Subscriptions are changing the dynamics of the gaming industry

Subscriptions are changing the dynamics of the gaming industry
The gaming industry is undergoing a revolution due to the rise of subscriptions. Now with tech giants including Apple and Google throwing their hats in the ring, the gaming wars are set to reach the next level. 

The subscription model has disrupted many industries. Starting from its roots in media and telecoms/utilities, subscriptions have even penetrated traditional industries such as automobiles and healthcare in recent years. Joining this growing list is the gaming industry which is finding interesting ways to leverage the subscription model.

Gaming Wars is the new Streaming Wars

Subscriptions in the gaming industry may be grabbing the headlines only now, but they have been around for more than a decade. Microsoft’s Xbox Live and Sony’s PlayStation Plus were among the pioneers, offering premium features for subscribers. 

However, 2019 has been a truly pivotal year for the subscription gaming industry, with a slew of companies making interesting announcements at the premier gaming industry showcase event E3. French video game company Ubisoft announced its Uplay+ subscription service, while Microsoft made further inroads with its xCloud game streaming platform. Meanwhile, tech giants Apple and Google were not far away with their own initiatives Arcade and Stadia respectively. Recent reports also suggest that Amazon is planning to get into cloud gaming next year.

Gaming subscriptions are already evolving into different segments, giving gamers a wealth of options to choose from. These include:
  • Console-linked subscriptions – the traditional model used by Xbox Live and PlayStation Plus
  • Cloud gaming services – emerging platforms such as Google Stadia and Microsoft xCloud providing device-agnostic games
  • Publisher-led subscriptions – for gamers loyal to specific titles and series, including Ubisoft’s Uplay+, EA’s Origin Access
  • Mobile gaming ecosystems – such as Apple Arcade and Google Play Pass
  • In-game subscriptions – providing access to additional game features, season passes, special items and/or other story-based exclusive content, for example Nintendo’s offerings for its popular games ‘Mario Kart Tour’ and ‘Animal Crossing: Pocket Camp’.
Subscription penetration in the gaming industry

The gaming industry has always pushed the boundaries of innovation through the use of technology in gameplay, with companies such as Microsoft and Sony especially at the cutting-edge. According to reports, there are currently more than 2 billion gamers across the globe. In addition, a SuperData Research report reveals that the top three gaming publishers reached $273 million in subscription revenue last year. In fact, analysts forecast that the total subscription and non-subscription revenue for the gaming industry can hit as much as $196 billion by 2020! Little wonder that the tech giants and new age startups are all queuing up for a piece of the pie.

Subscription models are showing tremendous potential for gaming companies, creating an inherently customer-centric service and giving customers complete flexibility to choose their experience. Moreover, they can control their payment terms and access features according to their unique needs.

This customer-first mindset is a win-win for businesses as well. The subscription model gives companies a steady customer base to start with, allowing them to make accurate forecasts about their revenue. Recurring revenue then allows them to focus on the subscriber and monetisation experience, creating a virtuous circle.

Who will dominate the subscription gaming industry?

At this juncture, it is difficult to predict which company will emerge as the dominant player in the gaming space. Currently, Microsoft is slightly in the lead with its popular Xbox console and line-up of subscription services - Xbox Live Gold, Xbox Game Pass and xCloud. However, don’t discount the likes of Sony, Google and Apple who have access to the technological know-how and deep pockets to fuel their ambitions in the gaming industry.

Obviously, the incumbents will have to keep pace with customer preferences and upstart competitors. If users are moving away from a console-based approach to device-agnostic services, companies in the cloud gaming space may have a better chance of winning the race. However, if mobile becomes the battleground, tech giants Apple and Google have higher chances of success.

Gaming companies need to take cues from their peers in music and video streaming. In our recent e-Book, we have already highlighted some of the key challenges in the subscription industry today. So, whether it be through free games with in-app subscriptions, more weird and creative games or innovating billing approaches, the gaming industry will have to rise above these challenges. Subscriptions are here to stay and the company that aligns their service best with evolving user needs will be the winner of this game!

Find out how our subscription billing platform, Cerillion Skyline, is geared to help gaming companies discover new revenue opportunities, reduce subscriber churn and increase customer lifetime value.