We need to talk about Xbox Game Pass

Seth Barton
Xbox Game Pass

Xbox Game Pass is the latest in a long line of services that have been branded ‘Netflix for Games’ - for better or worse. But with Microsoft and numerous heavyweight publishers behind it, Xbox Game Pass is the strongest contender yet.

So why aren’t publishers keen to talk it up?

In doing research for this article, MCV contacted several publishers for comment on the service. Every single one politely declined.Looking further, we couldn’t even find press releases from any of these publishers concerning the service. Not a single on-message enthusiastic soundbite from the likes of Warner Bros, 2K, Sega, Capcom, 505 Games, and Bandai Namco - all of which have titles on the service.

We’ve been assured that it’s not some shadowy Microsoft diktat - with the platform holder happy to discuss the service (see right). And while it’s early days, it will be available well before we see Project Scorpio revealed, and many of these publishers have already promised support for that and even added logos to promotional material.

So is there a wider unease about the new service and how it will affect games publishing? Once again, it looks like the service has summoned the much over-hyped spectre of the ‘disruptive business model’.

DISRUPTIVE INFLUENCE

Disruptive is one of the more irritating business buzzwords of the past decade. Yes, the ability to download MP3s did change the music industry irrevocably, first with illegal downloads, then with legal downloads and now with streaming. However, the big record labels are still largely there, though their artists are far more reliant on touring, merchandise and other revenue streams.

Xbox Game Pass, with its content reliant upon the same small group of publishers that sell full-priced titles, digitally and physically, isn’t about to violently rock anyone’s boat. If console games publishers don’t get onboard, consumers aren’t going to be pirating games in the void they leave, as happened with music and TV. 

Digital downloads have certainly changed the industry – just look at the 16.7 per cent drop in physical software sales last year – but Xbox Game Pass is a clearer threat to discounted digital sales than it is to full-priced physical games. After all, how many people will be picking up older titles in the online sales for under £10 if they have a big library of these titles already on tap?

It’s not the first attempt at such a service either, says IHS Markit’s head of games research, Piers Harding-Rolls: “There have been many past attempts to provide a collection of games under a monthly subscription model stretching back to the late 1990s. Some have been moderately successful - although none have developed into a mass market opportunity as we have seen in the online video or music space.” 

Nor is it the only one around today, he notes: “Xbox Game Pass offers a different distribution approach to Sony’s expanding PlayStation Now service. Sony’s on-demand approach is laying the framework for the future and significantly allows it to target PC users as well as those gaming on PS4, which brings it more directly in competition with the Xbox Play Anywhere initiative.”

“In the short term, Xbox’s approach is a more practical solution for those Xbox One users that do not want to stream the service and want to play natively.”

So Xbox Game Pass doesn’t look that radical on the surface. So maybe it’s the closeness of the Game Pass’ download-and-play model to current digital retail, that is so unsettling?

PASSING THE BUCK

At first glance, then, Xbox Game Pass is simply an alternate way for platform holders and publishers to make money from older titles. Much of what’s announced of the 100 game launch line-up is older, mid-tier games. Yes, there are a couple of homegrown tentpoles, such as Halo 5, but it will be the likes of Mad Max that underpin the service - decent games with mass appeal that many might have passed on as full-priced releases.

Content is king, says SuperData’s CEO Joost Van Dreunen: “The success of Game Pass and PlayStation Now depends on the consoles’ ability to negotiate top content from publishers. And, relatedly, it raises the question how Sony and Microsoft will differentiate their content offering to convince players to spend the extra $10-$20 a month. All of this is likely to benefit audiences most, and I think that is a positive thing.”

For publishers, the additional revenue stream is welcome, adding earnings to titles that have already had their day in the sun, if that. However, they will be keeping a very close eye on the impact it has on their digital sales. 

At the same time as potentially impacting long-tail digital sales, Xbox Game Pass is promoting them. It’s providing discounts on titles on the service, so users can buy games before they rotate out of the collection. Alongside that is the possibility of bringing new players to your ongoing franchise.

And in those terms, Xbox Game Pass is a very different beast from Netflix. While consumers may have to wait for the next series of Daredevil, when it does arrive they will get it on Netflix first, included in the price of the subscription. That simply won’t happen with Xbox Game Pass.

The pricing model of games makes it essentially impossible to offer a catalogue of new triple-A titles at a price that consumers will happily pay month-by-month. So the latest titles look unlikely to feature on the service. While TV viewers may have different needs and budgets, Netflix has successfully cast a net over many of them, something that looks far harder with gamers. 

Harding-Rolls agrees that it’s a trickier proposition: “Unfortunately the economics of running a subscription service like this at a $9.99 price point and what type and age of content can be included because of that, means that its impact is likely to be similar to previous efforts in this space. 

“Having said this, today’s general pressure on retail catalogue sales means that third-party publishers could well be more open to turning over their titles more quickly to a service like this - especially if it acts as a marketing channel for discounted catalogue sales - and the inclusion of more recent games would broaden its appeal. How the content portfolio develops and rotates is key to its success.” 

So, once again, content is king.

MAJOR BY-PASS SURGERY

Xbox Game Pass is definitely looking to developing its offering in the future. Head of Xbox Phil Spencer has already gone on the record to talk up the possibility via Major Nelson’s podcast.

“I think there’s an opportunity for this to not just be about games that have already shipped. I’d like to see [shipped] games come into Xbox Game Pass [at launch] as a way that they get distributed,” Spencer said. 

“You’ve seen this in the TV space with Netflix... At first, [it] was really about movies or TV shows that I might have missed. Now some of the best TV out there is actually being created as Netflix Originals.”

And it will likely evolve beyond downloads, too, says Harding-Rolls: “In time, as full streaming of games content becomes more commercially robust, I think it’s inevitable that Microsoft will look to implement its own streamed, on-demand solution.”

MAIN-STREAMING

Xbox Game Pass could well appeal to mainstream consumers as well as core gamers, says Van Dreunen: “The console market has matured to the point where it now services a mainstream audience. No longer confined to a narrowly defined demographic, platform holders like Sony and Microsoft are now in the position to expand and explore with new business models, including subscriptions.”

With both consoles now available for around £200, it’s still a considerable buy-in for the consumer; unlike Netflix, which now appears on practically every consumer device that you already own, be it phone, tablet, laptop or TV - or can be picked up for £30 via Google’s Chromecast.

"The console market has matured to the point where it now
services a mainstream audience."

Joost Van Dreunen, SuperData

Still, if Microsoft gives away a trial month with new console hardware, it could quickly become a default choice for Xbox gamers, and it would also allow for the gifting of a console, without any actual games, for the first time.

Xbox’s Phil Spencer had a dream scenario in mind: “Best thing for me, parent walks into the store, they buy a console. For a fairly minimal monthly amount, they’re able to get access to a hundred games for everybody in the family. That’s great.” Though that could describe a nightmare for some.

That said, Harding-Rolls can see it pushing console sales: “It aims to drive engagement and help sell Xbox One consoles to those that haven’t made the jump from Xbox 360 or a later console adopter that is comparing the offer between Xbox One and PS4.

FREE PASS?

Microsoft looks to be the big winner in all this. If the pass can maintain a strong catalogue then it could be a strong reason to buy an Xbox One over a PlayStation 4, especially for a mass-market consumer that prioritises convenience and value for money.

When Xbox Game Pass was announced, shares in GAME and GameStop fell. The service isn’t an alternative for heavily pre-ordered, must-have titles, but will impact the lucrative pre-owned segment of those businesses. Xbox Game Pass will be providing a similar library to the bargains that fill shelves at GAME, CEX and others. If gamers can have a constant library of rotating titles without the faff of having to head to the shops to trade-in and buy, then it will eat into what has become a big earner for bricks and mortar stores.

Bad for retail then, but a win for publishers, who currently see no income from pre-owned sales. If they can monetise their back catalogue at the expense of the pre-owned market, and without overly cannibalising their own digital sales. If they can do it while picking up a few converts to key franchises along the way, then it’s a big deal.

It shouldn’t hit big titles too much, as gamers will still be unable to resist the lure of new titles in their favourite franchises. If people acted that way, cinemas would have shut down decades ago, as we all waited patiently for the latest film to make its way to the small screen. A strong library of rotating back catalogue titles might, however, jeopardise the production of exactly the kind of mid-tier titles that currently populate the service. 

"How many games subscriptions can console companies expect the average gamer to pay for?"

Piers Harding-Rolls, IHS Markit

It’s also worth considering just how the new service will impact existing subscription services. Harding-Rolls reckons there’s only space for so many:

“There remains a few challenges for Microsoft to overcome with this subscription approach. Xbox One is already home to EA’s subscription service EA Access,  as well as Xbox Live Gold, which makes the launch of Xbox Game Pass a more complex purchase decision for end users.”

“With the roll-out of more subscription services, it becomes increasingly becomes a question of ‘How many games subscriptions can console companies expect the average gamer to pay for?’ and if a gamer has already reached his or her limit, which services will they drop to make room for Xbox Game Pass?”

GAME ON

Despite its huge user base, Netflix is aiming to make a profit for the first time in 2017, though even that’s far from certain. While Netflix benefits from astronomical growth and financial backing, neither Microsoft or its partners are in the same boat. These are mature businesses with keen competitors, that need to show profits this quarter, not in some vague future.

Xbox Game Pass is certainly no Netflix, then. Despite that, it’s an exciting and highly unpredictable next step in the way the industry sells games to consumers. And it’s that unpredictability that’s likely the cause of tight lips around the industry, compounded by publishers wanting to keep traditional retailers onside.

While Sony’s PlayStation Now was here first, its PS3-titles-only launch and streaming approach blunted its appeal to core gamers. Xbox Game Pass, while it has mass-market ambitions, could still appeal to gaming’s core market, and early adopters are key to getting momentum, wherever you plan to end up.

Xbox Game Pass could be the start of something huge, one day spanning downloads and streaming, Xbox and PC, new titles and library content. But if it’s not, then it’s certainly another exploration down an inevitable road, and surely that’s worth talking about.

PLUS! MICROSOFT SPEAKS ...

Publishers may have been shy to give their opinions, but Microsoft was happy to answer some of our questions about the service. We talk to Parimal Deshpande, who is director of marketing for Xbox Game Pass.

What has held back subscription gaming services in the past?

When launching a new subscription service, it’s critical to start with the end customer experience in mind. We asked ourselves, ‘What would the top fan favourite features and benefits be?’ and then worked backwards from there. 

Then it’s about planning and execution to deliver on that customer experience. This means getting it right in terms of download and play vs streaming, catalogue, getting top industry publishers on board... All of these are pieces to the puzzle, and while the idea of subscription-based content isn’t new, we wanted to get it right in the world of gaming.

Why launch the Pass now? After all, EA has run something similar on Xbox for years.

We’re always committed to offering our fans choice and value when it comes to gaming. Our fans cited the right balance of selection, quality, and value as key factors when considering a game streaming service.

Did you have a good idea of which titles you wanted to include or was that mainly down to your partners?

Our goal has been to deliver the best-possible gaming experience and give our fans great games of every fashion, from triple-A to ID, and from hits to hidden gems from Microsoft Studios as well as top industry publishers. We know that what will make a successful service is the quality of the titles – and I think fans will see that when we launch to the wider public later this spring.

Are you looking for more publishing partners at present?

We plan to add few titles each month, so there is always something new to play, and we’ll continue to work with our publishing partners to grow the library and add their titles.

 How often will you rotate titles?

Games are added to the catalogue each month, so there is always something new and exciting to play. When a game rotates out of the Xbox Game Pass catalogue, fans will be notified a few weeks in advance before it is removed from their library.

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Tags: Xbox One

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