Bloomberg Businessweek August 31, 202020
players say is a stronger slate of games. Central
to Microsoft’s optimism is a service called Game
Pass, which offers a vast selection of titles for a flat
monthly fee. “We’re confident,” says Sarah Bond,
the vice president who oversees relations with game
creators. “We will launch with thousands of games.”
Game Pass and similar offerings from Apple,
Google, Sony, and other software houses are
changing the dynamics of the video game busi-
ness. After spending hundreds of dollars on a game
machine, users would typically have to lay out an
additional $60 or so for any newly released A-list
title they wanted to play. Now a subscription cost-
ing $5 to $15 per month will get them scores, or
even hundreds, of games—including, in Microsoft’s
case, hot titles on the day they’re released. Since
Game Pass was introduced three years ago,
Microsoft has signed up 10 million subscribers.
Sony, which started its PlayStation Now service in
2014, has some 2.2 million customers, more than
triple the number a year earlier after the price was
cut in half, to $10 per month. “Subscriptions will
play a big role in driving engagement,” says George
Jijiashvili, an analyst at researcher Omdia.
Subscriptions can keep revenue flowing even
when a company has no new console or block-
buster title. Game Pass is available in 41 coun-
tries, and Microsoft is adding the ability to stream
games to Android devices. This fall it’s tripling the
number of countries where it sells what it calls All
Access, which gives customers a new console and
a Game Pass subscription for a monthly fee that’s
currently $20 to $25, similar to cellphone con-
tracts that periodically give you a new handset.
The company says deals with Walmart Inc. and
Target Corp. will help boost sales of All Access.
Contrary to expectations, Bond says, monthly
plans get customers to spend more. A Game Passsubscriptionleadstoabout20%moreplaying
time.Userssamplea widervarietyofgenres,and
theygenerate20%moreinsales,bothontitlesnot
includedintheplanandonextrassuchasdown-
loadablecontent.GamePasshelpedincreaserev-
enueforXboxcontentandservicesby65%inthe
mostrecentquarter.“Peoplemakethisassump-
tionthatif youhavea subscription,youstopbuy-
inggames,”Bondsays,buttheoppositeis true.
Theriskforsubscriptionprovidersis thatgame
fansmaytireofpayingmultiplemonthlyfees,
muchasTVfansarestartingtowonderwhether
theyreallyneedNetflixandHuluandDisney+
andHBOMax.Butindustrywatcherssaythere’s
plentyofroomforgrowthbecausethegamesbusi-
nesslagsvideoandmusicinconvertingbuyersto
subscribers.Whilesubscriptionsmakeupalmost
90%ofpremiumvideorevenue,Omdiasays,they
accountforlessthana fifthofthe$53billionin
annualsalesofconsoleandPCgames.
Although Microsoftoffersgamemakersan
upfrontpaymentandbonusesbasedonhowwell
a titledoes,producersaren’tentirelyenthusias-
tic.Many,particularlymakersofsmash-hitgames,
fretthatsubscriptionserviceswillshakeupthe
industryinthesamewayplatformssuchasApple,
Pandora,andSpotifychangedmusic,takingthe
biggestsliceofrevenue.AsurveybytheGame
DevelopersConferencefoundthatalmostthree-
fourthsofdevelopersfearsubscriptionsmighthurt
thevalueofindividualgames.Still,it’sa hit-driven
businesswithmyriadtitlesjockeyingforattention,
andevensuccessfulstudiosoftenworryaboutcov-
eringcosts.Forthem,GamePasscanseemlikea
surething.“Yougeta goodinfluxofcashasan
advance,”saysDanDaRocha,studiochiefatJaw
DropGames.“It’sa verygoodhelpinghand.”
Simon Byron,publishingdirector ofCurve
Digital,a softwarehouseinLondon,saysGame
Passhashelpedwinnewfansforhispuzzlegames,
whicharen’ttypicalconsolefare.Microsoftsays
60%ofpeoplewhoplayedCurve’sHuman:FallFlat
onGamePasshadneverdonepuzzlesbefore,and
two-fifthsofthoseboughta similartitleafterplay-
ing.Whileindividualsalesofthe$15gamearecom-
parableonXboxandPlayStation,fivetimesmore
customershavetriedit onGamePass,accordingto
Byron.“Weweregenuinelynervous,butsofarwe’ve
beenreallypleased,”hesays.“Selfishly,theservice
is becomingsopopularwithotherpublishersthat
it’sbecomehardertoputourtitlesthere,butthat’s
a signthey’redoingsomethingright.”�DinaBassTHE BOTTOM LINE Where users once had to lay out $60 for the
latest games, they can now get access to hundreds for $5 to $15 per
month—including hot titles on the day they’re released.◀ Bond