I decided to take a look at the numbers with some very crude calculations to get a rough idea if it's viable. Really wanting to work out if Sony aggressively pushed MGS to replace the current buy to play model (like Xbox is doing), could it work for them?
In 2021 Sony made $24.4 billion. 26% of that came from software sales.
That gives us all software revenue of $6.34 billion. We know royalties are usually set at 30% (though it can vary). From that we get:
Essentially this gives us two things
The revenue Sony makes on software after Dev payments: $1.9 billion
And what Sony could spend in licensing costs: $4.4 billion
If we make some assumptions that the revenue of software sales and network services flip while everything else stays the same, then we have a new potential model
To get to this point if we assume $180 per year in subs like Gamepass, then it would require a minimum of 35,244,444 subs to effectively replace the reduction in software revenue.
That is assuming software revenue doesn't drop even further
If we made a more extreme estimation that traditional software revenue drops to zero then the model looks like this:
To get to this you need 54.2 million subscribers
So all of this means that if Sony switched to a Multi Game Service model they would need between 35 - 55 million paying the full $180 per year
That's all for revenue. Working out profit is another issue, but we can assume Sony would have to spend at least $4.4 billion to on game licensing per year for the development community to be making the same that they do in the B2P model.
What we don't know:
We don't really know what licensing costs look like at all for Xbox for example. How it's calculated. There's potential that it's well above $4 billion per year which would change everything
Conclusion:
There's a lot of gaps in the data but at a glance it seems viable, which isn't really what I expected to find. Multi Game subscriptions could work but you need to sacrifice a lot before you get to the level of subscribers paying the full $180 cost per year where it is as viable as Sony's current model
The interesting thing is as it goes above our numbers it has the potential to far exceed the current model for Sony if they were to get subs to 80 million, 100 million etc
For Sony right now, they have the numbers in terms of PS Plus subs (47 million) but they are not paying enough. The average PS Plus sub is paying ~$80 where it needs to get to $180
Sony will be hoping they can get more and more people to switch to PS Plus Extra to make this viable for them, I think they have found in their own numbers that it can work but they are taking baby steps.
We've gotten to the point where it seems the one year mark is the point to add games to PS Plus Extra. But they may need to bite the bullet eventually and go day one releases and licensing big AAA games if they really want momentum in this space.
The money is there to be made but I think the longer they stall the harder it will be as Gamepass soaks up subscribers.
In 2021 Sony made $24.4 billion. 26% of that came from software sales.
B2P Model | $24,400,000,000 | |
Add On Content | $7,564,000,000 | 31% |
Hardware | $5,368,000,000 | 22% |
Digital Software | $5,124,000,000 | 21% |
Network Services | $3,660,000,000 | 15% |
Others | $1,708,000,000 | 7% |
Physical Software | $1,220,000,000 | 5% |
That gives us all software revenue of $6.34 billion. We know royalties are usually set at 30% (though it can vary). From that we get:
All Software | $6,344,000,000 |
70% Paid to devs | -$4,440,800,000 |
30% Royalty | $1,903,200,000 |
Essentially this gives us two things
The revenue Sony makes on software after Dev payments: $1.9 billion
And what Sony could spend in licensing costs: $4.4 billion
If we make some assumptions that the revenue of software sales and network services flip while everything else stays the same, then we have a new potential model
MGS Model | $24,400,000,000 |
Add On Content | $7,564,000,000 |
Hardware | $5,368,000,000 |
Digital Software | $2,684,000,000 |
Network Services | $6,344,000,000 |
Others | $1,708,000,000 |
Physical Software | $732,000,000.00 |
To get to this point if we assume $180 per year in subs like Gamepass, then it would require a minimum of 35,244,444 subs to effectively replace the reduction in software revenue.
That is assuming software revenue doesn't drop even further
If we made a more extreme estimation that traditional software revenue drops to zero then the model looks like this:
MGS Model | $24,400,000,000 |
Add On Content | $7,564,000,000 |
Hardware | $5,368,000,000 |
Digital Software | $0 |
Network Services | $9,760,000,000 |
Others | $1,708,000,000 |
Physical Software | $0 |
To get to this you need 54.2 million subscribers
So all of this means that if Sony switched to a Multi Game Service model they would need between 35 - 55 million paying the full $180 per year
That's all for revenue. Working out profit is another issue, but we can assume Sony would have to spend at least $4.4 billion to on game licensing per year for the development community to be making the same that they do in the B2P model.
What we don't know:
We don't really know what licensing costs look like at all for Xbox for example. How it's calculated. There's potential that it's well above $4 billion per year which would change everything
Conclusion:
There's a lot of gaps in the data but at a glance it seems viable, which isn't really what I expected to find. Multi Game subscriptions could work but you need to sacrifice a lot before you get to the level of subscribers paying the full $180 cost per year where it is as viable as Sony's current model
The interesting thing is as it goes above our numbers it has the potential to far exceed the current model for Sony if they were to get subs to 80 million, 100 million etc
For Sony right now, they have the numbers in terms of PS Plus subs (47 million) but they are not paying enough. The average PS Plus sub is paying ~$80 where it needs to get to $180
Sony will be hoping they can get more and more people to switch to PS Plus Extra to make this viable for them, I think they have found in their own numbers that it can work but they are taking baby steps.
We've gotten to the point where it seems the one year mark is the point to add games to PS Plus Extra. But they may need to bite the bullet eventually and go day one releases and licensing big AAA games if they really want momentum in this space.
The money is there to be made but I think the longer they stall the harder it will be as Gamepass soaks up subscribers.
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