It is undeniable that the success of companies relies heavily on how they adapt to change. This is abundantly evident in technology-intensive businesses where resistance to change sets companies on a path to failure. Subscription services for the gaming industry are set to become the next ‘big thing’ whose adoption will determine success or failure in the technological phase. There are signs which indicate that cloud and subscription services are the next disruptors in the gaming industry. Gaming companies are offsetting a reduction in hardware sales with a substantial increase in subscription services. According to the report by Newzoo, revenues generated by the console-based games will increase with a CAGR of over 9.7%, reaching $61.1 billion in 2022 while the PC gaming market will reach $39.5 billion by 2022 with a CAGR of +3.5%. Even though console and PC will remain as the most significant revenue streams, the ongoing consumer shift towards subscription services offered via PCs, smartphones, and TVs will reduce revenues from boxed or downloaded PC games by almost half by 2022. Growth in mobile game revenues will outpace incomes from console and PC in the next few years as the gaming industry shift towards subscription economy.
According to Forbes, gaming companies have accrued billions of dollars in profit and over 2.5 billion gamers around the world in the past few years, which will contribute to the expansion of gaming platforms into subscription business models in 2020. The shift from one-off game purchases and physical hardware to digital downloads and streaming is not a new phenomenon since it has been tried and tested with great successes, such as Netflix in the film industry and Spotify in the music industry. The successes of Netflix while traditional movie production houses and theatres go under highlights why both traditional gaming companies and new entrants into the industry need to adopt subscription services as an adaption to the introduction of subscription economy in the gaming industry.
Major Disruptions in the Gaming Industry
At the turn of the century, try-before-you-buy was introduced and disrupted the gaming industry by providing a new and effective model of doing business. Try-before-you allowed gaming to release games consistently within a short period offering their new games to players for free for the first hour. After the hour elapsed, the players who were already hooked were given the option of buying the full game. This model not only advanced the gaming industry by facilitating the entry and rise of new game developers such as Attari and Acclaim but also transformed and expanded the traditional demographic of gamers beyond teenage boys and young men to include female players.
A decade later, the gaming industry was disrupted again with the introduction of the free-to-play model, which required developers to offer the games for free. Even though over 90 percent of the players never spent a penny on the free games, the most engaged and hooked players spent tens of thousands of dollars to buy new offerings and tools in the game to hasten their game into the next level or improve their gaming experience. The new model led to the emergence of new game developers who had mastered the free-to-play model, such as Zynga, while household names such as Attari went bankrupt.
Analysis of the gaming industry indicates that the free-to-play model is gradually losing steam. A majority of gaming companies are seeking new business models that will provide the flexibility and the agility they need to adapt to a changing business environment. Flexible and agile gaming companies can compete more favorably in a technological advanced and globalized industry with highly competitive players. Additionally, the fact that tech companies are the service providers of future trends in the gaming industry, such as cloud-based subscription services and cloud billing, implies that they will not only play an enabling role but will also partake in subscription economy the industry as new entrants.
Subscription Services Emerging Trend in the Gaming Industry
As mentioned, prior, gaming companies are offsetting drops in hardware sales with increased investment in subscription services. Currently, gaming subscription services can be divided into two, transformed traditional PC and console gaming models into subscription services and new entrants into the gaming industry offering streaming services.
1. Transformed Traditional Gaming Companies
- Xbox Game Pass Ultimate by Microsoft: Among the leading companies who have already adopted PC gaming subscriptions and mastered this emerging trend includes Microsoft, which has harnessed the benefits and capabilities of the cloud allowing them to offer subscription service known as Game Pass Ultimate by combining Game Pass with Xbox Live Gold. This combination will enable gamers to enjoy all the benefits provided by Xbox Live in addition to access to over 100 games offered by Game Pass. Subscription-based service employed by Game Pass Ultimate offers more value to gamers than any other gaming platform, which has led to an influx of subscription by new gamers to the platform.
- EA Access by Electronic Art (EA): EA is one of the traditional gaming companies that has been offering games via Xbox and switched to the subscription business model. Currently, the company offers monthly subscription under EA Access, regarded as one of the earliest console gaming subscription services. EA Access gives FIFA, Maden, Battlefield, Dragon Age, and a growing list of new games with a 10% discount to new subscribers. Even though EA Access adopted a subscription model very early, it has been overtaken by late entrants such as xxx because they did not adopt an effective strategy for success in the subscription economy.
- PS Now Sony: Sony switched its renowned PlayStation from an Xbox exclusive gaming platform to a subscription-based service model known as PS Now. Even though Sony has the largest catalog of games, PS Now has failed to compete meaningfully in the transformation of the gaming industry into a subscription economy. One of the causes behind unsuccessful PS Now’s subscription service offering is Sony’s inability to innovate, leading recycling of games from PS3 and PS1. The lack of access to new games did not offer gamers value and sufficient incentive to the subscribers or renew their subscriptions.
The four biggest gaming subscription services (Source: backpacksandcontrollers.com)
2. New Entrants into the Gaming Industry
Apart from the old guards of the gaming industry, new companies such as Apple, Amazon, Google, and J2 Global have emerged as key players in the gaming industry, poaching millions of gamers from traditional gaming companies.
- Twitch Prime by Amazon: Amazon entered into the gaming industry by acquiring Twitch and transformed it into Twitch Prime by to offer subscription services. Currently, Twitch Prime is not only a one-stop-shop for gamers but also rival YouTube in content access. Players can subscribe to Twitch Prime’s monthly premium to access Amazon’s growing list of free games.
- Stadia by Google: Stadia is a cloud-based gaming service that offers gamers the opportunity to purchase and play a variety of games without downloading to a PC or console, regarded as the ‘Netflix of games.’ The games are hosted on remote servers, and video streamed to gamers via smartphones, tablets, computers, and TVs connected to the servers through the internet. Stadia offers invaluable insight into the endless possibilities offered by gaming from the cloud.
- Arcade by Apple: Arcade was launched in September by Apple to offer video game subscription service to gamers using the iOS App Store. According to CNN, gamers can subscribe to Arcade on a monthly or yearly basis to access more than 100 games, which includes Pac-Man, Lego, Sonic the Hedgehog, and many more. Apple’s decision to enter into the gaming industry was catalyzed by decreasing sales of the iPhone.
- Humble Bundle by J2Global: The emergence of J2 as one of the gaming powerhouses is attributed to the adoption of a subscription business model, which enabled them to offer Humble Bundle monthly subscription service. The subscription fee is set by the gamer with a portion going to charity, and the game developers share the remainder. This subscription service offers gamers a high level of value with affordable monthly charges to access a wide variety of games.
Even though new entrants into the gaming industry, such as Google, Apple, and Amazon will not challenge traditional gaming companies for market share, they are focused on getting their products into the market and the hands of gamers. The new entrants will challenge traditional gaming companies once their products have penetrated the subscription economy market, allowing them to fine-tune their services based on consumers’ feedback and enhance their competitiveness. It is undeniable that subscription services are the future of the gaming industry.
Tips for Successful Adoption of Subscription Business Model Services in the Gaming Industry
Analysis of the successes attained by Xbox Gamepass Ultimate and Amazon’s Twitch Prime indicates that successful subscriptions are not about acquiring new subscribers but retaining them. Higher retention can be attained by offering gate premium experience to subscribed gamers rather than one-time situational purchases via IAP. Simplicity in the gaming options and services provided is key to success because customers are more likely to be overwhelmed by too many options discouraging them from subscribing. The gaming industry should borrow a leaf from companies such as Uber and Netflix, which have attained immense success by offering very few subscription options. Dishonesty to trick gamers into signing up for a subscription or preventing them from opting out of their subscriptions is the main reason why subscription services were not accepted sooner by the gaming industry. To attain successful subscription offerings, gaming companies must avoid trickery and dishonesty. All these issues can be addressed by using a reliable and effective cloud-based service provider such as Tridens Monetization because it offers flexibility, agility, and capacity to develop customer-centric subscription business model.
Tridens Technology offers gaming companies and game developers with an invaluable opportunity to capacity they need to switch to subscription business model effectively and promptly. Tridens offers enterprise billing platforms that support subscription business models. A cloud billing platform offered by Tridens is an automated application that combines hardware and software to rate and collect recurring bills for companies’ gaming services. One of the most important platforms for the gaming industry offered by Tridens Monetization is the subscription billing platform. Tridens’ subscription billing platform bills customers’ usage of gaming products and services on a time basis. This platform enhances the flexibility and agility of companies by providing effective channels to rate, charge, and bill gamers on their platform. Also, Tridens’ billing platform sends invoices, accepts payments, and generates reports for the gaming companies reducing cost and saving time. Apart from subscription billing platforms, Tridens Monetization also offers usage-based billing software that generates bills for clients’ usage of a company’s gaming products and services. Using advanced software and cloud billing capabilities, Tridens’ usage-based billing creates an invoice for each user by tracking their usage of gaming products and services. Offering both usage-based billing software and subscription billing platforms means that Tridens Monetization offers gaming companies the flexibility and agility to adapt to prevailing situations in the industry, such as changes in business models and revenue streams. Gaming companies that seek to bill their clients based on usage are catered for by usage-based billing software, while those seeking to offer their games and services can do so using Tridens’ subscriptions billing platform.