CROSS POST FROM ANOTHER FORUM
XBox makes $10/month/user and drives increased engagement and monetization.
Now we know it is about $0.15 per hour from TWO different presentations.
Avg gamer plays about 40 hrs a month so TOTAL MONETIZATION IS ABOUT $0.40/hour.
$0.25 ($10/40h) from the subscription+ $0.15 engagement monetization
https://ibb.co/fD6hdPp
https://ibb.co/TWcrTMZ
2. How much it probably cost XBOX to acquire content and why do I believe it is loss-making despite claims to the contrary
3rd party content, which is about 80% of gamer hours COSTS AS MUCH AS $1.00 per hour.
REMEMBER! Xbox has tied content spend to per hour engagement, not per game.
https://ibb.co/XFdpVRK
https://ibb.co/Jtd4BkC
Even if content cost is half (or about $0.50/hr) bc indie's cost less, timing, etc.. that's still a ($0.10) per hour in gross profit.
We also need to add $0.06 or 15% of sales in costs for overhead, as we learned 1st revs have 85% GP% from the ZeniMax presentation.
Finally, consider customer acquisition costs. I’ll admit that i feel messy confident about this figure. If I assume a monthly churn of 5%-10% and an LTV of 2x-3x I get about $60.
IF a new user plays 40hr/month for 10-20 months before churning, he or she will play ~600 hrs so Xbox spends $0.10/hr in CAC.
https://ibb.co/x7GDJmt
https://ibb.co/GFT17cx
3. Why Playstation is CORRECT that the economics of video games do not scale to the current subscription model
Let us put it all together
$0.25 in subscription fees
$0.15 in total monetization
$0.40 in revenue per hour
$0.06 in overhead costs
$0.50-$1.00 in content cost per hour
$0.10 in CAC
$0.26-$0.76 LOSS PER HOUR.
Here is how I think it looks with 25m subs.
https://ibb.co/VSnz5Kg
https://ibb.co/C8JxGKJ
https://ibb.co/MVdm6pN
The development/content cost is the key variable to argue over. 1st party won’t save it either. Starfield is probably a $200m-$300m game that will likely hit 20m users. Let’s say they play an average of 50 hours, 1000m of engagement vs $250m in cost is $0.25/hr. That’s probably the floor for costs, and ignore all the other costs.
3rd party developers have a total cost per game equivalent of $0.30-$0.50/hr and they expect to make 2x-4x their cost in gross profit. It is going to be difficult to get AAA content meaningfully below $0.50-$1.00.Xbox is stuck paying MORE per hour of content than their ~$0.40 monetization rated
XBOX will either never get meaningful AAA support because
1. they either can't afford to keep paying
or
2. they'll pay but unlikely ever be profitable since costs/hr> revenue/hr
5. XBOX likely monetizes content at LESS than half the industry standard and has no cost advantage. This is an inferior business model
The key here is that Xbox's monetization model has switched to engagement. Console games are just too expensive and users don't spend enough hours to support the current model.
https://ibb.co/fMph7c5
XBox makes $10/month/user and drives increased engagement and monetization.
Now we know it is about $0.15 per hour from TWO different presentations.
Avg gamer plays about 40 hrs a month so TOTAL MONETIZATION IS ABOUT $0.40/hour.
$0.25 ($10/40h) from the subscription+ $0.15 engagement monetization
https://ibb.co/fD6hdPp
https://ibb.co/TWcrTMZ
2. How much it probably cost XBOX to acquire content and why do I believe it is loss-making despite claims to the contrary
3rd party content, which is about 80% of gamer hours COSTS AS MUCH AS $1.00 per hour.
REMEMBER! Xbox has tied content spend to per hour engagement, not per game.
https://ibb.co/XFdpVRK
https://ibb.co/Jtd4BkC
Even if content cost is half (or about $0.50/hr) bc indie's cost less, timing, etc.. that's still a ($0.10) per hour in gross profit.
We also need to add $0.06 or 15% of sales in costs for overhead, as we learned 1st revs have 85% GP% from the ZeniMax presentation.
Finally, consider customer acquisition costs. I’ll admit that i feel messy confident about this figure. If I assume a monthly churn of 5%-10% and an LTV of 2x-3x I get about $60.
IF a new user plays 40hr/month for 10-20 months before churning, he or she will play ~600 hrs so Xbox spends $0.10/hr in CAC.
https://ibb.co/x7GDJmt
https://ibb.co/GFT17cx
3. Why Playstation is CORRECT that the economics of video games do not scale to the current subscription model
Let us put it all together
$0.25 in subscription fees
$0.15 in total monetization
$0.40 in revenue per hour
$0.06 in overhead costs
$0.50-$1.00 in content cost per hour
$0.10 in CAC
$0.26-$0.76 LOSS PER HOUR.
Here is how I think it looks with 25m subs.
https://ibb.co/VSnz5Kg
https://ibb.co/C8JxGKJ
https://ibb.co/MVdm6pN
The development/content cost is the key variable to argue over. 1st party won’t save it either. Starfield is probably a $200m-$300m game that will likely hit 20m users. Let’s say they play an average of 50 hours, 1000m of engagement vs $250m in cost is $0.25/hr. That’s probably the floor for costs, and ignore all the other costs.
3rd party developers have a total cost per game equivalent of $0.30-$0.50/hr and they expect to make 2x-4x their cost in gross profit. It is going to be difficult to get AAA content meaningfully below $0.50-$1.00.Xbox is stuck paying MORE per hour of content than their ~$0.40 monetization rated
XBOX will either never get meaningful AAA support because
1. they either can't afford to keep paying
or
2. they'll pay but unlikely ever be profitable since costs/hr> revenue/hr
5. XBOX likely monetizes content at LESS than half the industry standard and has no cost advantage. This is an inferior business model
The key here is that Xbox's monetization model has switched to engagement. Console games are just too expensive and users don't spend enough hours to support the current model.
https://ibb.co/fMph7c5
