Xbox Game Pass is a new paradigm
The Xbox Game Pass is one of the biggest and most talked about developments in the gaming environment over the past five years, both for Microsoft and for the industry as a whole. Subscription services have made a big difference when it comes to publishing and consuming games. Game Pass is generally a good feeling among consumers, so the meme is “hundreds of games at a low price”. However, many critics of the service question or worry about the impact Game Pass has on the gaming ecosystem when it comes to reducing the value of games that grab attention or become reality. Making the subscription-based model sustainable is only possible for the following reasons: Microsoft is worth literally over $ 1,000 billion. The service is so new that long-term data is not available and you can only guess what impact Game Pass might have in the future. But that’s not all thanks to the lively and ongoing discussions and discussions about Game Pass.
Speaking to GameSpot, Wedbush Securities analyst Michael Pachter offered a few takeaways on Xbox Game Pass, acknowledging upfront that he never received confirmation of his estimates and only offered a general overview. Pachter said he believes one source of revenue for Game Pass comes from time spent playing games. Microsoft can pay publishers based on the number of hours people spend playing games on Game Pass, because “stickiness” – crass as it may be – is what businesses like to see. More time spent on your rig instead of “bouncing” is a good deal.
Like most other entertainment companies, Microsoft is hiding its business relationships and details of its contracts when it comes to Game Pass. It’s common practice, of course, but it also means that we have no good way of thinking or measuring the economic and business realities of Game Pass. Phil Spencer and other Microsoft executives have been talking about how valuable Game Pass is, but what else would they say? And the company, despite its overall size, appears to have placed real importance on Game Pass, with growth in subscriber numbers even being one of CEO Satya Nadella’s potential bonuses. The Game Pass may be great value, cost effective, and sustainable, but how does it all work?
“My best guess is that Microsoft ‘pays’ publishers 65% of revenue based on the time spent playing each game. If Microsoft games capture 50% of the game, they ‘pay’ themselves half of the 65%. Pachter said. “If EA’s games capture 10% and Microsoft has 25 million users paying $ 100 a year (which makes it simple), Microsoft’s revenue is $ 2.5 billion and the amount available for revenue sharing is 65%, or about $ 1.6 billion. This means that EA would get $ 160 million per year under these assumptions. It’s hard to know what percentage of time is spent on a game, but Microsoft has the means to capture and verify with publishers, so that’s how they get the games.
Spencer himself has openly explained that there is no set path for the deals made for the Game Pass releases. He told The Verge that Microsoft’s Game Pass offerings are “everywhere” and he understands that it can seem “unmanaged”. In some cases, Microsoft will fully fund the costs of developing a game, and the studio may sell its game on competing stores like PlayStation and Steam, or at retail, while Microsoft enjoys the benefit of having another game. Game Pass. “For them, they have protected themselves from any downside risk. The game will be done. Then they have all the advantages of retail, we have the opportunity to know the day and date. It would be a lump sum payment to a developer, ”he said.
Naysayers points out that play-time-based payment models can have subtle effects when developers create games and deliver longevity-focused Microsoft games and live services. That may be true, but Microsoft is clearly reducing chords in different ways at different times in different studios to meet their needs. There does not appear to be a universal model for Game Pass. Microsoft may perform another type of transaction that gives publishers a minimum guarantee for games that are only available for a limited time on Game Pass, Pactor said. However, Microsoft is not disclosing details of the transaction, so no official details are available.
In other cases, a game may be finished and then Microsoft makes a cash deal to bring it to Game Pass, Spencer said. Yet other offerings involve the use and level of monetization of a game through in-game sales. If this all sounds like the Wild West, that’s because it is.
Spencer openly admits that Microsoft does not have all the answers. “We don’t think we’ve found it, so we’re open to experimenting with many different partners. When we started we had a single use model. Most partners “Yes, yes, we understand, but we don’t believe it, so give us money up front,” he said.
I am a Game Pass subscriber and enjoy the many benefits of the service, and have recommended it to my friends and family. But as an observer and someone who loves the finer, granular details of how games make money, I’m intrigued by any situation where a company says, “This thing is great,” all the time, for everyone. »Where does the rubber meet the road? Who gets the short end of the stick? We do not know. But Strauss Zelnick, CEO of GTA Take-Two’s parent company, questioned whether or not it was possible for everyone in the chain – developers, publishers and consumers – to offer a subscription service like Game Pass. In a phone conversation, Zelnick said subscription services like Game Pass are suitable for older catalog games. This is why Take Two recently released some of its games such as GTA V and GTA: San Andreas on Game Pass. But he wondered if that made sense for the new version. “To achieve a meaningful business model in the entertainment industry, it must work for both entertainment manufacturers and entertainment consumers. Catalogs are consumers who really want access to many products, even for publishers. But when it comes to front-line products, it’s much more difficult to understand the economics. “
Zelnick observed that the “consumption models” for a streaming service like Netflix – which offers linear entertainment – are different from interactive entertainment like games. And as such, viewing Game Pass as the “Netflix of games” may not be appropriate. “Consumers involved in interactive entertainment have different consumption patterns than those involved in linear entertainment. Linear entertainment consumers consume approximately 150 hours of programming per month. It’s probably well over 100 different titles. In the case of interactive entertainment, consumers consume about 45 hours per month, which can be one, two, three, four titles. But it is certainly not 100 titles. So from a consumer perspective, it’s not clear that a subscription model really makes sense, for most consumers, ”he said.
Another game manager who isn’t very keen on subscription services is Graeme Struthers, co-founder of Devolver Digital. He told GameSpot that his main concern was that subscription packages could become so packed with games that subscribers might have a hard time finding something to play (anyone who has used Netflix is aware of this phenomenon). “The subscription world is a concern. And we’re active in these areas, so we can’t sit on the sidelines and complain about these things. Game Pass, PlayStation Plus and Apple Arcade, these are things we are involved in, ”he explained. “You wonder if this is going to lead to a situation where there is so much content that you kind of fall over the edge. It is the one that keeps us from sleeping at night.
Microsoft’s own data on Xbox Game Pass suggests the service is having a measurable and real positive impact. ID @ Xbox boss Agostino Simonetta told GI.biz that subscribers are playing 40% more games, which includes titles outside of the Game Pass library. Additionally, 91% of subscribers surveyed said they had played a song they wouldn’t have tried otherwise if it hadn’t been in the catalog. Microsoft data also shows that members are playing 30% more games than before they subscribed. By the way, I would like to try a game that has been skipped because it is part of the Game Pass subscription. This creates a snowball effect and more types of games are introduced beyond the areas of normal interest. From there, it’s not difficult to understand and accept Microsoft’s vision for Game Pass. It helps people discover and play more games than any other way. More people playing more games are a good deal for Xbox. In addition, Game Pass currently supports cloud gaming (in an incomplete and incomplete way for the moment), making this offer even more attractive. If you are interested in a particular game but don’t want to wait a long time for the download to finish, the option to launch it in seconds is really nice.
Perhaps an even more exciting corollary of Game Pass is that it creates a new paradigm where no one strictly needs to own an Xbox device to be an Xbox customer. Thanks to Microsoft’s continued push into the PC space and with cloud streaming, anyone with a mobile phone or tablet is a potential Xbox customer. And with cloud streaming now available on Xbox consoles, people with an original Xbox One model don’t necessarily need to upgrade their hardware to play the latest games. Thinking of it this way, the expensive investments to launch Game Pass today could indeed pay lucrative dividends later. NPD analyst Mat Piscatella told GameSpot that Game Pass can act as an “amplifier,” with positively received games enjoying greater adoption and better sales. Data and feedback from Microsoft and third-party publishers has shown that games that launch in Game Pass don’t necessarily see their sales decline – and, in fact, the reverse may in fact be true. You would expect a game released on Game Pass to decrease sales, but that’s not always the case. Indie game Descenders saw sales quadruple after joining Game Pass, for example. Of course, there may be confirmation bias here, as the developers aren’t exactly showing up to share stories about their games being poorly sold after they hit Game Pass. It’s safe to assume that not all of the hundreds of games on Game Pass have been successful.
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