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There’s no room for a successful subscription service in games

Despite offering a great deal, it makes little sense for platform holders and developers and doesn't fit with player habits at scale
There’s no room for a successful subscription service in games

I’m a huge fan of Xbox Game Pass. It is incredible value for money. I’ve been able to play games like Age of Empires IV, Starfield, Back 4 Blood, Football Manager and many, many more, all for just £7.99 per month.

But the business model of subscriptions doesn't make much sense for games.

That's not to say Microsoft isn't making a go of it. It has invested heavily in acquiring top developers and publishers like its $69 billion purchase of Activision and its $7.5bn purchase of ZeniMax and Bethesda. It even claims to have 34 million subscribers on Game Pass.

But it's questionable whether Microsoft’s gamble is ultimately going to pay off, particularly as Microsoft makes deep cuts across its Bethesda studios. (Listen to our recent podcast episode for my thoughts on that and the differing reasons executives have given publicly for the closures).

In February, Microsoft revealed Game Pass has 34 million subscribers, though it's not clear how that breaks down. Game Pass Core is now required for console players to play online after replacing Xbox Live Gold, potentially inflating the figures. In January 2022, Microsoft said it had 22 million subscribers.

The Verge reported Xbox content and services revenue, which includes Game Pass, was up by 62% year-over-year in Q3, but it attributed the bulk of that increase down to Activision Blizzard revenue.

According to Circana exeuctive director and games industry advisor Mat Piscatella, games subscription growth has stalled. March 2024 subscription spending was up 1% in the US compared to April 2023. Last year, April subscription spending rose just 2% from April 2022 to April 2023.

Unless growth is occurring outside of the US, that would suggest Game Pass is not growing quite so rapidly as it may seem.

On mobile, there have also been subscription services such as Google Play Pass (which is rarely talked about), Apple Arcade and Netflix - the latter seemingly the most serious endeavour. But it’s difficult to see how such services can be successful for these enormous companies, and in the long-term, for developers.

Apple might technically be one of the biggest games companies in the world, but it doesn’t particularly care for games - See App Tracking Transparency and the unique business terms it has for games compared to other apps.

It could easily drop Arcade at any time. A report on earlier this year noted there was “the smell of death” around the service, along with ever-declining developer payouts. It only exists because Apple wanted to get into 'services' at a time when hardware sales were soft.

Netflix doesn’t yet have the big breakout hit(s) it needs - or seemingly one on the horizon - to make games a substantial part of its offering. An old Grand Theft Auto is nice to have, but for a company like Netflix to really stick with games, it will want the big money spinner.

Games are played and built differently

One of the USPs for Netflix was that you could watch a TV show or film at any time you want, wherever you want. This all came at a low subscription price each month, with new content regularly added to the service and no ads (though things have changed on that front).

There was a clear disruption, backed by enormous amounts of investment to rapidly scale an innovative new service and effectively create a monopoly in the space. It was sufficiently different from the traditional way these mediums were consumed, and provided bang for your buck.

As I noted earlier, game subscriptions like a Game Pass are an incredible deal. But there are a few reasons they aren't scalable in the same way as TV and film:

  • The way games businesses make games is different from TV and film.
  • There’s more money for developers outside of a subscription service.
  • Games compete with premium, live service and free-to-play models.
  • Player habits are completely different.

As a passive experience, TV and film are easy to consume. They are also finite experiences (Unless you’re starting out on Naruto - good luck to you).

The promise of a Netflix for games assumes they are like film and TV. They aren’t. A wide array of game types means there are short, snackable, easy to play games, some that could become part of your daily routine. Games that last two hours, or grand story-based adventures that can last for 50 hours+. They can be free-to-play or premium.

Microsoft would love to have a Fortnite... but it wouldn't be half as successful inside Game Pass
Microsoft would love to have a Fortnite... but it wouldn't be half as successful inside Game Pass

Then there are live service titles like Fortnite, Apex Legends, PUBG Mobile, or MMOs like World of WarCraft, all designed to keep you coming back. The industry also has UGC titles like Roblox, the aforementioned Fortnite, and Minecraft. These experiences can be infinite, and they take up a lot of the time a subscription service is trying to take.

The model may work for small developers looking to fund their next game, but it's hard to see a reliable, long-term money maker when the goal is for the platform holder to gain sufficient scale and high engagement.

A Netflix for games isn’t scalable

There is an audience for an Xbox Game Pass, a Netflix or an Apple Arcade that’s eager to get a good deal or is willing to jump regularly from game to game. But that’s not the whole market. Certainly not the scale that Netflix, Apple and Microsoft want.

A subscription service doesn’t tap into all these differing player habits - it can’t.

A Fortnite wrapped as just one title in a subscription service isn’t sustainable and makes no business sense. I doubt it would receive the same support as it has as a single, free-to-play game.

A subscription service ignores the last 10+ years of industry trends: Ever larger and more expensive triple-A titles, live services and free-to-play.

You can make a game like Redfall for Xbox Game Pass that attracts millions of users - but how it monetises and engages on a subscription service over time is finite and significantly lowers its potential. You wouldn't see a $200 million per year investment in Genshin Impact on the service - even if that’s the kind of game Microsoft would love to have.

I’m also reminded of Apple, a year after the launch of Arcade, reportedly shifting its strategy to seek games with higher levels of engagement. That sounds an awful lot like free-to-play and live service to me!

Would a developer really want to limit its potential with a single paycheck on such an endeavour? What’s the long-term support plan when payouts are capped? If it’s a platform’s major first-party title - is such a game even profitable?

Subbed off

A subscription service ignores the last 10+ years of industry trends: Ever larger and more expensive triple-A titles, live services and free-to-play.

Xbox’s strategy appears to be at sea on Game Pass - particularly as it has effectively become a cross-platform publisher following the acquisitions of Bethesda and Activision, with titles like Call of Duty finding most of their success outside of Xbox hardware.

Apple Arcade saw some of the light on subscriptions - reported earlier this year it shifted its focus to kids games. It couldn't put the free-to-play and live ops genie back in the bottle. Rovio-backed subscription service Hatch did the same thing, shifting to Hatch Kids in an attempt to keep that platform alive.

I'm sure the idea of a consistent subscription revenue stream sounds appealing to platform holders, where the benefits can increasingly become heavily stacked in their favour.

But games subscription services have never truly worked, and it’s hard to see how they ever will.