Creating a subscription service isn't easy. Attracting new customers with the latest offers and updates while keeping current ones engaged and satified can feel like endlessly plugging holes in a leaky bucket. And with no clear link between content investment and number of customers it's far too tempting to rest on your laurels and let the money machine keep ticking over… But sooner or later you'll be rewarded with a mass exodus and your revenue hits the deck.
So what's the winning cominbation? Fundamentally Games CEO Oscar Clark explains the secret to achieving the holy grail of subs services: Smart and sensible investment in new content with maximum customer statisfaction and unquestioning retention.
I made the offhand comment that's the title of this article, back in PGC London, rather unfairly, on a publishing panel when the topic of subscription came up. But it has been something that has been in the back of my mind since 2011 (may have been earlier) when someone from the World of Warcraft Team gave a fascinating talk on the topic at a GDC lecture that I attended. At the time I thought their situation was just something that affected MMO markets, but increasingly the perspective they shared has become more and more central to my thinking about game monetisation.
Because any purchase we make, game related or not, needs to be a combination of anticipation, fear of missing out and social capital, otherwise we find ourselves unmoved to act. And these three elements are not enough on their own. It is only when the buyer themselves sets aside their other priorities and take the risk of the first purchase that these magical components result in spending.
This isn’t my idea. Check out the paper, Consumer behaviour as Risk Taking (R.Bauer 1960) which still holds water today. Repeat purchases are often driven by inertia, confirmation bias or, when we do our job right, a genuine desire for more.
So, with this in mind you could be forgiven for believing that I love subscriptions! That’s where things get more complicated…
What do we mean by a subscription service
teams need to make sure that they have enough new content coming through that will excite their consumers on a daily/weekly basisOscar Clark
In a Netflix/Spotify model we get what appears to be the ultimate value for the player. They get a buffet of delicious, varied content and it all comes to them at a single price point. That’s amazing! But the twist is that those teams need to make sure that they have enough new content coming through that will excite their consumers on a daily/weekly basis. It’s a content treadmill just to sustain the audience attention.
And there's an elephant in the room - the gym membership problem. As long as people don’t decide to unsubscribe, the platform keeps getting their revenue – the inertia I mentioned earlier. In fact, most platforms are better off when their subscribers don’t actually use the platform at all (and still pay). A customer who never uses the facilities, never generates additional costs, whether that is wear and tear on the gym equipment or firing up a web server. The inertia in this example comes from it being more effort to cancel the repeat process, rather than to just let it happen each month.
But this is something which creates an increasingly negative perception of the platform itself. Any changes to the offering, good or bad is a reminder to those people who are paying. Therefore, when those platforms hit a roadblock, such as the changing of contract terms, an increase in price, or even just a more talked about series on another platform they often lose a bunch of subscribers.
When to invest and when to stand back
Going back to that pivotal (to me) talk the World of Warcraft representative gave. They explained a third difficulty that they were having at the time. They were the dominant MMO at the time but had a fairly static number of subscribers and adding features outside of a big new upgrade release was next to impossible to justify. But why? The focus of the talk was about the introduction of a Pet system (yes this is a long time ago!). Other competitive games around the same time all had this feature, but the WOW team knew it would be a lot of work to add it to their game.
Adding any new feature was a cost and because at the time there were no in-app purchases in the game, you couldn’t demonstrate revenue benefits. Instead it had to be all about retention. New revenues would be linked to new expansions which generally meant a lot of other features to compete with. However, at the same time they were competing with newly scaling often free to play titles (such as Runescape) that were able to introduce new experiences more quickly.
In the end they managed to convince management to let them add the feature as it was super important, but it demonstrated to me the point that there is a lot more inertia in terms of innovation when it comes to ‘cost’ centres rather than ‘profit’ centres in an organisation. Teams that are focused on reducing cost will baulk at spending on new developments - even if they can help increase retention or if they are necessary to turn around a potential decline in users/subscribers.
We know that WOW is still around today but there are too many studios and teams who failed to understand the importance of revenue to justify creative development. It’s so much easier to take a risk if there is something that can be directly measured such as revenue from new assets.
There is another elephant in the room. What could be dubbed “The Spotify Problem”. There are over 80 million songs on Spotify and over half-a-billion users, and currently around 40% of revenue comes from subscribers. Spotify pays artists $0.003 and $0.005 per stream, the more artists and songs on the service the more that subscriber base revenue is split. But of course, its not that simple, if big new songs are released, those tend to get the lion’s share of the streams and hence reduce the share available to other content. Spotify also has an ad revenue associated with the streaming service which augments the revenue - although despite scaling with the level of listens, is not generally going to deliver the same value for artists.
Give them more of what they love (and let them pay for it)
So, what is the solution? Well, for me it’s all about upsell.
The ability to upsell items in your game, whether you are on a subscription platform or if your game includes a VIP subscription option such as a Battlepass, is extremely powerfulOscar Clark
There is a reason why I love Xbox Game Pass’s business model. I get access to premium content for a reasonable monthly price, and most of that content is available for a long time. But content leaves the platform regularly (so I get a level of FOMO to try those games before they go) and for games which support it I get to additionally make IAP purchases for additional elements. Whether that is DLC or other in-game elements.
Fallout 76 is my go-to example. A game which I expected to be terrible following it’s disastrous release. But as it was a title which was essentially free to me because I was already an Xbox Game Pass subscriber it was essentially free to play. I could also buy cosmetics and minor consumables on top of my subscription. In short, I was upsold. And I loved it. Indeed, I spent a lot more money on that game than I would have had I originally purchased it at full price.
The ability to upsell items in your game, whether you are on a subscription platform or if your game includes a VIP subscription option such as a Battlepass, is extremely powerful. This not only allows you to get revenue to support on-going development, but it gives you the freedom to explore what players actually love. But we have to do this authentically. If not we'll simply alienate our players and make expensive add-ons which just damage our reputation – and definitely no-pay-to-win!
In short, all-you-can-eat subscriptions often rely on inertia to sustain the revenue base, sometimes leading to resentment and ultimately making your game more vulnerable to rapid market changes. However, if we look instead at offering quality value propositions for players to choose to additionally purchase they will often reward us and this allow us to make sure that our game - and the game that they love - constantly adapts to new possibilities.