I’ve got this shower thought hunch about why corporations are so into subscription services rather than sales.
If you look at Steam, a 60 dollar game nets Valve around 20 bucks (30%) for every sale. On the other hand a subscription like Xbox Game Pass can only get Microsoft a maximum of 16 bucks per month, not even counting how much they pay to the developers included in the program.
So at least from this shallow reading, subscriptions should be worse than sales.
But on the other hand, there are some advantages which are obvious.
First off, casual users might not even be a potential loss for more expensive games. Besides that, it further alienates consumers from specific products they might want to consume, taking away developer power. And finally lots of people might just forget to cancel it because “it’s so cheap” even when not using it.
But my shower thought was: what if this is favoured because it’s worth much more as a financial asset?
Sales percentages are unpredictable and depend too much on third-party developers. If only flop games come out for a month, Valve will only learn about their lost potential revenue that same month. It’s all a series of events.
On the other hand, subscription numbers are easy to track. If they go down, Microsoft will have at least a month of a heads up. If they go up, they can know beforehand that they’ll have more money in the future. They are much more stable. They’re financial assets.
Does this make sense? Has somebody who actually knows what they’re talking about ever written about this?
Yup. Reliable recurring income =
“You will own nothing and be happy”
Private ownership was abolished for the working class long ago, now its time to make it universal
It’s more valuable, you’re right, plus a subscription service means that the person “signing up” doesn’t own the product in question. So if they had a physical or digital copy of a game and they payed $60 for it, if the company that made it wanted to increase the price on that game, that person wouldn’t pay a single extra cent. On the other hand, if they are subscribed to a “gamepass” or whatever, the price of that subscription to play their game might go up over time, meaning the company doesn’t just profit, it can increase profit for no expense on their part.
Additionally, a subscription service encourages people to play the game more frequently, which means they less likely to spend time (and money!) playing the competitor’s games, as they need to get their “money’s worth” every month.
Subscription services have a ton of benefits for big companies and none for consumers, so naturally it’s the way everything is headed.
Companies like subscriptions because it’s a constant revenue stream, and they can market the subscription as a lower cost of entry.
You see the same thing in the switch from one-time purchase software licenses to SaaS. You used to be able to get, say, Microsoft Office for maybe $120 one time, or maybe it was even included when you bought your computer. Now it’s $100 a year. Adobe did the same over ten years ago.
Having predictable cash flows is great for a company’s longer term planning, and in many cases brings in more revenue than single purchases.
You’re absolutely right about financialised services being more valuable than straight product sales, and this is exactly why so many companies in distribution channels are laser-focused on becoming a monthly subscription service.
In terms of game pass specifically, the point of the subscription service to was to make their platforms—xbox series consoles and I don’t know how they distribute its games on windows but I know it’s not steam—look not attractive and corral users in. Even with this the PlayStation sold much much better than Xbox. My hunch is that it’s because of the games library. Xbox’s is really bad so they invested in game pass. The service itself IMO is unsustainable. Down the line they will have to make some changes like raising prices or not having big budget first party games on it .
