Can a Multi-Game Subscription Focused Model Be Viable For Sony?
- Thread starter Yobo
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I think that this is the core of the problem, a lot of kids don't even ask their parents to buy games (not a lot). And this is at the age where parents would get a subs service so they don't keep asking for more all the time.
Now they have the f2p games to let go, and they ask for credits in these games (Roblox, Fortnite, etc.)... Obviously not all, but the big AAA games are for the older folks who don't have time to play online in a way that's fun.
You also have to consider that with their current strategy Sony has the money from selling games + the money from the game subs.
And that money they get from game subs was bigger in 2021 than the MS one according to the CMA and the Brazillian regulator. Seems that the MS and Sony subs remained more or less flat in 2022. It's fair to assume that in MS people continued slowly migrating to GPU, but we know for a fact that in Sony in 2022 there was a big migration to higher tiers.
So with the 2022 game subs changes in Sony's side they already highly increased their money from game subs and increasing their distance in game subs revenue vs MS, but doing it while keeping the huge amount of money they make from (mostly 3rd party) game sales.
It wouldn't be worth for Sony to increase a bit more the game subs revenue and lose most of their game sales, it wouldn't compensate it. In addition to this, it would piss off the publishers since a game sales focused market is way more benefitial for them, and would also piss off many players who now would need to spend more per year to play.
I think Sony will continue tweaking PS Plus to make it more appealing maybe soon additing the streaming to mobile they are working on, adding more cool content or maybe adjusting the pricing. But I don't see them making a big change from their current strategy that keep them as the market leader selling consoles, selling games for consoles and selling game subs.
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OP
OP
The other interesting thing is if you add up the software and network services per year ($10m) / the userbase (140m across PS4 and PS5), you can work out that users spend $71 on average per year on their gaming not including add one
With add ons it's $125
Both are still below the yearly cost for Gamepass Ultimate at $180 ($15 per month). So anyone saying it's cheaper is full of it
But you can also see how it can increase revenue.
With add ons it's $125
Both are still below the yearly cost for Gamepass Ultimate at $180 ($15 per month). So anyone saying it's cheaper is full of it
But you can also see how it can increase revenue.
Sony doesn't "pay to devs" 70% of their software revenue.
Can't see why publishers' revenue from 3rd party game sales would be included in SIE's revenue.
Pretty sure the revenue they report is simply their cut from 3rd party sales.
And then of course you forgot 1st party games, where SIE keeps 100%.
It's just the wrong model for gaming....
It's the wrong model for tv and film too and we can see how that is going now. It only worked when there was no competition.
(Sound familiar to what many have accused MSFT of wanting in gaming)
Games take too much time, there's free to play and GAAS and story games where they cost so much it just wouldn't work.
It's the wrong model for tv and film too and we can see how that is going now. It only worked when there was no competition.
(Sound familiar to what many have accused MSFT of wanting in gaming)
Games take too much time, there's free to play and GAAS and story games where they cost so much it just wouldn't work.
D
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Excellent thread @Yobo but like @Bryank75 says above, it's just the wrong model for gaming.
A free game has no value to it and it never fulfils us, because it's free. The human psyche kicks in and then wants more and more and more. The problem is, games aren't meant to be more and more and done forever. They're supposed to tell a story, then end. Just like a book.
The big problem with the subscription model and FtP model is they don't know how to end the game.
Have a think about all of your favourite games. See all of those moments that you enjoyed, that made you feel good with that game. How many of those scenes or moments were the ending or a story twist within the game? How many were online matches in a multiplayer game?
Sure, we've had some heart-pounding moments in online games and they're only a fraction of the best moments in gaming, thanks to stories and endings.
A free game has no value to it and it never fulfils us, because it's free. The human psyche kicks in and then wants more and more and more. The problem is, games aren't meant to be more and more and done forever. They're supposed to tell a story, then end. Just like a book.
The big problem with the subscription model and FtP model is they don't know how to end the game.
Have a think about all of your favourite games. See all of those moments that you enjoyed, that made you feel good with that game. How many of those scenes or moments were the ending or a story twist within the game? How many were online matches in a multiplayer game?
Sure, we've had some heart-pounding moments in online games and they're only a fraction of the best moments in gaming, thanks to stories and endings.
That's probably way too high if just talking Game Pass itself; a while back I was asked by @Heisenberg007 to see if I could help calculate Game Pass revenue. Since Microsoft don't provide the figures themselves (what a surprise), we had to work with 3P data and known Nintendo & Sony data, and go from there. I'll copy over what I posted in our messages here; there is a lot of assumptions made but fitting into the data that was provided I tried being as fair to MS as possible:
[Ampere's market data from their most recent report]
[Heisenberg007's numbers]
[My estimates]
Heya; so for Nintendo's numbers, I know Statista has it at "more than 36 million" current NSO subscribers, so considering the basic price is $20 for a year of NSO, that means their 2022 revenue was likely at least $720 million off the service. That IS assuming everyone has an annual sub (technically speaking some could have 1-month subs or 3-month subs at the time the total sub count was tallied), but I'd assume given the cost savings for a 1-year sub vs. 12 1-month subs ($20 vs $48), I doubt any significant number of people are choosing the shorter-duration amounts.
There's also the fact some people will be subbed to NSO+, which is more expensive than base NSO. Same for the Family Plan. Honestly I can't claim what likelihood there is of people paying for a 1-year NSO sub vs. the Family Plan vs NSO+. I guess just to be safe, and conservative, let's say 80% of the subs are the 1-year NSO, 10% are on the Family Plan, 5% are NSO+ and the last 5% are non-committals (1-month, 3-month subs, etc.).
So...
NSO: 28.8 million * $20 = $576,000,000
Family Plan: 3.6 million * $35 = $126,000,000
NSO+: 1.8 million * $50 = $90,000,000
Non-Committals: 1.8 million * $6 (average of 1-month and 3-month) = $10,800,000
The sum of that would be $802,800,000. Again I'm being conservative in the NSO+ and Family Plan amounts in particular, and could be slightly undershooting the non-committals, but I do think the vast majority of NSO subs would be the basic 1-year annual offer.
So, if using that as a working example, can add it to the Sony #s you provided and it gives us $3,960,465,787. That leaves the remaining
$3,839,534,213 for Xbox services. But that is "Xbox services" as in both Gold and Game Pass itself, and again that's just with including the working Nintendo services revenue numbers I threw up; there's a high chance I'm lowballing Nintendo's numbers by maybe $100 million or so.
In FACT....I just found something really interesting...this source that shows that in the CADE leak, for 2021 NSO made up 31% of Nintendo's $3.054 billion software revenue for that year, off a base of 32 million subscribers. In other words, that $946.74 million from NSO alone that year! Scaled to 32 million subscribers, that gives you $29.585625 per sub.
Assuming there's no real reason that per-sub ARPU would drop over the course of a year, and that NSO saw 4 million additional subs in 2022, then a good baseline to figure 2022 NSO revenue at would be ~ $1.065 billion. So we should probably move forward with that number, actually.
$3,157,665,787 + $1,065,082,500 = $4,222,748,287. Reduce that from the $7.8 billion and that leaves $3,577,251,713 for Xbox services. Now we know there's been some transfer from Gold subs to Game Pass, but there are STILL some people on Gold, and it has to be a decent number. I'm having a really difficult time finding any reports for Xbox Live sub counts; MS stopped reporting XBL subscriber counts YEARS ago, and if you want a picture of things prior to Game Pass, you have to go all the way back to 2017.
One number I came across was 2017 sub counts being at 52 million. That included XBL Gold and Silver, so I think we can be safe and go 50/50 on that; 26 million Gold, 26 million Silver. I think due to Game Pass over the years, that Gold number would have probably come down by at least 50%, to 13 million, and let's just say they are all $40 annual discount subs.
That would bring XBL Gold sub revenue at $520 million. So the $3.577 billion already drops down to $3,057,251,713. But...there is also Elder Scrolls Online. AND Fallout '76. Both of those have paid subs of the "premium" tier, but otherwise you only need a base sub (XBL Gold, Game Pass, PS+ etc.) in order to play them online. I'm going to assume the vast majority of people who get the premium subs for either are getting them for the whole year, but I'd also say that only at most 25% of the total player bases of both games are subbed to the premium tiers. BUT, those premium tiers would be counted in the subscription revenue for Xbox, now that Zenimax revenue is rolled into the Xbox division's.
ESO's sub count in 2022 was around 22 million. Its premium sub cost is ~ $140 a year (monthly cost reduces to $11.67). Fallout '76's sub count in 2022 was around 13.5 million. Their premium sub (Fallout 1st) costs $99 for a year sub. I'd assume most people subbing to the premium tier of either game is paying for a year-round sub, but maybe 10% are non-committals, so we'll just reduce them from the revenue count.
ESO: 22,000,000 * .25 = 5,500,000 * $140 = $770,000,000 * .9 = $693,000,000
Fallout '76: 13,500,000 * .25 = 3,375,000 * $99 = $334,125,000 * .9 = $300,712,500
Combined, ESO & Fallout '76 would account for another $993,712,500 of Xbox's services revenue. Again, these ESO+ and Fallout 1st estimates are my own, assuming only a portion of the sub bases for both would be on the premium subs, but those who are, the vast majority would be in for the whole year via the annual sub options (some small portion may only check them out for a month or two before dropping it, some extreme ones would pay the whole year through the monthly cost, but I'm ignoring those and cutting 10% off the totals in those instances as a result).
Altogether, the $3,577,251,713 that is left for Xbox when removing the Sony and (probable) Nintendo services numbers are reduced to $2,063,539,213 for Game Pass when you ALSO remove the (probable) XBL Gold, ESO+ and Fallout 1st services revenues. At least, that's what I feel comfortable with rolling on. Assuming sub count is still where they last reported, 25 million, then the ARPU from Game Pass is $82.54. That's almost $40 below the regular yearly asking price for basic Game Pass, and about $97.46 under the asking price of Game Pass Ultimate. But more troubling would be just how low that total revenue for Game Pass actually is.
Could go into speculation from here on with that point but this was already way longer than I intended it to be. Anyway if you have some insights off what's been shared, feel free to send them through. Or if you can find better sources for XBL MAUS prior to Game Pass in older fiscal reports, that'd be appreciated as well. Hope this has been useful!
Now these were all based on 2022 data, so it doesn't have any relevance for 2023. However, one thing I made clear to do was also keep ESO and Fallout '76 sub revenue in mind since those would also count towards Xbox's services revenue. And of course, XBL Gold. However as also presented there I was assuming sub count being relatively locked at 25 million; it could have been at say 27 million, or maybe dipped briefly to 24 million. It's hard to say. But I'm only using the last official numbers Microsoft provided themselves on sub count.
I think there are a lot of bullish estimates on Game Pass revenue but IMHO if it were anything even say around the range you are claiming, strictly from Game Pass itself, why would Microsoft not share those numbers as indicators of solid growth to shareholders in fiscal reports? A company this large doesn't need to hide numbers or obfuscate them unless they know the numbers don't look particularly good in context, and I think that is the case with Game Pass total sub revenue.
Now I did notice you mention your range is before accounting for any discounts, and (if I read it correctly) accounts for add-on content (I'd presume for content in the service) and factors in XBL Gold subscribers? Not necessarily sure what the hardware part is about in that context there, unless you can maybe clarify. I guess with those considerations my only issue would be how do you assume what amount would be reduced once discounts are taken into account? Personally I think that's really hrd to assume for, it's just easier to try and isolate the specific component (Game Pass in this case), try and calculate a realistic annual revenue, and get an ARPU from that. We know for a fact the ARPU isn't $120, it's certainly not between $120 and $180, and it's definitely not $180.
Though I'd still say something around the $2 billion annual range is pretty decent considering many of the loopholes and pricing discount offers Microsoft have, at least one of which is being closed now, and others might be closed or have their effectiveness (Reward points) reduces as they try maximizing subscription revenue going forward.
OP
OP
You may be right, thanks for pointing that out with the royalties cause it changes everything
From Sony's supplemental information
So I've worked out the ratio of 1st and 3rd party and we can work backwards from the assumed 30% 3rd party royalty to get total software revenue
| Ratio | Revenue | |
| 1st party | 43.9 | $953,869,393 |
| 3rd party | 259.3 | $5,634,130,607 |
| Full game software | 303.2 |
| Revenue | |
| 1st party | $953,869,393 |
| 3rd party royalties | $5,634,130,607 |
| 3rd party total | $18,780,435,357 |
| Total Licensing Cost | $25,368,435,357 |
So the new estimate for total software revenue on PlayStation is $25 billion. Which makes the whole idea of subs replacing the revenue completely unworkable.
You would need 141 million subs at $15 a month OR at 50 million subs you would need to increase prices to around $42 a month (that's assuming it completely replaces software sales) just to cover licensing and first party dev costs
This is more in line with what I was hoping to find the first time and can no longer see any viability in this.
Seems like this approach massively shrinks the revenue coming into gaming and as a lot of us theorised will result in lower quality games because of the reduced revenue coming into the whole market
I wonder if Microsoft's numbers are just a reflection of the royalties as well, or with their system they are collecting all the revenue and then handing out the licensing cost. It must be at least for Gamepass games. If so, Xbox entire ecosystem is making less money than just the PS software sales
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You have to keep in mind that when MS acquired Zenimax, all of Zenimax's revenue got rolled over into the Xbox division. That's when you saw the first big spike; this also occurred with services since games like ESO & Fallout '76 are their own services, but are now rolled into Xbox gaming services revenue. If/when MS acquires ABK, you will see the same thing happen again, just on a larger scale.
Also FWIW Xbox software sales aren't completely abysmal. I think with many Western publishers the ratios on Xbox aren't terribly far off from PlayStation. EA and Madden, for example. Plus globally I think Xbox digital sales are a decent bit higher than PlayStation, even if in specific region that isn't the case (such as the UK, surprisingly enough, averaged out). I also think they just get a lot of people buying Xbox peripherals like controllers, and now arguably stupid stuff like the controller diapers, fingernail polish, bibs, etc. which I'd assume count towards Xbox revenue as well.
Oh and can't forget that Minecraft revenue is factored into Xbox revenue as well, and we know that IP is still going strong.
OP
OP
Great numbers and interesting to see. Not sure I agree with your estimated for Fallout 76. I agree my numbers are the high estimate with all other factors considered, I expect the actual number lands somewhere in the middle of our two estimates
OP
OP
Its clear to me that Microsoft is engaging in predatory pricing and combined with their acquisition tactics are a serious risk of collapsing gaming.
Its also clear how they were able to present and argument to the CMA that their own business model could not sustain COD. Though what's also obvious is they don't care about the losses they are sustaining
Will be very interested in if the FTC case reveals anything substantial about Microsoft's losses
Its also clear how they were able to present and argument to the CMA that their own business model could not sustain COD. Though what's also obvious is they don't care about the losses they are sustaining
Will be very interested in if the FTC case reveals anything substantial about Microsoft's losses
@Yobo So I also looked at your OP numbers again, and given those are accurate total software sales revenue for PlayStation that year was $6.832 billion, correct?
Okay, so assuming the idea is that Sony would pursue a MGS strategy similar to Game Pass, that obviously means all 1P games Day 1. I know you assume an approach where Sony prices PS+ similar to MS pricing GPU, but I don't know if Sony could get away with that big of a price increase without enabling similar loopholes and pricing discounts that MS did (and are only now starting to close up on, VERY gradually), because that's the only way MS got to 25 million subs in the first place.
2021 is where I think Sony software accounted for 18.5% of software revenue. So of the $6.832 billion, Sony's service would have to account for potentially $1.26392 billion in lost sales revenue. That's in an extreme case where they completely lose in software sales of 1P games due to them being in the service. Realistically I don't think the drop would be any more than 50%, or $631.96 million. But that's on top of what PS+ already brings in, and in 2021 that was $2.5 billion. So a Sony MGS strategy would probably need to account for $3.13196 billion, but that's based on the 2021 revenue figures. I think in 2022 PS+ pulled in $3.157 billion so working with that means a MGS strategy would need to account for around $3.78896 billion.
Keeping sub prices at where they currently are, and using the 2022 ARPU ($67.72), gives us a required 55.95 million PS+ subscribers to support that model, and that's assuming Sony 1P B2P revenue only sees a maximum averaged drop of by 50%. But then I guess there becomes the question of how is marketing funding accounted for? Is Sony forced to outright market/promote PS+ a lot more the way Microsoft does Game Pass? If so, how does that affect their current game-centric advertising, or their general PS console-centric advertising? If they scale back on any of those, does that lead to reduced sales, meaning the sub service has to account for that in revenue to make up for it?
Then I guess the other question becomes does Sony have enough 1P content to keep the service regularly refreshed? If they don't, they'll have to pay out for 3P content which means for each 3P game they pay out for, they'll want the service to make up for that in revenue. So say 10 AA 3P games for $10 million each to put Day 1 into the service, means the service has to bring in an additional $100 million to justify it, at the very least. But, these services really grow off the strength of AAA games, not AA or indie ones. I couldn't imagine Sony being able to get a typical 3P AAA game (say from Capcom) in the service Day 1 for anything less than the equivalent of 500K copies, or $35 million. And that's working off the assumption it's a game maybe expected to do 1.5 million in sales at full launch price, across multiple platforms, and that no other MGS has the game for Day 1 as well.
Ultimately I just think there are a lot of wild variables to account for which are too complicated, nuanced, and generally probably not worth it if the revenue & profits through an MGS strategy aren't notably higher than through the traditional model. There has to be an obvious, immediate benefit, and that's usually in terms of more profits and lower operating costs, otherwise these companies are generally adverse to such big changes (unless they feel desperate enough to do so).
Okay, so assuming the idea is that Sony would pursue a MGS strategy similar to Game Pass, that obviously means all 1P games Day 1. I know you assume an approach where Sony prices PS+ similar to MS pricing GPU, but I don't know if Sony could get away with that big of a price increase without enabling similar loopholes and pricing discounts that MS did (and are only now starting to close up on, VERY gradually), because that's the only way MS got to 25 million subs in the first place.
2021 is where I think Sony software accounted for 18.5% of software revenue. So of the $6.832 billion, Sony's service would have to account for potentially $1.26392 billion in lost sales revenue. That's in an extreme case where they completely lose in software sales of 1P games due to them being in the service. Realistically I don't think the drop would be any more than 50%, or $631.96 million. But that's on top of what PS+ already brings in, and in 2021 that was $2.5 billion. So a Sony MGS strategy would probably need to account for $3.13196 billion, but that's based on the 2021 revenue figures. I think in 2022 PS+ pulled in $3.157 billion so working with that means a MGS strategy would need to account for around $3.78896 billion.
Keeping sub prices at where they currently are, and using the 2022 ARPU ($67.72), gives us a required 55.95 million PS+ subscribers to support that model, and that's assuming Sony 1P B2P revenue only sees a maximum averaged drop of by 50%. But then I guess there becomes the question of how is marketing funding accounted for? Is Sony forced to outright market/promote PS+ a lot more the way Microsoft does Game Pass? If so, how does that affect their current game-centric advertising, or their general PS console-centric advertising? If they scale back on any of those, does that lead to reduced sales, meaning the sub service has to account for that in revenue to make up for it?
Then I guess the other question becomes does Sony have enough 1P content to keep the service regularly refreshed? If they don't, they'll have to pay out for 3P content which means for each 3P game they pay out for, they'll want the service to make up for that in revenue. So say 10 AA 3P games for $10 million each to put Day 1 into the service, means the service has to bring in an additional $100 million to justify it, at the very least. But, these services really grow off the strength of AAA games, not AA or indie ones. I couldn't imagine Sony being able to get a typical 3P AAA game (say from Capcom) in the service Day 1 for anything less than the equivalent of 500K copies, or $35 million. And that's working off the assumption it's a game maybe expected to do 1.5 million in sales at full launch price, across multiple platforms, and that no other MGS has the game for Day 1 as well.
Ultimately I just think there are a lot of wild variables to account for which are too complicated, nuanced, and generally probably not worth it if the revenue & profits through an MGS strategy aren't notably higher than through the traditional model. There has to be an obvious, immediate benefit, and that's usually in terms of more profits and lower operating costs, otherwise these companies are generally adverse to such big changes (unless they feel desperate enough to do so).
They are selling 30 million ps+ subscription every year and are selling games standalone. They have much higher revenue potential with their current model.
Add their upcoming GAAS projects of which at least 2 will succeed
Add their upcoming GAAS projects of which at least 2 will succeed
Predatory pricing should've been the main concern all along, the focus should've been on how MS wants to destroy an entire industry by imposing a business model that does not work for anyone not even themselves.
The CoD angle was always odd and makes no sense that it was treated differently because everything that applies to it is also true for all the other games just on a smaller scale.
OP
OP
I can't imagine how it is beneficial to any Dev or publisher who doesn't have a low sales forecast. That's probably why MS are outright buying publishers, because nobody with a substantial userbase was agreeing to their model.
If you get the equivalent of 5 million units sold in licensing fees, but then your game blows up you may have entirely lost out.
Let's take Elden Ring for example, say Bandai Namco were forecasting 5-8 million sold and maybe 2 million from Xbox alone. They get that payment and then it blows up massively and they miss out on hundreds of millions of dollars