-based gaming. But those providing the service will also need to continue to secure unique content that makes their offering stand out.

Both Microsoft and EA have engaged external partners to beef up their libraries. In order for this to be sustainable, developers and publishers need to see the value. Unless there is a lot of money changing hands, that often means that partners will see the best alignment with catalog titles that have already been through sales and discounts. There are outliers, though. EA and THQ Nordic have come together to include Darksiders III (released in late November 2018) as part of Origin Access Premier.

“The reason why I believe they are participating is because it’s providing their games an opportunity to be seen and provided to new players,” Blank says. Putting third party games alongside our games creates an even larger ecosystem of play.”

With discoverability becoming an increasing challenge on digital storefronts, EA and Microsoft see that providing a way to cut through the noise is a key way to add value to partners.

“We’ve received feedback from partners, which we have been excited to see in our own data, around Xbox Game Pass’ ability to help give smaller/independent titles and studios a better chance to succeed at launch, helping to create longevity for these experiences,” Percy says. “With Xbox Game Pass, titles such as ‘Laser League’ and ‘Human: Fall Flat’ have the potential for millions of players to access and engage with their title at release, which helps contribute to the overall health of the game.”

As the battle for consumers’ subscription dollars heats up, the services that can attract and retain a broad range of content will have the most success bringing people into the fold and keeping them on board.

Pricing is going to be key. Right now, the subscription programs are exceptionally affordable, with Origin Access Premier, PlayStation Now, and Discord Nitro only $100 per year; Game Pass at $120 per year; and Humble Monthly at $132 per year (inclusive of games you can keep post-membership). That doesn’t seem sustainable over the long-term if players begin buying fewer new releases and lean more heavily on the content that’s included in their subscriptions. Knowing that games will show up on a service after a bit of a wait will mute, but not eliminate, the desire to buy new games.

Despite the growing interest from consumers and publishers in subscription-based gaming, it likely won’t fully replace traditional physical ownership or digital purchasing. Music and movie sales aren’t dead, they’ve just been eclipsed. The same is likely to happen with games.

“I think we’re going to live in a world for a period of time with a whole array of different kinds of models coexist,” Blank says. “We’ll see people want to subscribe to games. We’ll see the impact of cloud and how that will enable players to play games across all different kinds of devices. I think we’re going to live in a world where many different models coexist for a long time. And as a result, we have to get good at helping players understand what the right service or the best way to play is for them.”

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