Is Game Pass underperforming?

One of the defining changes in media in the 21st century - perhaps the defining change - is the switch to on-demand subscription services for most of our video and audio entertainment. This change isn’t just dramatic, it’s seemingly inevitable. Now that we have the technology to do this, the idea of going back to individual purchases of all music and movies feels just like that - going backwards.

It was only natural then, to expect that something similar would happen in the gaming space. And sure enough, some of the big players have tried to become the Netflix of gaming, including Microsoft, Apple, and of course, Netflix themselves.

As a player, I’m a fan of these. I have on several occasions suggested that Game Pass specifically is the best value in gaming. But over 5 years later, it’s clear that the service hasn’t taken off to the extent they might have hoped, leading to the narrative that it’s underperforming or a failure.

The state of game subs

Recent reports have Game Pass subscribers at somewhere around 34 million, which is simultaneously a large sounding number and a small fraction of the total Xbox and PC gamers. Consider that there are an estimated 120M+ monthly users of Steam, and that Steam doesn’t include Fortnite, League of Legends, Roblox, Minecraft and other titles that may boast more than that 34M figure by themselves. This slower than expected growth is being cited as a key reason for Microsoft’s recent studio closures.

A recent tweet by Circana’s Mat Piscatella reported that “non-mobile video game subscription spending was only up 1%” vs the previous year. That’s a tiny increase for what seemed like it could be the next big thing.

On the mobile side, things are a bit murkier. Subscriber counts for Apple Arcade are a little harder to come by, and due to the inclusion of Apple Arcade within the broader Apple One package, they may represent an overcount of the number of real users if we did have them. Similarly, Netflix technically offers games to all of its several hundred million users, but since it comes bundled in with the existing video subscription, that number represents only the number that have access to their game catalog, not those using it or those aware it even exists. Data from Apptopia put the number of players on a daily basis somewhere in the ballpark of 2M.

Source: https://x.com/MatPiscatella/status/1787873505092202867

So what happened?

Given the ubiquity of streaming in music and video and the time these services have been available, a couple of potential explanations jump out. Either

While I can’t rule out A, I suspect B is more likely, and I’m going to make an attempt to explain what I think that flawed assumption is.

Two types of game

To start with, let me ask a seemingly simple question: are games a form of media? The obvious answer is “Yes”, but a more nuanced answer would be “They can be”. One of the biggest trends over the past couple of decades has been the rise of games specifically designed to be played for a potentially endless amount of time. The audience for these titles do not really treat “gaming” as a hobby so much as they treat individual games as a hobby.

This change can be seen in a variety of ways:

So while games certainly can be a form of media, not all gamers treat them as something to be consumed like media. Ironically, despite this article being about subscriptions to catalog services, subscriptions to individual games have actually done very well. Wold of Warcraft alone reportedly peaked at over 10M subscribers, putting it potentially around ⅓ of Game Pass by itself.

Amongst all these trends, there may have only been one clear trend in the other direction, and that’s in the independent scene. Not all independent devs of course, but prior to the last decade, it was unusual to see smaller teams competing for Game of the Year awards, whereas now that’s fairly common, and most of those tend much more to the experiential side.

Unfortunately, as you can probably tell from the words being used in this blog, there still aren’t commonly agreed upon terms for these two types of game, nor does any store (to my knowledge) let you search or filter by one or the other. All of which continues to make it easy to conflate them and overlook the importance of this distinction.

The size of the market

To rephrase the above, the core problem of selling monthly access to a catalog of videogames is the sheer number of gamers who simply aren’t looking for new game experiences every month. There may well be hundreds of millions of people who played a videogame today, but let’s start chipping away at that figure.

All the people who just play F2P games and don’t spend a cent on anything? They’re probably not potential customers, and I’d guess that this group could number in the hundreds of millions.

And all the ones who do routinely spend money in F2P games? They’re typically quite committed to those games, and hence probably not the kind that are looking to jump from game to game on a regular basis.

Ditto for the competitive gamers who want to find a game - be it FPS/RTS/MOBA/CCG/etc - that they can commit to for long enough to develop mastery.

Really, if any game in your Steam library has a playtime of over 500 hours, you may be getting enough value from the games you buy that a catalog service actually becomes worse value by comparison.

Anyone who just wants to play the biggest AAA games of the year will likely be ruled out too - there’s just not that many exceptional ones per year these days, and they’re spread across too many publishers and platforms to get a significant number on one service. Others may arrive later, but at this point I think Microsoft and Ubisoft are the only traditional publishers launching their biggest titles on day one on [the higher tiers of] their services, something Sony has thus far declined to do for their PSN Extra/Deluxe tiers. So this kind of player may be a potential customer, but may also lean towards signing up occasionally for limited time periods rather than being an ongoing customer.

Similarly, fans of indie games may also want to play whatever notable releases arrive in their favourite genres (or just anything getting enough buzz), but again, if you want to be part of the zeitgeist then you may also not be fully satisfied with this combination of occasional day 1 releases and semi-random older choices.

So what you’re left with is players who want to play a wide variety of games, either by indies or whatever back catalog premium titles are currently on rotation, and aren’t getting so distracted by other off-service titles to find the subscription service unnecessary. Oh and they also need to have access to the platform(s) your service runs on.

How big is this market? I have no idea. We’d need some far more experienced analysts to dive into that one. But I feel fairly comfortable saying that it’s likely nowhere near as big as the overall size of the gaming market might suggest. And it likely pales next to the largest single titles as well.

This concept of total addressable market is very important to the perceptions of success or failure, because if you hear that Microsoft are only reaching ~34 million of the multiple billion gamers, then it’s easy to conclude that it’s underperforming. But if you think that the number of people who might be interested in such a service might stretch to only around 100M, then they may have already reached around a third of the entire market. In most industries that’d likely be considered pretty good for a few years work at a new business model.

Why this goes unnoticed

Part of the reason this often goes undercovered in much of the gaming press is that the gaming press is comprised of people who need to be jumping from game to game on a weekly basis as part of their job. As a result, even if they do have their forever game that they can keep going back to, they also need to enjoy playing a variety of games every month or they likely wouldn’t be doing what they are.

There are of course people who specialise in covering a single game, though I suspect it’d be a fairly rare scenario that there was enough to say about a game that launched over 3 years ago to keep a gaming journalist employed full time, even if there were still 10M people playing that game. All of which leads to a strong focus on what’s new and upcoming over what the majority of players are actually spending their time on.

In other words, the market for gaming journalism is mostly the section that cares about what’s new and novel. And as discussed above, this section represents only a tiny portion of the total gaming market, and it may not be growing fast, if it’s growing at all.

But it is the segment of the market that’s most likely to be found regularly reading the gaming press or listening to their podcasts, so it’s natural to think of it as being more representative of the gaming landscape as a whole than it really is. And therefore to think that because their audience would likely appreciate a large selection of high-quality games for a reasonable monthly fee, that there must be a very large market for such a thing.

But it may still be a niche, as hard as that may be to believe.

The wrong solution

In the face of these perceived shortfalls, an inevitable solution will be proposed - that the service needs to expand into the kinds of games that can hold onto players for months or years. This can be seen both in Microsoft’s addition of bonuses for several of Riot’s F2P games on Game Pass, and in Apple’s reported pivot of the criteria they’re looking for in Apple Arcade titles. These notions, while understandable, may be missing the point. They’re understandable because, as discussed already, we know that there are types of games that can hang onto players for months or longer, and a game subscription service that had such a game might be able to keep someone resubscribing every month in the same way that a must-watch television series might keep subscribers around for the length of the season.

But they’re potentially missing the point because, also as suggested above, these can be exactly the kinds of games that can monetise on an ongoing basis all by themselves. And a game that can get a large player base to commit to even $5 a month directly probably stands to make a lot more than it could as 1 of several hundred games on a $10-15 monthly subscription.

This is one area where games are unique from the other media types. Movies and music can certainly get one-off revenue from a number of sources, but I don’t know how many musicians or film directors ever aspired to reliably make $15 a month from over 10 million fans as World of Warcraft did.

Similarly, any player who did find themselves primarily playing a single game on a subscription service might naturally start to wonder why they’re paying for hundreds of other games if they’re mostly just playing one, and could be supporting that single dev directly.

Takeaways

Given my rambling nature, there’s a few things to summarise here, but I’m going to focus on one in particular -  we need better labels for the variety of experiences games can offer. I have to believe that few people would treat movies, TV shows and Tiktok videos the same, despite all being video-based entertainment options. Spotify doesn’t treat music, podcasts and audiobooks the same, despite all being audio-based entertainment options. And I think gaming provides a similar breadth of forms, though we lack the language to differentiate them.

The closest any store I can recall has come to this distinction is the paid/free split on the mobile app stores, though I don’t think either has really done anything to explain what the differences are between premium and F2P games, nor does it do anything to separate F2P games from just plain free games.

After spending a little time pondering a few ideas for naming, I think the most logical options would simply be ‘finite games’ and ‘infinite games’, though perhaps some creators may wish to declare that they make finite games that just happen to take a year to finish, by which time they hope to have added even more content.

Such terms could help everyone in the gaming space. They would help developers better communicate what they’re making. They would help players understand what they’re playing or what they’re in the market for. And for the purposes of this blog, it would help analysts and the rest of us better quantify the size of various segments of the overall market.

Ideally, any catalogue service listing ‘finite games’ should also list an estimated playtime, in the same way that every video and audio service tells you the length of what you’re about to see or hear. Such times may have to include vague min/max figures to account for the variety of different experiences, but not only is this possible, Microsoft are already doing it on Game Pass through the HowLongToBeat data. Some worried that this would limit the reach of shorter titles, but I suspect the opposite might be true - from personal experience, once you have an ‘all-you-can-eat’ model, you develop a new respect for games that haven’t been padded out to meet some arbitrary hours-per-dollars metric. If you’re unsure about a game, knowing that it’ll only take a few hours either way can be a lot more encouraging than hearing a game gets really good after the first dozen hours.

Addendum

Most of this blog was written before MS announced the recent pricing and feature changes for the Game Pass tiers, but I don’t think anything above fundamentally changes. If anything, it may serve as an explanation for a possible strategy change. Remember the $1 trial month? That’s a thing you do when growing your audience is more important than short-term profit. Upping the prices and forcing players to upgrade to the top tier for what used to be the marketing slogan of your service (“Play it day one with Game Pass”) is something you do when you think that the smarter play is extracting more revenue from your existing users.

Robert Green is a game designer with 19 years experience making games across a wide variety of genres and platforms. The opinions expressed are solely those of the author and do not necessarily reflect those of his employer or gamedeveloper.com. The author has also worked on games for multiple subscription services, but this isn’t a marketing post and I don’t have any confidential internal data to base this blog on.